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AMM          Business Answers MPEG Layer-3 - Version 12.98           [Image]

Technology           ... thank you for your interest in our MPEG
                     Layer-3 audio compression technology. In this
Services             document you will find answers to the most
             [Image]
                     frequently asked questions about licensing of
Applications         MPEG Layer-3 technology and how to contact us.

Partners
             The Fraunhofer Gesellschaft  [TOP]

Download
                     The Fraunhofer Gesellschaft is the leading
Support              organization of applied research in Germany. It
                     operates 47 research centers in Germany with
Gallery              about 9,000 employees, about half of them
                     scientists and engineers. The Fraunhofer
Licensing            Gesellschaft expands to a worldwide
[Image]              Organization, especially in USA and Asia. Home
                     of the Fraunhofer Gesellschaft is Munich,
                     Germany.

                     One of the goals of the Fraunhofer policy is a
                     rapid transfer of innovations into products.
                     The total research expenditure is about US$ 700
                     million.

                     The Fraunhofer Institut Integrierte Schaltungen
                     (Fraunhofer IIS), based in Erlangen, Germany,
                     is one of the 47 research centers. Fraunhofer
                     IIS is the leading international research lab
                     in the field of high quality low bit rate audio
                     coding.

                     Fraunhofer IIS has been the main developer of
                     the most advanced audio coding schemes, like
                     MPEG Layer-3 and MPEG-2 AAC (Advanced Audio
                     Coding). Fraunhofer IIS plays a major role in
                     the ongoing work for the MPEG-4 Audio
                     standardization process and contributes to many
                     other standards bodies as well, like ITU-R
                     TG10/4, ITU-R WP10C, AES and MPEG-IPMP.

                     WWW: [Image]http://www.iis.fhg.de/audio/
                                 http://www.iis.fhg.de/amm/

             THOMSON multimedia  [TOP]


                     The world´s fourth-largest consumer electronics
                     group, THOMSON multimedia develops,
                     manufactures and markets: televisions, VCRs,
                     camcorders, audio and communication appliances,
                     satellite decoders, DVD players, as well as
                     color TV tubes and professional television
                     equipment (studio equipment, TV cameras,
                     mixers, etc.).

                     With its pan-European brands - THOMSON,
                     TELEFUNKEN and SABA - and its American brands -
                     RCA, GE and ProScan - today the group is the
                     leader in the United States, No. 2 in Europe
                     and is strongly increasing its market presence
                     in Asia, Latin America and Eastern Europe.

                     WWW: [Image]http://www.thomson-multimedia.com/
                                 http://www.rca-electronics.com/
                                 http://www.nipper.com/

             1. GENERAL  [TOP]


                     Q. I am interested in source coding technology.
                     What can you do for me?
                     A. Licensing source code, developing real-time
                     DSP code as well as DSP-based hardware, and
                     developing codec libraries for desktop
                     computers is part of the Fraunhofer IIS
                     activities. The focus is on (mobile)
                     high-quality low bit rate audiovisual
                     communications (e.g. digital broadcasting
                     systems or internet services).

                     Q. Regarding MPEG Layer-3, do any patent rights
                     exist?
                     A. As for practically any important technology
                     (and particularly for publicly established
                     standards), you should know that patent rights
                     for MPEG Layer-3 exist. Although others may
                     also hold patents, THOMSON multimedia and
                     Fraunhofer IIS have an important portfolio of
                     patents related to MPEG Layer-3. To facilitate
                     the market acceptance and penetration of
                     products using MPEG Layer-3, THOMSON multimedia
                     and Fraunhofer IIS decided to offer companies,
                     that wish to distribute MPEG Layer-3 products,
                     the possibility to obtain a license under the
                     patents of both parties.

                     Q. Who grants licenses under this combined
                     portfolio to use MPEG Layer-3?
                     A. We have split the licensing activities in
                     two parts:

                       1. THOMSON multimedia handles consumer
                          applications, such as desktop software,
                          broadcast systems, pay-audio services and
                          codec ICs.

                       2. Fraunhofer IIS handles professional
                          applications, such as ISDN codecs based on
                          DSP hardware, developed as part of a R&D
                          project with Fraunhofer IIS.


                     Q. So, whom should I contact?
                     A. You may address your request to any of us,
                     but the descriptions in the previous answer and
                     the rest of this FAQ should give you some
                     guidance. In order to speed up the process, we
                     would appreciate to receive a description of
                     your business model and your expected use of
                     the technology. You will find the contact
                     information at the end of this document.

