Royalty charges to decrease for Taiwanese CD-R output

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Tuesday, May 25, 2004

Royalty charges to decrease for Taiwanese CD-R output

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Taiwan’s Intellectual Property Office (IPO) of the Ministry of Economic Affairs will make its judgment later this month on a lawsuit filed by Taiwanese optical disc makers against Philips to challenge royalty charges. Leading local makers are remaining silent about the case although the judgment is expected to be favorable.

The IPO has been examining this case since 2002. The accusers demanded that Philips reduce its CD-R royalty charge rate from 4.5 cents per disc to 0.45 cents (90% discount).

The US International Trade Commission (ITC) on March 11 this year ruled against Philips in a case charging Taiwanese makers Gigastorage and Princo with infringement on six CD-R/RW patents. As the ITC decision is expected to be a good reference for Taiwan’s IPO, the Taiwan agency may decide in favor of the accusers by imposing a compulsory reduction in royalty charge on Philips, institutional investors indicated.

Any reduction in royalty charges will only apply to CD-Rs for sale in Taiwan. For top manufacturers in Taiwan, such as CMC Magnetics, Ritek and Prodisc Technology, domestic sales account for less than 5% of their total revenues and so they are not really concerned about the IPO’s judgment, although they will be pleased to see a favorable result.