Digital-TV patent pool draws fire in Europe
By Junko Yoshida
EE Times
(11/24/98, 5:58 p.m. EDT)
GENEVA — As European broadcasters this month begin airing terrestrial
digital-TV signals, the issue of intellectual-property rights related to the
Digital Video Broadcast-Terrestrial (DVB-T) standard is raising hackles
among industry leaders here.
Four of the biggest companies in consumer electronics and
telecommunications worldwide — Philips, Matsushita, CCETT and Victor
Co. of Japan (JVC) — are gearing up for a war of wills against Europe's
major set-top vendors over what the latter regard as sky-high royalties for a
handful of patents. The companies have agreed to offer a joint licensing
program on a dozen essential patents related to DVB-T, with Philips acting
on behalf of all four in collecting royalties.
The dispute, which is likely to affect the ultimate terms of royalty rates and
their structure, could have far-reaching implications for a global community
of set-top box vendors, TV manufacturers planning to integrate a terrestrial
digital-TV decoder and even PC companies that want to launch
DTV-capable multimedia PCs in Europe, based on the DVB-T standard.
Philips, Matsushita, JVC and CCETT claim their patents — 12 in all —
were found to be essential on framing structure, channel coding and
modulation for DTV.
EE Times has learned that the royalty proposed is around $3.50 for each
set-top box designed to receive DVB-T-based digital-TV signals. Separate
royalties are proposed per transmitter for broadcasters. The latter rate
varies depending on the power of a transmitter, according to industry
sources. If the companies' initial proposal is adopted, consumer system
companies will be forced to shell out more than 7 percent of a set-top's cost
(in the case of a $500 DVB-T decoder box) to the four companies.
Toon Groenendaal, a member of the patent department at Philips
International B.V. (Eindhoven, Netherlands), declined to comment on the
details of the proposed licensing program, noting that the initial proposal —
currently floating around the industry — won't become final until early next
year. He acknowledged, however, that the four companies will work in
tandem, and that Philips likely will be charged with collecting the royalties for
all.
Patent pooling is being fostered by the DVB Project, an industry group
based here that is developing digital-video broadcast standards in Europe.
DVB members, among them leading European set-top manufacturers such
as Pace and Sagem, learned the four companies' initial proposal under a
non-disclosure agreement through the IPR Module, a unit of the DVB
Project dealing with intellectual-property issues.
Carter Eltzroth, chairman of the IPR Module, said that DVB members now
have an opportunity to respond to that proposal. Details will be further
discussed here at an IPR Module meeting on Dec. 1. As with any
commercial negotiations, "debates could be quite vigorous," Eltzroth
indicated.
Some DVB members were quick to express their displeasure when asked
about the initial proposal floated by the four patent holders. Objections
ranged from the royalty rate itself or the way it's structured to how the four
companies decided that $3.50 per set-top was a fair price.
The royalty issue affects not just set-top vendors, but also any system
companies thinking about launching TV, PC, DVD or any other
consumer-electronics devices with DVB-T receiver capabilities.
"We cannot see the justification, or its reasonableness to pay, until we see
actual details of patents that those companies claim to have," said Anthony
Dixon, director of legal services at Pace Micro Technology plc. The initial
proposal has not disclosed those details, Dixon said.
An engineering manager working for a French set-top vendor, who spoke
on the condition of anonymity, said, "We are not happy about this at all." He
pointed out that set-top vendors today would have to pay a host of
royalties, including MPEG-2 video, Dolby Digital and Musicam, besides this
DVB modulation-scheme royalty.
Of even greater concern, some said, is the flat-rate structure proposed. "We
may be able to accept, say, such a term as paying 5 percent of total system
cost in the first-generation set-top box," the executive of the French system
company said. "But as the market expands and the cost of set-tops goes
down, it would be unacceptable for us to keep paying such a huge amount
of money for each box."
Dixon of Pace Micro agreed. "The rate should decrease as the price for a
set-top falls or volume for the set-top goes up," he said.
Further, $3.50 per set-top struck many DVB members as too high a price
for 12 essential patents held by a mere four companies. One vendor, who
asked for anonymity, pointed out that MPEG L.A., a licensing agency for
MPEG-2 video intellectual property, is asking each company to pay "$4 per
MPEG-2 video decoder, but that standard involves more than 52 patents
and a consortium of many essential patent holders."
Others observed that broadcasters may have to pay not just royalties
associated with transmitters they've built, but also royalties for set-tops, as
some of them are initially subsidizing the cost of terrestrial DTV receivers.
But in the end, "it'll be consumers who pay for this," Dixon said.
That intellectual property should become a hot potato is no surprise to DVB
members, according to Eltzroth. "Since day one of the formation of the DVB
Project in 1994, we've explored the IPR [intellectual-property rights] issues
through an ad hoc group," he said. "As a result of forming a separate IPR
Module, we've had more than two years to put the whole thing together."
Fearful of any blocking patents that would slow down the launch of DVB,
the DVB Project established an explicit IP policy. It made sure that every
DVB member participating in the development of DVB standards signs an
agreement to provide their IP in a fair, reasonable and non-discriminatory
manner. The IPR Module, meanwhile, has also been working to forge a
patent-pooling arrangement.
After setting a deadline on declarations from anyone claiming to have
essential patents on any of the DVB standards, the DVB Project hired
Robin Boxall as an independent specialist to investigate each claim. The
results of his review revealed that no one was declaring patents essential to
either satellite or cable digital-TV standards. But Boxall found claims related
to DVB's terrestrial digital TV — filed separately by four independent
companies — are indeed essential to DVB-T, Eltzroth said.
Since the number of companies found having essential patents was so small,
compared to MPEG-2 video, the quartet chose to go with a classic
arrangement of one company — in this case, Philips — collecting royalties
for all, he said.
The good news for DVB members is that the patent pooling by the four
companies will create a one-stop shop. It is expected to lower the burden
for licensees as well, according to Eltzroth.
Eltzroth made it clear that the DVB Project, although committed to the
creation of a patent pool, "won't come up with numbers and terms of
licensing." These details are yet to be negotiated between the four
companies and those seeking the licenses.
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