DTV Royalties Challenged by Group Claiming Patent Fees Are Too High
Americans are overpaying for DTV sets because of exorbitant royalties levied by patent holders that license the technology on unreasonable and discriminatory terms, a group that includes TV makers Vizio and Westinghouse Digital claimed Friday. In a petition due to be filed with the FCC Friday, the group was to ask the commission to initiate a rulemaking to regulate the patent fees, and to impose fines on licensors judged to be non-compliant.
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Compared with DTV patent licensing process elsewhere in the world, licensors in the U.S. “operate in an un-regulated ‘Wild West’ without supervision or accountability,” said the Coalition United to Terminate Financial Abuses of the Television Transition (CUT FATT). “As a result, American consumers pay $20 to $30 per television for intellectual property rights that cost about $1 elsewhere in the world,” the self-styled CUT FATT group said. Although its news release didn’t identify its membership, a 34-page draft of the petition to the FCC identified Vizio and Westinghouse as members.
“American consumers will purchase more than 45 million DTVs and will be overcharged more than one billion dollars in the crucial digital transition years of 2008 and 2009 alone,” CUT FATT said. “These excessive patent costs hit the poorest Americans the hardest and place hugely disproportionate burdens on Americans that rely on free over-the-air broadcasting to watch television.”
The petition urges the formation of licensing pools for essential DTV patents, and strict FCC policing of which patents are essential for ATSC reception -- compared with non-essential patents that are bundled in to boost fees. The group’s news release made scant mention of the MPEG LA licensing pool, which provides one-stop-shopping for many essential DTV patents. Those include a $2.50 fee for DTV’s MPEG-2 compression, and $5 for a variety of ATSC patents that include the Zenith-developed 8-VSB modulation system. It wasn’t clear how CUT FATT arrived at $20 to $30 in royalty charges for DTVs sold in the U.S.
The FCC “will review the petition and, if necessary, take appropriate action to address any concerns,” an agency spokesman told us Friday. Spokespersons for Sen. John Kerry, D-Mass., who has taken an interest on the issue of DTV patents, didn’t reply to our queries. Zenith-owner LG, which owns many basic DTV patents, declined comment pending review of CUT FATT’s petition. A CEA spokesman said: “As a trade association and ANSI-accredited standards developer, CEA does not communicate with companies on any specifics regarding patent licensing. Therefore, we are not in a position to comment on the specifics of the petition. It is important to note, however, that digital television prices have come down significantly in recent years, from an average unit price of $1,537 in 2004 to a projected average unit price of $761 in 2009, to the benefit of all U.S. consumers.”
CUT FATT wants the FCC to declare that U.S. DTV patent royalties automatically violate commission rules against unreasonable and discriminatory license terms if those royalties “exceed international or industry comparables” by more than 50 percent, the petition said. Any party claiming to hold “essential” DTV patents should have the burden of proving that essentiality and that its licensing terms are reasonable and nondiscriminatory, it said. Any patent holder that refuses to disclose license terms should be presumed to “discriminate among licensees,” it said.
CUT FATT wants the FCC to fine patent holders at least $250 for each DTV set sold in the U.S. as punishment for trying to collect royalties “on terms that are either unreasonable or discriminatory,” the petition said. The commission also should impose a fine of $11,000 for each set blocked from import or sale “if the blocking party has refused to license an essential DTV patent to the excluded manufacturers on reasonable and nondiscriminatory terms,” the petition said.
The FCC has “wide discretion” in what fines it may levy for serious violations, the petition said. “The callous price gouging of American consumers disclosed in this petition and in other matters that have been brought to the attention of the Commission by other parties are willful and far more egregious violations than operational errors leading to sale of noncompliant sets,” such as Syntax-Brillian’s violation of the DTV tuner mandate, it said: “The proposed forfeitures are consistent with fines the FCC has previously assessed for violations of its DTV tuner and analog labeling rules, and the FCC could impose these forfeitures without any advance declaration.”
The FCC should also issue a rulemaking notice proposing adoption of “light touch” licensing of essential DTV patents, the petition said. All holders of essential patents would be required to identify those patents and “state all terms on which those patents have been licensed within 30 days of the effective date of the rule,” it said. They would be given 90 days to form a patent pool under the watchful eye of the agency, it said. “If any patents deemed to be essential are excluded from the pool by their owners, the essentiality and licensing terms for those patents should be separately subjected to public comment and FCC review for reasonableness.”