Google is already promoting the VP9 video codec, which may very well raise new patent issues, while pushing for adoption of VP8 as an Internet standard. But the patent license it has drafted for VP8 and just published doesn't meet the requirements of the Open Source Initiative's definition of open source, says the President of the OSI's Board of Directors, Simon Phipps, in a blog post. According to Mr. Phipps, the draft license "shows signs of unfamiliarity with the tenets of software freedom". The OSI can't speak for the Free Software Foundation, of course, but the two organizations share many values and the FSF's emphasis of software freedom ("[t]he issue is not about price") entails even stricter requirements for acceptable license terms. Simply put, if your proposal doesn't please Simon Phipps, know that Richard Stallman ("RMS") is harder to please.
Historically, the World Wide Web Consortium (W3C) has applied its royalty-free (RF) licensing requirements in ways that ensured compatibility of HTML-related essential patent licenses with the philosophies of Free and Open Source Software (FOSS) organizations, particularly the FSF and the OSI. The Web movement and the FOSS movement have succeeded symbiotically and in tandem: FOSS powers large parts of the Web and drove its adoption, while the Web has allowed FOSS to thrive and contributed greatly to its popularity. If Google wants the W3C to consider its proposed VP8 patent license an acceptable W3C RF license, it effectively asks the W3C to part ways with the FSF and the OSI, after approximately two decades of close and fruitful collaboration. This is utterly divisive.
Shortly after the announcement of an MPEG LA-Google license deal relating to VP8 I was confused about Google's intentions to comply with the W3C patent policy when I saw a Google employee link to a web page that involved FRAND licensing commitments when he said they were planning to comply with the W3C's patent policy. Now that Google's proposal has been published, the answer is that Google's proposed VP8 patent license is not a permissive RF license but a typical FRAND-zero (or, synonymously, "RAND-zero") license. Zero license fees to be paid by licensees (though Google presumably paid or pays MPEG LA) -- but reasonable and non-discriminatory terms (field-of-use restrictions, reciprocity) are imposed and, which Mr. Phipps considers the most significant issue with the proposal, "gaining benefit from the agreement requires individual execution of the license agreement".
The final two sentences of the OSI President's blog post declares Google the loser and VP8's rivals the winning camp:
"This document seems to me to be an effective outcome for those in MPEG-LA's patent-holder community who want to see VP8 disrupted. It has provoked an autoimmune response that must have Google's enemies smiling wickedly."
I don't want to speculate about the intentions of the 11 originally-unnamed, meanwhile-disclosed companies that contributed patents to the MPEG LA-Google deal, or of the MPEG LA pool firm. Frankly, it doesn't matter what company A or company B wants to achieve in this context. At least for now, Google's own license grant under Section 3 of that proposed agreement raises the same issues that Mr. Phipps criticizes with respect to the other patents involved -- Google isn't being more generous than the MPEG LA group in those respects. At any rate, conspiracy theories aren't even needed when simple business logic can explain everything. If a company believes that video codecs should be available on affordable terms, but that intellectual property holders should be compensated somehow, then it can be Google's best friend and will nevertheless attach certain conditions to a license grant. Such conditions can be monetary and non-monetary. The financial part has been resolved. While I doubt that the patent holders gave Google a freebie (considering that they don't even do this in connection with H.264, the standard they promote), Google can apparently afford those royalties without having to charge end users. There's major strategic value for Google to gain in controlling an Internet standard, as non-MPEG LA-contributor Nokia's comments on its decision to withhold a license implied. So Google picks up the bill. But the non-monetary terms shine through its proposed "VP8 Patent Cross-license Agreement".
Mr. Phipps says it's probably "unworkable" for the FOSS community, and at the very least unacceptable, that a licensee must identify itself and sign up to get a license, including downstream users since there's no right to sublicense. The FOSS approach is that someone just grants you a license and the downstream is automatically licensed, too, so you can share freely without any bureaucracy or loss of data privacy involved for anyone. But let's think about the modus operandi of those third-party patent holders, wholly apart from any theories of world domination or destruction. They want a reciprocal license (Section 5 of the proposed VP8 license). That's why Google calls this a "cross-license". It would be foolish for them to make their VP8-essential patents available when a beneficiary of their license grant can withhold a license. But they must have a reasonable degree of legal certainty that they can use the other party's back-licensing obligation as a defense to infringement claims. And that's why they need a formal cross-license agreement in place. Otherwise the licensee could later claim that it never consented to that license grant.
