China doesn't pay royalties. Proposes AVD standard........
eetasia.com
China threatens rival spec to dodge DVD royalties
Posted : 15 Jan 2001
Under public pressure to pay what they consider excessive royalties on DVD products, manufacturers in China are threatening to roll out their own specification for DVD-like disks and players for the Chinese market. The spec for China's so-called Advanced Video Disk (AVD) technology, which foreign companies would be required to license for products they sell in China, could be published this year if DVD royalty issues are not settled. But industry sources outside mainland China said AVD may be a ploy to gain leverage in negotiations over DVD royalties.
Chinese manufacturers raised the topic of the new AVD standard after members of the DVD Forum said at the 2001 International Consumer Electronics Show that they are stepping up efforts to get DVD system manufacturers to pay intellectual-property royalties, which can amount to as much as 10 percent of DVD hardware's total cost.
"The unilateral high royalties will be very harmful for the global industry and customers. It sets up a terrible barrier to further negotiation and cooperation," said Jin Zhenglong, secretary general of China Audio Industry Association (CAIA), which represents about 90 DVD and video CD player manufacturers in China. "It probably will drive Chinese manufacturers to give up on the DVD format. It also means foreign companies [will] need to pay high royalties for adoption of China's homegrown format in this growing market."
But Lu Shuh-tai, director of the Optical Electronics and Systems Laboratory in Taiwan, said he believes the Chinese government "wants to negotiate with the DVD Forum to see if it can get greater benefits from the royalties." The proposed AVD spec could be used "as leverage," Lu said.
Difficult decision
China has already demonstrated an ability to establish its own standards, when it successfully rolled out the Super Video CD standard as an alternative to the Video CD standard developed by Philips, JVC, Sony and Matsushita. Those latter companies never succeeded in collecting royalties from China for the Video CD standard. However, backing China's AVD spec would be a difficult decision for some manufacturers here that already hold a significant stake in the global DVD market.
China's largest DVD manufacturer, Jiangshu Hongtu High-Technology Co. Ltd (Zhenjiang, China), exported nearly 1 million DVD players to the United States in 2000. The company vows to become the top DVD manufacturer in the world—an ambition it shares with many other DVD manufacturers here.
The creation of an entirely new spec presents other difficulties, said Mark Huang of AOpen Inc. (Taipei, Taiwan), a leading maker of DVD-ROMs. Huang said he would be surprised if China's AVD spec was truly a new standard, and said it was more likely to be a hybrid that would still use patented technology from the DVD Forum and other DVD patent holders.
"How can the AVD standard avoid using some of the technology, which is also backward compatible with VCDs?" Huang said. "That would be very difficult."
Maintaining compatibility with system components would also be problematic, he said. "And most of those components originate in Japan. So it will be difficult to avoid the royalties," Huang said.
Negotiations scheduled
Because China is a leading source of DVD players, the DVD Forum established a lab with China's Ministry of Information Industry last December, according to Tian Yujing, director of the DVD Authentication Lab of China. "Local companies are passing the strictest tests here for meeting the requirement of DVD Forum."
The joint lab is located in the MII's Electronic Audio and Video Institute, one of China's most important technology and standards bodies for consumer electronics and broadcasting equipment. The institute is expected to have a key role in China's decision on an AVD standard.
Despite China's threat to move forward with AVD, negotiations over royalties continue with DVD proponents, with a new round of talks set to begin Monday (Jan. 15) in Beijing. The outcome of the talks may determine the future for ACD.
A delegation from the so-called 6C group—six companies that have formed a DVD patent pool, involving Toshiba Corp, Matsushita Electric Corp., Victor Co. of Japan (JVC), Mitsubishi Electric Corp., Hitachi Ltd and Time Warner Inc.—will meet China's MII on Monday. Then they will fly to Shanghai to negotiate with CAIA.
The 3C group—another patent party comprised of Philips Electronics, Sony and Pioneer—also has ongoing negotiations with CAIA. Last year, CAIA and Dolby Laboratories Inc. reached an agreement on the licenses and royalties of the AC-3 audio spec for DVD. Chinese manufacturers received a preferential rate from Dolby by counting all output together under CAIA. Dolby collects royalties in China with assistance from CAIA.
China's government and manufacturers regard DVD as a key product to internationalize their consumer electronics industry. Many of China's manufacturers are members of the DVD Forum and as such are willing to pay DVD royalties once they can sort out the issues of the patent portfolio behind DVD, which is said to include as many as 2,000 patents. However, suggestions that the royalty rate could be close to 10 percent of hardware costs have raised hackles for a DVD industry where margins are narrowing.
"What we want is reasonable and suitable treatment and win-win results for all parties involved," said an MII officer. "But the DVD Forum's unilateral actions before any agreement will make things worse. I think all arguments are caused by their worries about tougher and tougher competition from Chinese manufacturers.
"CAIA has held many bilateral talks with 6C, 3C, Dolby and other parties since last year," the officer added. "That indicates that we faithfully respect intellectual property. But I don't understand why the DVD Forum suddenly released the money-collection plan at this moment, for our talks are still ongoing."
— Sunray Liu
EE Times |
