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Friday, March 04, 2005
Taiwanese 6C alliance lowers DVD royalty fees

The 6C alliance, a DVD patent pool group composed of Hitachi, Matsushita Electric (with brand name Panasonic), JVC, Mitsubishi Electric, Toshiba, Time Warner and IBM, on March 2 announced a reduction in its DVD royalty charge rates by 10%-25%, effective on June 30 this year and retroactive to January 1, 2005.

In response, major manufacturers of optical discs and optical disc drives in Taiwan expressed the belief that they would not benefit substantially from the royalty cut.

BenQ, Lite-On IT, Quanta Storage, Asustek Computer and Hon Hai Precision Industry (with Foxconn as trade name), almost all of the makers of DVD-ROM drives and DVD burners in Taiwan at present, have already cooperated technologically with the 6C alliance or the 3C alliance (Philips Electronics, Sony, Pioneer, LG Electronics) or 1C (France-based Thomson) at more or less different modes, and therefore the royalty reduction by the 6C alliance does not mean much for them.

For leading Taiwanese makers of blank DVD discs such as CMC Magnetics and Ritek, OEM prices have dropped to US$0.3-0.5 of which the current royalty fees account for as much as 15%-25%, leaving the decrease of US$0.01 (from US$0.075 to US$0.065) in royalty payment to count for little, Taiwanese makers of optical discs pointed out.

However, makers of DVD players/recorders in China are expected to benefit considerable from the royalty cut, for most of them are not under licensed use of 6C, 3C, or 1C patents. According to Zhonglun-Kumtong, a Beijing-based law firm authorized by the 6C alliance for the China market, the alliance will amend its licensing program to offer many choices of using its patents and adjust down royalty charge rates for some patents for Chinese makers.

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