1. Patent Pools Covering Digital Media Content Delivery Platforms DIGITAL SPARK IP Conference University of Albertay Dundee Bill Geary 2 September 2010

2. Overview MPEG LA Background Overview of MPEG LA Patent Pools Identify Technologies and Market Conditions Suitable for Patent Pools Patent Pool Facilitation Process Biotech and the Licensing Supermarket Questions? 2

3. MPEG LA Background 3

4. MPEG LA pioneered modern patent pool licensing 4

5. MPEG LA Background A “Patent Pool” is a voluntary jointly administered licensing programme including patents essential to a technology* o“voluntary”: the participation of each licensor is based on its own commercial decision o“jointly administered”: the participants select a single Licensing Administrator to handle the licensing, collection, royalty distribution and taxes o“patents”: only issued patents are included in the programme offered for licence o“essential”: each of the patents is necessary – from a technical or commercial point of view – to implement the technology 5 * Definition by Carter Eltzroth, Legal Director of DVB, Geneva

6. MPEG LA Background The MPEG-2 standard was an inflection point that marked the change from delivering consumer video content in analog form to a standardized digital format oBut companies who created the MPEG-2 standard were hesitant to develop products and deliver content because they were concerned about an MPEG-2 patent thicket Biggest challenge to MPEG-2 was access to essential patents oIPR of many parties created risk and potential for conflict if Standard could be used at all given the patent thicket 6

7. MPEG LA Background In 1997 after US DOJ Business Review (EC Comfort letter Dec 1998), MPEG LA revolutionized intellectual property rights licensing by offering an alternative patent pool as a licensing solution http://www.usdoj.gov/atr/public/busreview/215742.htm oMPEG-2 License grew from initial 8 to 26 patent holders with 159 patent families consisting of more than 900 patents in 57 countries. Not only have MPEG-2 royalty rates not increased, but they have been reduced five times. o1500+ Licensees accounting for most MPEG-2 products (TVs, DVD players/recorders, Blu-ray Disc™ players, set-top boxes, PCs, DVD Video discs, game machines, cameras) in the current world market 7

8. MPEG LA Background MPEG-2 became the most successful standard in consumer electronics history o ~ 4.2 billion devices o ~ 44 billion video discs o ~ $3 trillion in product sales 8

9. MPEG LA Background The solution - known as the MPEG LA® Licensing Model - has become the template for addressing patent thickets 9

10. MPEG LA Background Independence oMPEG LA is neither Licensor nor Licensee oFair, impartial administration oEach licensing program separately administered 10

11. MPEG LA Patent Pools 11

12. 12 MPEG LA Patent Pools June 22, 2010 Data MPEG-2 Program started in 1997 Started with 8 patent owners 102 patents ● Currently 26 patent owners ● 905 patents in 57 countries ● 1586 Licensees ATSC Program started in 2007 Started with 6 patent owners 41 patents ● Currently 8 patent owners ● 148 patents in 22 countries ● 118 Licensees AVC/H.264 a/k/a MPEG-4 part 10 Program started in 2005 Started with 14 patent owners 20 patents ● Currently 26 patent owners ● 1350 patents in 44 countries ● 835 Licensees VC-1 Program started in 2007 Started with 16 patent owners 130 patents ● Currently 18 patent owners ● 562 patents in 34 countries ● 195 Licensees MPEG-4 Visual part 2 Program started in 2004 Started with 20 patent owners 77 patents ● Currently 29 patent owners ● 1015 patents in 52 countries ● 656 Licensees MPEG-2 Systems Program started in 2006 Started with 8 patent owners 161 patents ● Currently 10 patent owners ● 209 patents in 29 countries ● 134 Licensees IEEE 1394 Program started in 1999 Started with 6 patent owners 8 patents ● Currently 10 patent owners ● 273 patents in 22 countries ● 224 Licensees