                     Q. I just want to buy a MPEG Layer-3 software
                     and/or hardware product. What is available?
                     A. Many companies already licensed our MPEG
                     Layer-3 technology and offer those products.
                     Please visit the Fraunhofer web site
                     (http://www.iis.fhg.de/amm/) for more
                     information.

             2. PATENT AND KNOW-HOW LICENSING TERMS AND CONDITIONS
             [TOP]

                     Q. How much royalties or other fees do you
                     charge?
                     A. The rules of ISO/MPEG determine that
                     licenses have to be granted on fair and
                     reasonable terms. For identical applications,
                     we add that the terms are non-discriminatory.
                     The details depend on the application and the
                     specific business model.

                     Q. What kind of licensing models exist?
                     A. To date, we have developed and granted
                     license agreements for the following
                     applications:

                     THOMSON multimedia

                             o Software decoders (see 2.1.)
                             o Software encoders (see 2.2.)
                             o Hardware codecs for consumer-type
                               applications (see 2.3.)
                             o Pay-audio systems (see 2.4.)
                             o Broadcast systems (see 2.5.)

                     Fraunhofer IIS

                             o Professional applications (see 3.)
                             o MPEG Layer-3 Source and Object Code
                               (see 4.)

                     CREDITS

                          In all cases, we expect that MPEG Layer-3
                          products reference the licensors, like:
                          "MPEG Layer-3 audio compression technology
                          licensed by Fraunhofer IIS and THOMSON
                          multimedia".

             2.1. SOFTWARE DECODERS  [TOP]


                     2.1.1. Free MPEG Layer-3 Software
                     Decoders/Players for Personal Use

                     For the free distribution of decoders we do not
                     charge a running royalty. At the Fraunhofer IIS
                     web site (http://www.iis.fhg.de/amm/download/)
                     you can find the players we have developed and
                     which may be downloaded for free also.
                     Fraunhofer IIS does not give any technical
                     support for the free players. E-mails
                     complaining about bugs in free software will
                     not be answered!

                     More in general, no license fee is expected for
                     desktop software decoders/players that are
                     distributed free-of-charge for personal use.

                     2.1.2. Commercial MPEG Layer-3 Software
                     Decoders/Players

                     If MPEG Layer-3 software decoders/players are
                     sold (shareware or commercial software), the
                     royalty per decoder is US$ 1.00. We just remark
                     that we have not asserted our patents against
                     decoders of which less than 10,000 units have
                     been sold.

             2.2. MPEG LAYER-3 SOFTWARE ENCODERS  [TOP]


                     While most of the distribution of MPEG Layer-3
                     software decoders is free of charge, for all
                     MPEG Layer-3 encoders a license is needed and
                     royalties have to be paid.

                     2.2.1. Software Encoders not developed by
                     Fraunhofer IIS

                     If you have developed your own software encoder
                     or acquired a software encoder from another
                     developer than Fraunhofer IIS to run MPEG
                     Layer-3, you have to get a "patent-only"
                     license from THOMSON multimedia; the following
                     royalties apply:


                         1 - 1,000 encoders [Image]   US$ 25.00 per
                                                               unit

                              1,001 - 2,000           US$ 20.00 per
                                   encoders                    unit

                              2,001 - 3,000           US$ 15.00 per
                                   encoders                    unit

                             3,001 - 10,000           US$ 10.00 per
                                   encoders                    unit

                           10,001 - 100,000            US$ 5.00 per
                                   encoders                    unit

                         > 100,000 encoders            US$ 2.50 per
                                                               unit

                     US$ 15,000 annual minimum, payable upon
                     signature and each following year in January,
                     fully creditable against annual sales.

                     The royalty does not include any on-going
                     support from Fraunhofer IIS. This agreement
                     does NOT cover the right to sell MPEG Layer-3
                     encoded data (e.g. in "pay-audio" and
                     "broadcast" systems). These rights are covered
                     by the licenses described under 2.4. and 2.5.

                     2.2.2. "Professional" MPEG Layer-3 Software
                     Encoder

                     The "Professional" MPEG Layer-3 encoder,
                     developed by Fraunhofer IIS, supports bitrates
                     from 8 .. 256 kbps (sample rates 8 .. 48 kHz,
                     mono/stereo). For distribution of the
                     Professional MPEG Layer-3 encoder you have to
                     get a "patent and know-how (professional)"
                     license from THOMSON multimedia (covering the
                     use of all relevant patents as well as
                     know-how); the following royalties apply:


                         1 - 1,000 encoders [Image]   US$ 50.00 per
                                                               unit

                              1,001 - 2,000           US$ 40.00 per
                                   encoders                    unit

                              2,001 - 3,000           US$ 30.00 per
                                   encoders                    unit

                             3,001 - 10,000           US$ 20.00 per
                                   encoders                    unit

                           10,001 - 100,000           US$ 10.00 per
                                   encoders                    unit

                         > 100,000 encoders            US$ 5.00 per
                                                               unit

                     US$ 15,000 annual minimum, payable upon
                     signature and each following year in January,
                     fully creditable against annual sales.

