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Thursday, May 31, 2001
 Standoff on CD-R royalties nears end in Taiwan
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Message Text: "...Taiwan's top recordable compact disk (CD-R) maker is nearing a deal with Royal Philips Electronics on royalty payments, signaling an impending conclusion to a drawn-out battle between the Dutch electronics giant and the island's numerous disk manufacturers. Ritek is wrapping up the details of a multi-year licensing agreement with Philips that would amount to between 10 percent and 15 percent of the wholesale average selling price per CD-R. Last month, Ritek rival CMC Magnetics settled a similar deal with Philips and agreed to pay 3.5 cents per unit. Together, the two Taiwanese companies account for nearly 50 percent of the global CD-R supply; Taiwan accounts for about 80 percent of the world supply.

In January, Taiwan's Fair Trade Commission (FTC) levied $430,000 in fines against Philips, Sony Corp. and Taiyo Yuden Co. Ltd. for collusion in charging high royalty fees and abusing their CD-R market positions, according to an FTC official.

Philips Research, on behalf of Philips, Sony and Taiyo Yuden, announced in April that four additional Sony patents are likely to be brought into a collective agreement involving a "future revision of the CD-R patent portfolio," which could change the cost of royalty licensing. However, that will not effect Philips' royalties in Taiwan. "In Taiwan, because of the FTC ruling, Philips, Sony and Taiyo Yuden license separately," the Philips spokeswoman said. "Everywhere else Philips collects on behalf of the patent holders and then an internal calculation is made."

Originally the Taiwanese manufacturers cried foul over CD-R royalties that hadn't changed in more than five years, when retail prices for disks were far higher than today. "The price has plunged so quickly, but the royalty has stayed the same. That's not fair," said Sean Lee, an executive at Ritek. Sources familiar with the standoff said some CD-R makers wouldn't open their books to Philips so the company could determine whether royalty payments accurately reflected unit shipments..."

 
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