Every time you stream a show on a smart TV, join a video call from a laptop, or scroll through short-form video on your phone, you’re relying on decades of compression technology that most people never think about. Video codecs, the software that shrinks massive raw video files down to something your internet connection can actually handle, sit quietly underneath nearly every screen-based experience in modern life. What’s less visible is the licensing system that funds the research behind those codecs, and a renewed industry conversation about fair, reasonable licensing terms is worth understanding, especially as video quality keeps climbing toward 8K and beyond while streaming volume grows every year.
At the center of this system are standard-essential patents, commonly called SEPs, which cover technology that becomes mandatory to implement once an industry formally adopts a given codec as a shared standard. Companies including InterDigital have spent decades developing the underlying compression techniques that made successive generations of video standards possible, from AVC through HEVC and now VVC, the newest codec generation aimed at squeezing even more video quality out of the same bandwidth. According to InterDigital’s own description of its history, the company positions itself as one of the earliest pioneers in this space, having helped define digital cellular standards before expanding into video compression research that now touches smartphones, tablets, laptops, TVs, headsets, and streaming platforms across the industry.
The economics behind this system follow what industry groups describe as a virtuous cycle of innovation, and it’s worth walking through because it explains why licensing terms matter so much to how the whole ecosystem functions. Companies typically invest heavily, often hundreds of millions or billions of dollars collectively across an industry, into developing new codec technology years before any standards body formally adopts it. Only after a codec achieves genuine market success and gets widely implemented across devices and services do patent holders begin licensing those standard-essential patents, and they’re generally required to do so under what’s known as FRAND terms, meaning fair, reasonable, and non-discriminatory licensing conditions. That structure is meant to strike a balance: patent holders get compensated for research investment made years earlier, while device makers and service providers get predictable, non-discriminatory access to technology that’s become industry-standard rather than facing arbitrary or wildly inconsistent licensing costs depending on which company they’re negotiating with.
In practice, licensing happens through two main paths. Implementers, meaning the TV manufacturers, chipmakers, and streaming services actually building products around these codecs, can negotiate directly with individual patent holders, or they can go through patent pools that bundle licenses from multiple SEP owners into a single agreement. That pooled approach has become increasingly common because negotiating separately with dozens of different patent holders for a single codec standard would be impractical for most manufacturers, particularly smaller companies without dedicated legal and licensing teams. Sisvel, one of the more established players running these pooled licensing programs, has described how its early efforts around standards like DVB-T2 struggled initially before evolving into a more balanced program that eventually covered more than 2,100 declared-essential patents and secured deals with over 200 technology users, including nearly every major device manufacturer in that particular market.
Recent licensing activity gives a concrete sense of how this plays out commercially. InterDigital announced in January 2026 that it had signed a new patent license agreement with LG Electronics, covering LG’s digital TVs and computer display monitors under a joint licensing program the company runs alongside Sony. The agreement spans several underlying technologies beyond video codecs specifically, including ATSC 3.0 broadcast standards and Wi-Fi, reflecting how modern consumer electronics licensing has expanded well past pure video compression into the broader web of connectivity and broadcast standards a single television now needs to support. Julia Mattis, InterDigital’s Chief Licensing Officer, characterized the deal as reflecting the company’s broader positioning around advanced video compression, broadcast technology, and Wi-Fi as increasingly essential across a growing range of connected devices, framing LG’s position as one of the world’s largest TV manufacturers as a significant validation of that licensing approach.
Why does any of this matter to someone who just wants to watch a show without buffering? The honest answer is that it shapes the pace and cost structure of the entire consumer electronics industry in ways that ultimately reach device prices and available features. When licensing terms are genuinely fair and predictable, manufacturers can plan product development and pricing with confidence, patent holders keep investing in the next generation of compression technology, and consumers eventually benefit from better video quality at lower bandwidth costs. When licensing disputes drag on or terms become unpredictable, the friction shows up eventually in higher costs passed through the supply chain, or in slower adoption of newer, more efficient codec standards that could otherwise reduce the bandwidth every streaming service and broadcaster needs to pay for.
The video codec landscape also isn’t without genuine competitive tension. Alongside the patent-licensed standards like AVC, HEVC, and VVC, an industry consortium built AV1, a royalty-free codec backed by major tech companies specifically to offer an alternative that avoids traditional per-unit licensing fees altogether. That competition has arguably pushed the licensed codec ecosystem toward more transparent, streamlined licensing programs than existed a decade ago, since patent pools now have to compete not just with each other but with a genuinely royalty-free alternative gaining real adoption across streaming platforms.
As video resolution standards continue climbing and streaming volume keeps growing globally, the underlying licensing framework supporting codec development will likely keep drawing attention from regulators, device manufacturers, and patent holders alike. Whatever direction individual disputes take, the basic mechanism, years of upfront research investment eventually recouped through fair, standardized licensing once a technology proves itself at scale, remains the foundation making today’s high-quality, low-bandwidth video experience possible on virtually every screen in your home.
More detail on standard-essential patent licensing is available through InterDigital’s official licensing resources. For more coverage of consumer electronics and streaming technology, visit Techora.