                     The royalty does not include any on-going
                     support from Fraunhofer IIS.

                     This agreement does NOT cover the right to sell
                     MPEG Layer-3 encoded data (e.g. in "pay-audio"
                     and "broadcast" systems). These rights are
                     covered by the licenses described under 2.4.
                     and 2.5.

                     2.2.3. "Advanced Plus" MPEG Layer-3 Software
                     Encoder

                     For applications which do not need an encoder
                     with full MPEG Layer-3 capacity, we believe
                     that the "Advanced Plus" MPEG Layer-3 encoder
                     meets the needs of most customers for personal
                     use. The "Advanced Plus" MPEG Layer-3 encoder
                     is developed by Fraunhofer IIS and supports
                     bitrates up to 56 kbps (sample rates 8 - 24
                     kHz, mono/stereo), with the additional
                     capability to encode 128 kbps stereo at 44.1
                     kHz. For distribution a "patent and know-how
                     (advanced plus)" license from THOMSON
                     multimedia is needed (covering the use of all
                     relevant patents as well as know-how); the
                     following royalties apply:


                           1 - 10,000 encoders        US$ 12.00 per
                                                               unit

                              10,001 - 100,000
                                      encoders    US$ 8.00 per unit

                            > 100,000 encoders    US$ 4.00 per unit

                     US$ 15,000 annual minimum, payable upon
                     signature and each following year in January,
                     fully creditable against annual sales.

                     The royalty does not include any on-going
                     support from Fraunhofer IIS.

                     This agreement does NOT cover the right to sell
                     MPEG Layer-3 encoded data (e.g. in "pay-audio"
                     and "broadcast" systems). These rights are
                     covered by the licenses described under 2.4.
                     and 2.5.

                     2.2.4. "Advanced" MPEG Layer-3 Software Encoder

                     The "Advanced" MPEG Layer-3 software encoder is
                     developed by Fraunhofer IIS and supports
                     bitrates up to 56 kbps (sample rates 8 .. 24
                     kHz, mono/stereo). Please contact Fraunhofer
                     IIS for licensing details.

             2.3. HARDWARE CODECS FOR CONSUMER-TYPE APPLICATIONS
             [TOP]

                     If you have developed an MPEG Layer-3 hardware
                     decoder (DSP or ICs), you have two licensing
                     possibilities:

                        * Integrating a licensed IC (e.g. from
                          Micronas Intermetall), in which case the
                          license fee is paid for by the IC
                          supplier; or

                        * In all other cases the royalty per decoder
                          is US$ 1.25.

                     If you also integrate an encoder into your
                     hardware device, the royalty is US$ 2.50 per
                     unit.

             2.4. PAY-AUDIO SYSTEMS  [TOP]


                     The licenses mentioned under section 2.2 (MPEG
                     Layer-3 software encoders) exclude reselling of
                     MPEG Layer-3 encoded data. To use MPEG Layer-3
                     in a music-on-demand system, where MPEG Layer-3
                     encoded data is sold to end-users, you have to
                     get a "pay-audio" license from THOMSON
                     multimedia; the following terms apply:

                        * 1.0 % of the price to the listener
                          (minimum US$ 0.01 per download).

                        * Reporting is to be based on the system as
                          used by the copyright organizations.

                        * US$ 15,000 annual minimum, payable upon
                          signature and each following year in
                          January, fully creditable against annual
                          sales.

                     We do not charge a royalty for free
                     distribution of MPEG Layer-3 encoded data (e.g.
                     if parts of songs are distributed to promote
                     mail-order CD-sales).

             2.5. BROADCAST SYSTEMS  [TOP]


                     The licenses mentioned under section 2.2 (MPEG
                     Layer-3 software encoders) exclude
                     broadcasting. To use MPEG Layer-3 in a
                     broadcasting system (such as Internet Radio),
                     you have to get a "broadcast" license from
                     THOMSON multimedia; the following terms apply:

                        * Fees charged for broadcasting are based on
                          the gross broadcast income (including
                          advertising and subscription).

                        * Gross broadcast income less than US$
                          250,000 per year, an annual fee of US$
                          2,500; or

                        * Gross broadcast income greater than US$
                          250,000 per year, a royalty of 1 % of
                          gross broadcast income.

