MPEG-LA's proposed royalty scheme includes a fee of US $1.00 per handset and 1% of any transaction revenues from wireless content services that use the OMA DRM 1.0 standard. Several such services exist today.

The INDICARE Monitor article was written by Renato Iannella, currently a researcher at the National Institute of Information and Communications Technology in Australia, and Susanne Guth, a professor at the Unversity of Vienna.  Dr. Iannella is the inventor of the Open Digital Rights Language (ODRL), which the OMA chose to use as the basis of the rights expression language (REL) designed into the OMA DRM standards, and Dr. Guth is a Program Chair of the International ODRL Workshops.  Both are private contributors to the ODRL Initiative.

In the article, Iannella and Guth attack not only the MPEG-LA royalty scheme but also some of the specific patents in the pool -- ContentGuard's patents on the use of RELs in DRM implementations, mainly U.S. Patent No. 5,715,403 and its European counterpart EP 0 715 244 B8 -- for their validity in general as well as their applicability to OMA DRM implementations in particular.  Although discussions of the '403 patent's applicability to OMA DRM have taken place in private, this article is the first public assertion against this intellectual property -- a warning shot across the bow that could lead to a drawn-out battle in court. 

As for the characterizations in the two trade associations' statements: at one level, they amount to the usual posturing that such organizations do on behalf of their membership, especially when it comes to statements that the member companies themselves would find distasteful to make in public.  In this sense, these statements reflect remarks that executives of mobile device vendors made to the press a month ago. 

Yet the GSM Association's statement goes further; it is stronger than the MEF's call for more reasonable royalties and suggestions of other licensing schemes as models.  While acknowledging the drawbacks of proprietary solutions compared to open standards, the GSM Association implies that any royalties on DRM patents are unacceptable.  It also calls for a review of "credible alternative" DRM technologies for mobile content, with the goal of recommending solutions to the Association's members as alternatives to the OMA DRM standards, and it has set a deadline of next Monday (April 11) for DRM vendors to submit proposals. 

The GSM Association's statements are, of course, best viewed as a negotiating gambit, especially since its proposed technology "beauty contest" pushes the boundaries of some antitrust laws.  If taken at face value, however, we would almost want to use the GSM Assocation's same characterizations ("impractical, excessive and short-sighted") to describe its own statement.

If mobile carriers end up shying away from the OMA DRM standards and adopting proprietary DRM solutions, then two things will probably happen.  First, MPEG-LA -- or some subset of its patent contributors, which include InterTrust as well as ContentGuard -- may solicit the vendors and implementers of those proprietary technologies for licensing fees instead.  The patents in the MPEG-LA pool cover many aspects of DRM implementation in general, not those that are specific to OMA DRM and not just RELs. 

Secondly, the odds are good that "credible alternative DRM solutions," as a practical matter, means "Microsoft" -- an outcome that the mobile device industry was presumably hoping to prevent through its rapid embrace of OMA DRM.  (Microsoft already licenses both InterTrust's and ContentGuard's IP.)  Prior to the advent of OMA DRM, there were a few vendors with proprietary DRM technologies for the mobile market, such as US-based Lockstream (recently acquired by conditional access vendor Irdeto Access).  But these small vendors have thrown in their lot with OMA; reverting to their proprietary technologies may be onerous for them and would, as mentioned above, be unlikely to dodge the patent coverage issue. 

For the mobile industry, the only outcome of this situation that would be worthwhile is the negotiation of DRM patent royalties that device makers, software vendors, and wireless carriers can live with.  Certainly companies like ContentGuard and InterTrust, whose core business is patent licensing, aren't going to go away.  And even if some subset of the mobile industry challenges ContentGuard's '403 patent in court, along lines that Iannella and Guth's article suggests, other patents in the MPEG-LA portfolio remain at issue.  

In this light, the GSM Association's stance also has a subtext of goading the OMA itself into getting directly involved.  The OMA -- not a very communicative organization to begin with -- actually dissociated itself from this squabble in a public statement a month ago. 

There are reasonable approaches to take in negotiating fairer royalty schemes.  One is to pass the royalties on to the content owners, who, after all, have the only direct incentives to protect their content from piracy.  This is harder work, because it involves either keeping accurate records of the ownership of content involved in mobile services -- or, if that's not possible, instituting the kind of "dumb and easy" scheme that is the mirror image of the device levies that no one really wants. 

Another approach to more reasonable royalty schemes is one that encourages the mobile carriers' experimentation with OMA DRM-based content services rather than penalizing them for it.  This could be done by eliminating the requirement that the royalties be retroactive to all OMA DRM implementations and establishing thresholds of revenues, subscribership, or device unit volume that must be exceeded before royalties apply.  Without provisos like these, carriers and device makers have limited incentives for using the OMA standards. 

At this moment, OMA DRM looks like the only viable alternative to a Microsoft-dominated future for DRM in the mobile content industry -- especially given Apple's lack of success in launching iTunes onto mobile handsets through its stalled deal with Motorola.  Competition is necessary to develop consumer-friendly solutions, and even though several services can use the same DRM and still compete with one another, competition at all levels of technology can only improve matters for consumers and thus help dissuade them from obtaining content illegally.  And, of course, open standards like OMA DRM intrinsically encourage such competition.  Yet even Microsoft itself -- ever conscious of antitrust scrutiny in Europe, where the OMA standards are most rapidly taking hold -- should hope for a successful outcome to the negotiations between MPEG-LA and the mobile industry.

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