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Thursday, January 08, 2004
Mobile phone makers face MPEG4 patent royalties

MPEG LAbegan to impose royalties on patent technologies this year, domestic mobile phone makers will have to pay royalties for 3G handsets amounting a maximum of 4 million dollars a year.

Industry sources said on January 7 that mobile handset makers, except Samsung Electronics, LG Electronics and Pantech & Curitel, were bound to pay millions of dollars of royalties when they use MPEG4 technologies for their 3G handsets that feature mobile images.

MPEG LA is entrusted to license and manage some 150 MPEG4 technologies, the next-generation mobile image compression technologies, developed by 22 companies worldwide. Among domestic firms, Samsung Electronics, Pantech & Curitel, and LG Electronics own 10, 5 and 3 visual licenses, respectively.

Dividing into visual and system segment technologies, MPEG LA will reportedly levy royalties either on lumpsum or running royalty basis which will be different in amount depending on adoption of encoder or decoder technology.

In case of adopting both the encoder and decoder technology simultaneously, the mobile phone maker is required to pay a lumpsum royalty of 2 million dollars per segment. Running royalty will be free for the first 50,000 units of handsets sold, but the handset maker need to pay royalties of 0.4 to 0.5 dollars per unit for those exceeding that quantity up to 2 million dollars.

Most mobile phone makers except the three, therefore, will have to pay royalties of a maximum of 4 million dollars annually for 3G gears. Patentees are also obliged to pay royalties when they use others' patent technologies.

In particular, mobile handset firms will have to pay patent royalties for MPEG4 technologies beginning in the latter half of this year as Qualcomm, the largest CDMA chipset vendor, is set to roll out new chipsets that support MPEG4 during the first half. And, patentees of MPEG4 audio technologies including Dolby are mulling to levy royalties, resulting in a raise in production costs of mobile phones.

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