Last month saw the launch of VideoLabs, a new collective platform helmed by a group of IP industry veterans, designed to reduce patent risk in the video space. With the rollout of 5G, the spread of video into more devices and the recent explosion of new streaming platforms such as Disney+ and HBO Max, the potential IP dangers for implementers are only on the rise.
Rather than focusing on a specific standard, as a pool does, VideoLabs’ approach is to zero in on the whole video space with a membership model designed to acquire high quality, high-risk patents and to advise member companies on threats from lower quality grants. Or at least that’s the rationale for the new platform.
The new initiative is led by Joe Chernesky and features his fellow Kudelski Group veterans Bill Thomas and Bill Goldman, as well as Lenovo’s former vice president of IP Ira Blumberg. Between them, the quartet have years of experience in the patent and licensing worlds including stints at Intellectual Ventures and various major IP-owning operating companies.
To finance their new play, the VideoLabs’ team has raised $10 million in debt financing and has kicked things off with four core members: Hewlett Packard Enterprise, the Kudelski Group, Siemens Healthineer and Swisscom. It has already started acquiring patents from the likes of Swisscom and Nokia and, according to Chernesky, is planning on spending at least 60% of membership revenue on purchases.
The annual membership dues are set to be made public, with Kevin Rivette’s and Peter Detkin’s consultancy Sherpa Technology Group advising on the appropriate rates. How much a company is asked to pay will depend on a range of factors including how much of their product reads on the technology that VideoLabs is focused on, so Netflix can expect to pay more than, say, IBM.
In addition, geography will be considered. Companies that are operating in countries where there isn’t much IP risk will pay a reduced rate. Other factors will also come into play, including an operator’s profitability. And then for smaller businesses with less than $300 million in revenues, it will be “essentially free”, says Chernesky, beyond a small administrative fee.
Once any acquired patents have been licensed to VideoLabs’ members, they will be sold on through an AST-style catch and release model, either to members or on the secondary market.
Of course, if you’re a potential member you already have a bunch of options to guard against patent risk, such as AST, RPX and Unified Patents. What marks this initiative out, Chernesky explained on a call, is being centred on a specific part of the technological world. Focusing beyond that “is a bit like trying to boil the ocean”, he said: “For our members our goal is to clear all of the really risky patents in this technology area, which we define as end-to-end content delivery.”
As they scope the market for assets to buy Chernesky and co are focusing on grants in six PCT classification codes:
- G06K – Data presentation
- G06Q – Data processing systems
- H04H – Broadcast communications
- G06F – Digital data processing
- H04L – Digital info transmission
- H04N – Television
According to VideoLab’s analysis, almost half of all patents asserted by PAEs in the last 10 years have been from those six codes. The classes cover more than just the collection of IP in the video stack, they also underpin the technology - and for the main players they appear to pose the greatest threat.
Chernesky claimed that the firm has spent “a couple million dollars” analysing the landscape and has pinpointed around 1.5 million patents worldwide that are relevant to a sector that continues to have considerable momentum. “When you look at the broader video market it’s a half a trillion to a trillion-dollar industry,” he highlighted. “It includes all the traditional TV and pay-TV operators delivering content, it includes mobile where the killer app for 5G really is video and it includes Disney+, HBO Max, Netflix, YouTube and others delivering video over the internet - so it’s a huge market with a lot of active patents.”
The VideoLabs head drew a parallel with the wireless sector of the mid-2000s where an already large market was disrupted by the integration of technology into a new generation of mobile devices and by the emergence of new players in the space. We all know how that turned out and Chernesky predicted that that kind of disruption may now play out in video.
“You’re going to have the Nortels and the Blackberrys, you’re going to have winners and losers and it’s going to free up a lot of these patents,” he said. Add in the current state of the video codec space, where competing patent pools and independent IP owners are all vying for licensees’ attention and their dollars, and you have what the Kudelski Group alum described as “an inordinate amount of patent risk”.
Hanging over this platform, as it does with any patent collective, is that if you aren’t prepared to litigate you may end up with a free rider problem by which VideoLabs is essentially clearing a large amount of risk for companies who have declined to join. Chernesky said that they were not ruling out litigation against those found to be infringing VideoLabs’ patents but that building the member base is the top priority.
“Unlike RPX, I’m not willing to say “we won’t litigate” because I just don’t know the future and if I say “I’ll never litigate” then some in the industry will say “cool, I don’t have to contribute” and that would be bad,” he remarked. “So while we don’t have plans to litigate and I don’t expect to litigate, I’m not going to take it off the table.”
Bill Thomas added that if the firm did pursue litigation then any damages it might receive would be ploughed back into the business. “We won’t profit from litigation, we’ll use any profits to continue to acquire or to lower our membership costs over time,” he said.
With such a huge market, a large amount of value tied up in the IP and the potential for major disruption, all operating companies in the space face a not inconsiderable amount of patent risk. The market for VideoLabs would appear to be there but as with any collective it needs companies to sign up so it can buy assets in sufficient number to ultimately make membership worthwhile. “This model only works if the industry sponsors us,” Chernesky conceded.
The leadership group clearly has deep ties in the sector, and experience on both sides of the table negotiating licensing deals, so they’re well positioned to make their pitch. If they succeed the market may have a new kind of defensive operator on its hands.
This article first appeared in IAM. For further information please visit https://www.iam-media.com/corporate/subscribe