History (1999): Lots of Confusion on DVD Patents

Confusion continues to be the chief characteristic of the royalty issue for DVD disks and drives.

In June, six major corporations in the DVD Forum, namely Hitachi, Matsushita Electric, Mitsubishi Electric, Time Warner, Toshiba and JVC have commenced a licensing program for patents concerning DVD-Video and DVD-ROM players and disks, as well as DVD decoders.

The fees amount to:

• 4% of net drive selling price, with a $4 minimum,
• 4% of the net decoder selling price, with a minimum of $1,
• $.075 per disk.

This patent agreement was accepted by the US Department of Justice, which also approved a second plan, proposed by Philips, Sony and Pioneer. Under their arrangement, the disk manufacturers will have to pay:

• for disks, an initial fee of $10,000, of which $5,000 is creditable vs. running royalties of $.05 per disk,
• for drives, an initial fee of $ 10,000, of which $5,000 is creditable vs. running royalties of 3.5% for each player, with a minimum of $5 per device.

Philips also plans to demand a sub-licensing fee of $.03 per disk for MPEG-2 patents and $.20 per AC-3 audio channel.

This probably won’t be the end of it, since companies such as Discovison Associates and Thomson Multimedia, which also retain patents for the technology, will also want their piece of the pie.

DVD manufacturers, however, do not seem to be falling over themselves to pay these royalties.

On the Philips web site dedicated to its optical licensing activity, only 4 companies appear to have registered for DVD disks: Jackin Optical Technology (Hong-Kong), Societe Nouvelle Areacem (France), Takt (Poland) and Vogue Trading Video (Belgium).

This article is an abstract of news published on issue 139 on August 1999 from the former paper version of Computer Data Storage Newsletter.