Sure but the license itself does imply that. The price licensees pay is pro-rated based on usage but is also capped at 6.5 million until 2015. The license will be renewed every 5 years but will not increase more than 10%:
The first term of the License runs through 2010, but the License will be renewable for successive five-year periods for the life of any Portfolio patent on reasonable terms and conditions which may take into account prevailing market conditions, changes in technological environment and available commercial products at the time, but for the protection of licensees, royalty rates applicable to specific license grants or specific licensed products will not increase by more than ten percent (10%) at each renewal.
They used to raise the cap by 10% every year, then last year it jumped 30% and got fixed for the next 5 years. I assume that added clarity was a concession to pressure from WebM even though it meant a higher price hike right now. They also specifically added text clarifying that the cap was not limited to a 10% yearly rise so the max amount payable is explicity unknown and unlimited.
The maximum annual royalty (“cap”) for an Enterprise (commonly controlled Legal Entities) is $3.5 million per year 2005-2006, $4.25 million per year 2007-08, $5 million per year 2009-10, and $6.5 million per year in 2011-15.
…and you're right that there is a footnote saying. "Annual royalty caps are not subject to the 10% limitation" which is important.
I do find it a bit strange to hear people say the license fees are unknown. Even if you assume an unlimited cap, you can schedule out what the pro-rated fees will look like for you for the next 5-10 years based on your projected growth. You can argue that they are too high, but I don't think you can argue that they are unknown. If nothing else they are bounded on the high end.
Are you saying that last year, you could have predicted the licence fee cap would have been $6.5 million and not 5.5 or 7.5 or 10.5? If you couldn't then it was unknown until they announced it. Similarly, what do you predict it will be in 5 years and each of the next 20 years till the patents run out? Are you sure?
No, I'm agreeing that you're right that the cap is effectively unknown. I missed that footnote (shame on me). My point is that even with an unknown cap, the license rates are predictable for the foreseeable future:
Free under 100k units
$0.20 per unit above 100k
$0.10 per unit above 5 million units
Now, I'm no fan of software patents and I wish they would be done away with. But given the choice between that and the practical/technical/patent uncertainty of webM I don't feel like those are massive payments.
I'm glad Google open sourced the on2 codec and I can even see that maybe the H.264 prices have been influenced by that move. But from a practical standpoint, I think Apple and Microsoft are making a reasonable move. People say it's short-sighted, but I think they are relatively protected.
The first term of the License runs through 2010, but the License will be renewable for successive five-year periods for the life of any Portfolio patent on reasonable terms and conditions which may take into account prevailing market conditions, changes in technological environment and available commercial products at the time, but for the protection of licensees, royalty rates applicable to specific license grants or specific licensed products will not increase by more than ten percent (10%) at each renewal.
(PDF link:) http://www.mpegla.com/main/programs/avc/Documents/AVC_TermsS...