             3. MPEG LAYER-3 APPLICATIONS FOR PROFESSIONAL USE
             [TOP]

                     MPEG Layer-3 applications for professional use
                     are licensed by Fraunhofer IIS.

                        * Decoder: US$ 6.25 per unit
                        * Encoder: US$ 25.00 per unit

             4. MPEG LAYER-3 SOURCE AND OBJECT CODE LICENSED BY
             FRAUNHOFER IIS  [TOP]

                     Source and Object Code for MPEG Layer-3 encoder
                     and decoder are licensed by Fraunhofer IIS.

             4.1. SOURCE CODE FOR GENERAL PURPOSE CPU´s (PC´s)
             [TOP]

                     The following license fees apply for source
                     code for General Purpose CPUs (e.g. running
                     under Windows, MacOS and UNIX):

                        * US$ 30,000 for the decoder source code;
                          and
                        * US$ 60,000 for the encoder source code.

                     Please note that you still need a license for
                     products created with the source code (see
                     above).

             4.2. DSP SOURCE AND OBJECT CODE  [TOP]


                     DSP code for efficient real-time
                     implementations of MPEG Layer-3 is licensed on
                     a non-exclusive basis. Typically, we offer a
                     "ready-to-run" implementation, using
                     standard-I/O routines, on one SINGLE target
                     hardware platform, defined cooperatively
                     between our customer and Fraunhofer IIS.

                     The following platforms are supported for MPEG
                     Layer-3:

                        * DSP563xx (Motorola)
                        * TMS320C67 (Texas Instruments)
                        * ADSP21x6x (Analog Devices)
                        * TM-1100 (Philips)

                     Fraunhofer IIS can offer DSP code for any of
                     these devices, but our favorite is the DSP563xx
                     family from Motorola. For a stereo encoder up
                     to 48 kHz sampling rate, you need at least one
                     DSP56303 plus 192 K * 24 bit external RAM, and
                     for a stereo decoder, you need one DSP56303
                     plus 64 K * 24 bit external RAM, or one
                     DSP56309 without any external RAM at all.

                     Please note that you may further reduce the
                     necessary processing power by limiting the
                     operation to mono (half power) and/or to lower
                     sampling rates (e.g. half sample rates mean
                     half power again).

                     Due to several special encoding options, please
                     contact Fraunhofer IIS for licensing details.

             CONTACT INFORMATION  [TOP]


                     THOMSON multimedia

                          Mr. Henri Linde
                          Manager, Licensing & Intellectual
                          Property
                          lindeh@thmulti.com
                          46, Quai Alphonse Le Gallo
                          F-82100 Boulogne Billancourt
                          France
                          voice: +33 1 41 86 52 87
                          fax: +33 1 41 86 0921 or +33 1 41 86
                          5638


                     Fraunhofer IIS

                          Mr. Niels Rump
                          Manager, Business Relations
                          layer3@iis.fhg.de
                          Am Weichselgarten 3
                          D-91058 ERLANGEN
                          Germany
                          voice: +49 9131 776 611
                          fax: +49 9131 776 399


             ROYALTY SUMMARY  [TOP]


                     SOFTWARE CODECS

                        * Decoders: Freeware OK; US$ 1.00 per unit,
                          if sold.

                        * Encoders:

                             o Not developed by Fraunhofer IIS
                               A sliding scale starting at US$ 25.00
                               per encoder, decreasing to US$ 2.50
                               per encoder for more than 100,000
                               units per year.

                             o The Fraunhofer IIS encoders

                                  + Professional encoders
                                    A sliding scale starting at US$
                                    50.00 per encoder, decreasing to
                                    US$ 5.00 per encoder for more
                                    than 100,000 units per year.

                                  + Advanced Plus encoders
                                    A sliding scale starting at US$
                                    12.00 per encoder, decreasing to
                                    US$ 4.00 per encoder for more
                                    than 100,000 units per year.

                     HARDWARE CODECS

                        * Decoders: US$ 1.25 per unit (or paid for
                          by the IC manufacturer)

                        * Encoders: US$ 2.50 per unit having a
                          encoder or full codec

                     MUSIC DISTRIBUTION

                        * For pay-audio, music-on-demand,
                          internet-radio and other types of selling
                          mp3 files, the royalty is 1% of the
                          revenue (minimum US$ 0.01 per download).

                     MINIMUM ROYALTIES

                        * All agreements with running royalties have
                          an annual minimum of US$ 15,000,
                          creditable against annual royalties.

                                          [TOP]

[Image] Copyright ©1998 Fraunhofer-Gesellschaft
