After Steve Jobs made a thinly-veiled threat of patent enforcement against Theora and other open-source codecs, two key players from the Xiph.Org Foundation (the organization behind Theora) responded publicly. Its founder, Christopher 'Monty' Montgomery, sent his quick comments to the media (I also received them from him directly when emailing him after seeing Steve Jobs' email). His colleague Gregory Maxwell, the Theora project leader, sent his reaction to a public mailing list. A few days later, Karsten Gerloff, the president of the FSFE, stated his opinion on his blog.
The two Xiph leaders and the FSFE president took different angles but all of them doubted that Steve Jobs' threat had any substance. They used different terminology ranging from "blackmail" to (in a semi-hypothetical context) "jackbooted thugs". Those are hard words, but are they backed up by hard facts? Let's look at them one by one.
Are those patents holders dogs that bark but don't bite?
The official Xiph.Org statement starts by mentioning a long history of veiled patent threats against Ogg multimedia formats, ten years ago with respect to Ogg Vorbis (the audio format) and in recent years against Theora (the video format from the same family). Monty then concedes that this time it might "actually come to something", but he won't worry until "the lawyers" tell him to.
If the veiled threats Monty refers to appeared vain in the past (since no legal action against those open-source codecs was actually undertaken), I can understand the Xiph.Org Foundation's wait-and-see approach. However, a famous Spanish proverb says (in a literal translation) that "the pitcher goes to the well so often that it ultimately breaks."
For whatever reasons, one of which may be the fact that suing open source over patents hurts a company's popularity among software developers, certain patent holders may have refrained from legal action in the past but we may now have reached (or be nearing) a point where at least some of the relevant patent holders may indeed be prepared to strike. A reluctance to do so need not be an impediment forever. When weighing off pro's and con's (of legal action), patent holders may come down on the "no" side in one year and on the "yes" side a few years later under different circumstances in the market.
One field that is very litigious -- and for which HTML 5 and video are going to be fairly relevant -- is the mobile communications sector. Apple and Nokia are suing each other in different courts in parallel. Apple is suing HTC. Those actions are real and giving cause for concern that the concept of the mobile web may also bring mobile sector-like litigiousness with it.
The representation that patent holders -- especially some of those who have contributed to MPEG LA's H.264 pool -- only make unspecified threats and are too afraid of actually taking their patents to court (which could result in invalidation of patents for prior art or a court opinion that interprets a patent claim more narrowly than its owner) was voiced by FSFE president Karsten Gerloff in an effort to question the substance of Steve Jobs' infringement assertion. I understand his motives and they are good, but I have a different impression of how far Apple is willing to go. Just in its litigation with HTC, which is not the only one to which Apple is a party as we speak, Apple is asserting 20 patents.
Karsten makes a similar claim about Microsoft and the possible infringement of some of its patents by the Linux kernel. But it's not hard for me to imagine that there may be (easily) hundreds of Microsoft patents that have the potential to read on the Linux kernel. The ones that are most frequently heard of, the FAT patents, have survived various patent busting attempts due to the way patent law unfortunately works, a fact on which I reported recently.
I strongly doubt that companies of the nature and stature of an Amazon or HTC would pay Microsoft patent royalties without substance just on the basis Karsten speculates about. There's nothing to gain for those companies by doing a press release in which they confirm (even without specifying details, which simply isn't usually done) royalty payments to one major patent holder. That can actually result in others who believe they have patents reading on GNU/Linux trying to collect royalties from the same licensee.
All right holders will prefer to achieve their objectives without suing, which is always just a last resort, but that doesn't necessarily make it a safe assumption that they aren't prepared to sue, especially if they have already proven so or are, like Apple, proving it right now.
Is there an antitrust problem?
Monty and Gregory (both of the Xiph.Org Foundation) allude to antitrust issues in their statements while I can't see any problems in that regard.
Monty says about MPEG LA that "they assert they have a monopoly on all digital video compression technology, period, and it is illegal to even attempt to compete with them." Monty notes they don't say exactly that, but it appears to be how he interprets their past statements on these kinds of issues.
Assuming -- just for the sake of the argument -- that MPEG LA's patent pool indeed does cover so many codec-related techniques that no one can build a competitive codec at this stage without infringing on at least some of those patents, that would (in case it's true) constitute a monopoly. However, in that case the only obligation that regulatory authorities could impose on MPEG LA under competition rules would be to make its IP available on a RAND (reasonable and non-discriminatory) basis. In other words, they can charge something (there's no way that competition law could justify an expropriation without compensation), but they aren't allowed to overcharge.
When Steve Jobs wrote that a patent pool was being assembled to "go after Theora" and other open-source codecs, he didn't say that the objective would be to shut everyone else down. this could also simply mean to collect royalties from those using that technology. As long as those royalties are RAND, there wouldn't be any anticompetitive behavior, but Theora would lose its royalty-free status. It could still compete, but the playing field would look different than the way Theora's proponents describe it as of now.
Gregory's email statement quotes a US Department of Justice statement on licensing schemes premised on invalid or expired intellectual property rights not being able to withstand antitrust scrutiny. I can't see that this reduces in any way the legal risk for Theora and its proponents. I assume that there are, unfortunately, large quantities of valid and non-expired patents related to codecs.
I also can't think of any legal theory based on which patent holders forming a pool to assert rights against Theora would have to contact the Xiph.Org Foundation beforehand. Not only is there no legal obligation but also do I think that in case there are patent holders who (unfortunately) own patents that read on Theora, they are free to coordinate their efforts and present a united front to Theora's supporters.
The term "anti-competitive collusion", which appears in Gregory's email as one of the possible explanations for what's going on, is unclear to me. While my sympathy is with an open-source project, this is just about what would or would not be legal if undertaken, a question on which I reach, to my own dismay, a somewhat different conclusion.
Is there a risk of H.264 becoming too expensive?
Karsten (FSFE) is afraid of a future H.264 "lock-in" and the cost increases this could result in:
It hardly takes economic genius to determine that when enough people and works are locked into H.264, the MPEG-LA will have every incentive to start charging any fee they please. (Oh, and don’t you dare use that expensive camera for professional purposes. Your H.264 license is purely for non-commercial use.)Lock-ins can indeed come with a hefty and ever-increasing price. The mainframe hardware market, in which IBM has a monopoly, is a good example: for a given amount of RAM, the cutthroat price is 60 times of what it is for an Intel-based PC.
However, in the specific case of H.264 and the license fees charged by MPEG LA now and in the future, there are assurances that a scenario of "charging any fee they please" (as Karsten wrote) won't happen.
Like I explained further above, if MPEG LA had a monopoly because any video codec (at least any codec that would be competitive in today's market) needs at least some their patents, then antitrust rules would require RAND pricing. Otherwise, if those patents don't cover the entire field, there could and would be competition, which would gain traction in the market especially in the event of price hikes.
One must also consider that MPEG LA's current pricing is very far from "any fee they please" (even though in a perfect, software-patent-free world the price would be zero), and they have promised to keep future price increases within certain limits. To those who are interested in those pricing questions, I can strongly recommend Ed Bott's ZDNet blog post, "H.264 patents: how much do they really cost?" His analysis contains a number of good points that are consistent with my own analysis of the information available on MPEG LA's website. While controversial (starting with its headline), his blog post "Ogg versus the world: don't fall for open-source FUD" is also quite interesting.
Having analyzed in this post some of what's been said in the debate, I will outline some of my own thoughts in the following post, including what I believe the W3C may have to consider at some point.