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Can anyone answer this: what is the legal theory behind this "downstream liability" where someone who creates a video, transcodes it to something other than H.264, and then releases the video under a creative commons BY-SA license, and then someone else comes along and becomes liable for patent royalties because of a previous person in the remix chain having used H.264?

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I don't think there is such a thing[1].

This idea might have come from the liability that can come downstream if an unlicensed (or inappropriately licensed) encoder was used to create the asset. I could see an argument for making the end distributor liable for the encoding royalty.

[1] If the file really is in another format and not just an obfuscated H.264. Judges aren't generally idiots and don't like it when you suggest they are.

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