Patents for MPEG-2 Technology

MPEG-2 was a video-compression technology used as an international standard. Compliance with the MPEG-2 standard required the use of several patented technologies used in combination with each other. The owners of the patents to those technologies (owners) agreed to combine their patents into a single patent pool. Under the agreement, an administrator, MPEG LA, L.L.C. (administrator), would grant non-discriminatory licenses to use the patented technology, collect royalties, and distribute the royalties among the owners. The agreement contained a “most-favored-nation” clause to ensure that royalty rates were nondiscriminatory. A grant-back provision required a licensee of any patent essential to the standard to grant that license to other licensees and any of the owners. An independent expert continually reviewed the standard to ensure that it kept up with technological developments so as to hold only essential patents. The agreement also provided that while the administrator could only license the entire portfolio, the individual owners could license their patents separately. Licensees were free to create alternative technologies that could compete with the patented technologies. The owners requested a business review letter from the U.S. Department of Justice (DOJ), stating the DOJ’s intentions with respect to antitrust enforcement of the agreement.