Google itself is a good example -- "good" only in terms of suitability, though bad in terms of behavior -- of why reciprocal-licensing commitments must be formalized. Courts in three different countries have already found Google to fail to honor grant-back obligations vis-à-vis Microsoft -- two of them formally ruled on this (England and Wales High Court, Mannheim Regional Court; both in connection with ActiveSync), and the third one (the United States District Court for the Western District of Washington) did not formally adjudge the issue because Google itself (only its Motorola Mobility subsidiary) was not a party to the relevant case, but nonetheless stated that Microsoft was an intended third-party beneficiary of the Google-MPEG LA agreement concerning H.264. And in those cases, Google had identified itself and formally signed license agreements, but it still disputed the applicability of those terms. Now imagine what would happen if someone with Google's mentality, which a U.S. judge described as "what's mine is mine and what's yours is negotiable" , refused to honor a grant-back obligation and claimed that there wasn't even an enforceable agreement in place... especially in jurisdictions that don't even recognize the concept of third-party beneficiaries to an agreement.
As for field-of-use restrictions, Mr. Phipps criticizes that the license doesn't cover you "[i]f you're writing any multipurpose code or if the way you're dealing with VP8 varies somewhat from the normal format -- perhaps you've added capabilities". Again, let me remind you that Google's own license grant under the proposed agreement comes with the same restrictions. Google itself apparently doesn't want people to modify VP8. It wants to control it. Just the way it controls Android through its arbitrarily-applied compatibility definition. Even if Google ultimately agreed with Mr. Phipps and allowed modifications with respect to its own patents, it would still have to convince those third-party patent holders to grant an equally permissive license. But in that case, someone could use patents that also read on, for example, H.264 and call it a modification of a licensed VP8 codec. Just like Mr. Phipps considers certain aspects of the proposed license "unworkable" for open source, so would it be unworkable for patent holders who generally license their patents on commercial terms to grant a license without any field-of-use restriction (and to an unidentifiable, unlimited number of beneficiaries).
The OSI President hopes that Google will improve this license agreement. But whether it can is another question. It can probably make improvements with respect to its own patents, and I believe that's what it should do at a minimum. This would affect its ability to monetize Motorola Mobility's H.264 declared-essential patents, but those have been found to have very little commercial value anyway. At least Google would show that it respects the FOSS philosophy.
Finally I'd like to talk about what the terms of the proposed license say about the need Google saw to take a license from those 11 MPEG LA contributors. After the announcement of the license deal some people argued that Google merely wanted to avoid litigation but that the agreement didn't constitute an admission of the very third-party patent infringement issues Google had denied for a long time. In other words, they said Google was paying for peace of mind, not for essential intellectual property.
It's true that sometimes license deals are struck even though the licensee is convinced of the merits of its case. That's the nuisance-value business model of certain patent trolls: they'll sue you over meritless claims and offer a license at much less than the cost of a proper defense (which is usually not recoverable in the United States). However, I believe that when all the parties to an agreement are not patent trolls but (as Judge Robart described Google in the MPEG LA H.264 context) "sophisticated, substantial technology firm[s]", then I believe there must be a strong presumption that a license deal doesn't just involve bogus claims. And that presumption is further strengthened if a licensee insisted over the years that certain claims had no merit.
Granted, a presumption, even a very strong one, still isn't proof. One needs to know the actual terms of an agreement to have clarity. None of them were announced two months ago. It's just clear that whatever Google pays is enough that Google can just absorb the costs for the downstream. The amount of money involved could be more, or even much more, than what is needed to prove that Google took those infringement allegations seriously, but if Google pays for it silently (because it can afford it), we won't know. Now at least some of the non-monetary terms are clear -- or they will be clear with definitive certainty if Google, despite criticism from Mr. Phipps and others who will agree with him (or even go beyond his criticism), can't offer a license to those third-party patents on permissive terms. The non-monetary terms demonstrate that Google took those infringement allegations seriously. Otherwise it wouldn't have drafted a license that threatens to divide the Web and FOSS communities, which in turn would have major impact on Google's own open source reputation. The non-monetary price Google is willing to pay here is so substantial that I believe it would have chosen to defend itself in court against any infringement claims (which it could have done proactively through declaratory judgment actions) if it had truly thought that all those infringement allegations were bogus, as it would have had all of us believe.
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