Tuesday, March 7, 2023

Avanci announces patent pool for ATSC 3.0 (aka NextGenTV) broadcasting standard that is ubiquitous in U.S. and South Korea: initial licensors hold more than 70% of SEPs

From the position of strength of its standard-essential patent (SEP) pool for connected vehicles--though Charles River Associates may not acknowledge the full extent of it--the Avanci brand is expanding into new segments of the patent licensing business. The Avanci Aftermarket pool launched last month and covers connected devices that are not pre-installed in cars. That is obviously an adjacent business area. The new patent pool announced today is named Avanci Broadcast and defined as "a patent licensing platform for the ATSC 3.0 broadcasting standard".

Standard: The Advanced Television Systems Committee (ATSC) standards were developed in the U.S., but have also been adopted in its neighbor countries (Mexico, Canada), and in South Korea. In other parts of the world, such competing standards as DVB and ISDB are more popular, though ATSC 3.0 may be adopted in several additional countries. In 2009, the U.S. made a complete switchover from analog (NTSC) to digital (ATSC) broadcasting of terrestrial TV programming. The latest version, ATSC 3.0, is also referred to as NextGen TV, but not mandatory, though it is technologically superior.

Avanci's press release describes the benefits of ATSC 3.0 over its predecessor version as follows:

"... ATSC 3.0 enables 4K / UHD broadcast with higher frame rates, better color and sound, and other technical improvements over the previous standard. It also works hand-in-hand with content delivered over the internet for services such as customized advertising, on-demand and premium content, and interactivity."

Licensors: The initial group of Avanci Broadcast licensors includes

  • South Korean consumer electronics powerhouses Samsung and LG Electronics;

  • Japanese consumer electronics icons Sharp and Panasonic;

  • ONE Media, a subsidiary of Sinclair Broadcast Group, which according to a recent press release "owns, operates and/or provides services to 185 television stations in 86 markets, owns multiple national networks including Tennis Channel and Stadium; has TV stations affiliated with all the major broadcast networks and owns and/or operates 21 regional sports network brands"; and

  • South Korean research firm ETRI and U.S. licensing firm Sun Patent Trust.

Avanci estimates that those patent holders "represent more than 70% of all patent families containing ATSC 3.0 declared essential patents," with "the addition of several more licensors in the coming months" apparently being in sight.

It is unusual for a licensor to issue its own press release on the creation of a patent pool, but that is what ONE Media did today. ONE Media's press release touts the technical benefits of ATSC 3.0 in detail and quotes its Executive Vice President Jerald Fritz:

"The ability to offer this remarkable technology to consumer equipment manufacturers in a simple, all-encompassing license, should ease the process of deploying new receiver products to consumers worldwide. We congratulate Avanci for helping shepherd several leading international organizations toward this common goal."

Licensees: Not only does the pool start with broad coverage of the relevant patent landscape but also with an impressive group of initial licensees. Three of those licenses--Samsung, LG, and Sharp--are also licensors, while Sony is mentioned only in its role as a licensee. According to the press release, those companies are "collectively responsible for the vast majority of ATSC 3.0 televisions sold to date." To be clear, the vast majority of TV sets doesn't mean that most of the licensing work is already done. It could be that some lower-cost TV makers will be harder to convince, and TV sets are not the only type of device to implement the ATSC 3.0 standard. Think of set-top boxes, for instance.

Pricing: The base per-unit royalty rates per TV or set-top box are stated on the Avanci Broadcast webpage. The price matrix there incentivizes signing up early, with the lowest rates applying to license agreements signed by May 31, 2023 ($2.10 per unit for 2022-2025, $2.40 for 2026-2028). Those who sign up after May 31, 2023, but still within six months of shipping their first ATSC 3.0 product, get a rate of $2.75 through 2028, which is less than the $3.00 per unit (through 2028) that all those who sign up after May 31, 2023 and more than 6 months after shipping their first ATSC 3.0 product.

Management: Besides Avanci founder, the press release also quotes the executive in charge of Avanci Broadcast, who is none other than Ilkka Rahnasto of Nokia fame.

Two pools: MPEG LA, which has been a top-notch patent pool administrator for a long time, was first to launch an ATSC 3.0 patent pool. There's limited overlap with respect to licensors (ONE Media, Panasonic, Sun Patent Trust). Pool administrators operating in good faith can always find solutions to avoid duplicative royalties (be they due to previously existing pools or to bilateral licenses). Whether that is much of a practical issue here is unclear: MPEG LA's list of ATSC 3.0 patent licensees is "To Be Supplied" according to the firm's website.

In general, a single pool for a given standard is in the best position to reach a high market penetration (such as Avanci's connected vehicle pool). Fragmentation can lead to frictional losses and reduced transactional efficiencies. But this is a case-by-case question. When a new pool launches with the momentum that Avanci Broadcast apparently has, then there must have been an opportunity that some market actors thought was best addressed by means of a new pool that has the potential to bring everyone together.