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What do people mean when they say the h264 video codec is "patent encumbered"? What restrictions are there to the usage of h264? I've been using the free Handbrake transcoder to encode h264 videos and using the free VLC media player to decode h264 videos. I didn't have to pay a dime to encode and decode h264. So why is Firefox and Chrome shying away from supporting h264 in HTML5 and instead developing their own inferior codecs such as VP8 and Theora?

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Interesting question, although saying that VP8 and Theora are "inferior" codecs is subjective, to say the least. Some might say that they're far superior. –  nhinkle Jun 20 '11 at 2:32
    
@nhinkle Visually, they are inferior, which I believe has already been proven experimentally. In terms of coding efficiency, it may be argued as well. One thing they're good at however is coding speed. @JoJo Note that Chrome and Firefox are not developing their own codecs. VP8 was bought by Google (and rebranded to WebM) but developed by a company called On2. Theora was originally derived from VP3 (which happens to be developed by On2 as well). –  slhck Jun 20 '11 at 3:59

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It is considered encumbered because there is a group (MPEG LA) which manages the portfolio of patents which make up the H.264 standard. The license for H.264 (AVC) states:

Includes right to manufacture and sell AVC encoders and decoders with the right of End Users to use them for personal and consumer (including internal business) purposes without remuneration but not for other uses

This means you don't have to pay to use H.264 software because that allowance has been bestowed upon you (but could be taken away from future implementations of the standard if MPEG LA so chose). For example, they could update the software but say this new version no longer has the allowance for free individual use, so you are stuck with outdated software.

The real reason Firefox, Chrome, et al., want to move away is that vendors and manufacturers do have to pay royalties, and again they could at any time lose access to future licensing. If H.264 becomes the de facto standard (which it is becoming, or has already become), then large companies who build their platforms on top of "encumbered" technologies like H.264 (e.g. YouTube, Vimeo, most Flash video sites, etc.) are then beholden to the whims of this monopoly which Google, etc. didn't like and had the resources to avoid (see WebM).

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Interesting side note: Adobe's yearly patent costs for h.264 are estimated to be $5.000.000 (researched it once, lost the reference though). –  slhck Jun 20 '11 at 4:12

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