13. 13 MPEG LA Patent Pools Licensors in MPEG LA Pools Alcatel Lucent Apple Inc. British Telecommunications Canon, Inc. CIF Licensing, LLC Competitive Technologies, Inc. Columbia University DAEWOO Electronics Dolby Laboratories Licensing Corporation ETRI (Korea) France Télécom Fraunhofer-Gesellschaft Fujitsu Limited General Instrument Corp./Motorola GE Technology Development, Inc. Hewlett-Packard Company Hitachi, Ltd. KDDI Corporation Koninklijke Philips Electronics N.V. LG Electronics Inc. Microsoft Corporation Mitsubishi Electric Corporation Nippon Telegraph and Telephone Corporation NTT DOCOMO Oki Electric Industry Co., Ltd. Oracle America, Inc. Panasonic Corporation Pantech Co., Ltd. Robert Bosch GmbH Samsung Electronics Co., Ltd. SANYO Electric Co., Ltd. Scientific-Atlanta, LLC Scientific-Atlanta Vancouver Co. Sedna Patent Services, LLC Sharp Corporation Siemens AG Sony Corporation STMicroelectronics N.V. Telefonaktiebolaget LM Ericsson Telenor ASA Thomson Licensing Toshiba Corporation Victor Company of Japan (JVC) Zenith Electronics, LLC June 22, 2010 Data

14. Identify Suitable Pool Candidates 14

15. Identify Suitable Pool Candidates Identify technologies with “patent thickets” (interdependence of complementary patents owned by multiple patent owners) oDrive need for multiple transactions oImpede technology adoption, interoperability and use oRestrict freedom of design oIncrease potential for conflict oCreate threat of holdout oBilateral licenses may be inefficient for many 15

16. Identify Suitable Pool Candidates 16 IPR Licensee “One-to-Many”“Many-to-One” IPR Licensee MPEG LA® “Many-to- Many” Licensing Model IPR Licensee IPR Thicket IPR

17. Identify Suitable Pool Candidates 17 MPEG LA® “Many-to- Many” Licensing Model IPR Licensee MPEG LA The MPEG LA® Licensing Model enables access to essential IPR owned by multiple IPR owners in a single transaction as an alternative to separate licenses MPEG LA is granted a nonexclusive sublicensing right from essential IPR owners, collects and distributes royalties for the benefit of the essential IPR owners, and is paid an administrative fee from royalties collected

18. Identify Suitable Pool Candidates To attract both patent owners and patent users, successful patent pools strike a balance between reasonable return on investment and reasonable access 18

19. Identify Suitable Pool Candidates For IPR users, the MPEG LA® Licensing Model means oConvenience oAccess oTime, cost and risk savings oOpportunity for level playing field oFreedom to design oFocus on products instead of patent licensing oCompetition 19

20. Identify Suitable Pool Candidates For IPR owners, it means oOpportunity for mass market adoption oReturn on investment oFuture innovation 20

21. MPEG LA® Licensing Model Lessons Learned Alternative licenses with potential for high percentage compliance Patent thickets favoring pool over bilateral licensing solutions Technology of value to mass market oMany Licensors oMany Licensees Need for buyers and sellers – reasonable access/reasonable return Identifiable royalty products Simple, nondiscriminatory license terms Emphasis on marketability oValue given for value received oOpen to new business models oPrice to sell across mass market oResponsive to the marketplace oBoth Licensees and Licensors are customers 21

22. Patent Pool Facilitation Process 22

23. Patent Pool Facilitation Process STEP 1 – Determine what the market needs STEP 2 – Define “essentiality” parameters STEP 3 – Call for patent submissions STEP 4 – Initial patent evaluations STEP 5 – Identify initial essential patents and notify essential patent owners STEP 6 – Meetings of essential patent holders STEP 7 – Design License STEP 8 – Announce License terms, conclude Licensor agreements and issue License 23

24. Biotech and The Licensing Supermarket 24

25. The Licensing Supermarket 25 “One-size fits all“ solutions based on technology standards (e.g., MPEG-2 and others) may not be suitable for non-standards-based technologies Applying its independent “many-to-many” mass market licensing expertise, MPEG LA has developed a licensing supermarket to address biotechnology patent thickets, specifically gene patents for diagnostic testing

26. The Licensing Supermarket With the goal of clearing patent rights enabling researchers, laboratories and testing companies to design comprehensive diagnostic genetics test panels, thereby making such tests widely available to the public, a new business model is called for that can balance costs with incentives, and MPEG LA is prepared to deliver it (http://www.mpegla.com/Lists/MPEG%20LA%20News %20List/Attachments/230/n-10-04-08.pdf)http://www.mpegla.com/Lists/MPEG%20LA%20News %20List/Attachments/230/n-10-04-08.pdf 26

27. Questions? 27 For more information, please contact Bill Geary, VP Business Development bgeary@mpegla.com +1-301-986-6660