Patents are ammo in YouTube and Netflix's video wars

March 4, 2011: 10:30 AM ET

The Justice Department is investigating whether a "patent pool" is abusing the system to try and cripple a new Google-developed open-source video standard.

Google's (GOOG) YouTube and other video downloading websites like Netflix (NFLX) license the video streaming technology for the video they provide (called H.264) from a consortium of companies that collectively operate a LLC Patent pool called MPEG LA.  The group says that they are a patent pool or "convenience store" for companies that wish to license video software.  But for those on the outside however, MPEG LA seems more like a monopoly.

In May of last year, a German Software company called Nero filed an antitrust suit against MPEG LA, claiming it "unlawfully extended its patent pools by adding non-essential patents to the MPEG-2 patent pool" and has been inconsistent in charging royalty fees.

A report today says that there could be more legal trouble on the way for MPEG LA.

MPEG LA is the target of the formal antitrust probe, the people familiar with the matter said. MPEG has amassed pools of patents covering widely used video formats and collects royalties for its members, which include Apple (AAPL) Inc. and Microsoft (MSFT) Corp. Antitrust enforcers are investigating whether MPEG LA, or its members, are trying to cripple an alternative format called VP8 that Google released last year—by creating legal uncertainty over whether users might violate patents by employing that technology, these people added.

According to the Journal, the DOJ is investigating whether the MPEG LA group and/or its members are trying to cripple an alternative format called VP8 that Google released last year—by creating legal uncertainty over whether users might violate patents by employing that technology.

In a statement last year, Larry Horn, MPEG LA's chief executive said "I can tell you: VP8 is not patent-free, It's simply nonsense."  Member company Apple's CEO Steve Jobs, in a letter to the Free Software Foundation explained that a patent pool was assembled to "go after" a previous open-source format.

"All video codecs are covered by patents," Mr. Jobs wrote. "Unfortunately, just because something is open-source, it doesn't mean or guarantee that it doesn't infringe on others patents."

Google, who has the biggest video sharing site on the 'net, would clearly like to rid itself of its dependency on MPEG LA.  Last year they spent $150 million on a company called On2 who builds an Internet video format which it claims is free of MPEG LA's patent claims.  Google opened up the technology and it is now available as Open Source as WebM.  It has the support of the #2 browser-maker Firefox as well as Opera.

Last Month, the MPEG LA issued a call for its patent holders to dig into their patents for  WebM infringements.

So far, nothing has come up.

Google has a lot to gain or lose in this battle and it is bringing a slew of companies along with it.  Adobe (ADBE) also would like to stop paying for H.264 patents and has emerged as a strong partner in the fight.  During the unveiling of WebM at GoogleI/O last year, Adobe CTO Kevin Lynch took the stage and pledged support for the emerging platform.

Google does face an uphill battle.  With H.264 hardware encoders available on most mobile electronics, WebM simply won't play as well in a mobile environment, at least until WebM hardware encoders emerge.

Google's exploding Android OS may be a key help them in that area.  Google also has its YouTube subsidiary, which some say hosts around half of the Internet's video, to help out which could offer some sort of benefit to WebM.

This "Fight for video on the net" will play out over years, not months.

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About This Author
Seth Weintraub
Seth Weintraub

Google went from searching the Web to worming its way into nearly every facet of business and government. Seth Weintraub unveils where the company is going, who it's competing with, who it's about to compete with and how market forces push the company to veer or adhere to its Don't Be Evil motto. For 15 years, Weintraub was a global IT director for a number of companies before becoming a blogger.

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