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Wednesday, January 26, 2005
Chinese DVD player makers sue consumer giants over royalties


Two Chinese DVD player manufacturers have sued consumer electronics giants Philips, Sony, Pioneer and LG Electronics, alleging they violated U.S. antitrust laws in the licensing of patented technologies.

The class-action suit was filed on behalf of Chinese DVD manufacturers Wuxi Multimedia and Orient Power Digital Technology. The four companies currently offer a joint patent license program administered by Philips. The license program covers essential patents for DVD-Video and DVD-ROM.

At a time when DVD system manufacturers are up against stiff price competition around the world, this is one of the first cases in which Chinese DVD manufacturers have looked to the courts in hopes of narrowing the disparity between the IP haves and have nots in the consumer electronics industry.

The move also illustrates long-standing Chinese irritation over having to pay royalties to entrenched companies.

If Wuxi and Orient succeed, they will seek refunds for royalty payments made by Chinese DVD player makers over the past three to four years, plus a punitive claim that would triple the refunded royalty payments, according to reports.

While Philips and its partners claim they own a number of patents and have DVD patent applications pending, they are not alone in asking for royalties on DVD disks and players.

Since the DVD Forum failed to come up with a formula for DVD IP licensing at the inception of the DVD standard, system manufacturers must deal with two competing patent pooling organizations for DVD IP licensing.

A Philips-led 4C group, the defendant of the lawsuit, is one of the two patent pooling organizations. Both are independently collecting royalties from manufacturers.

The lawsuit, however, does not involve another DVD IP licensing group called 6C. It members are Toshiba Corp., Matsushita Electric Industrial Co. Ltd., JVC, Mitsubishi Electric Corp., Hitachi Ltd. and Time Warner Inc.


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