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Class-Action Suit Filed Against DVD Patent Holders

15 Jun, 2004 By: Erik G., Holly W.

A Chinese electronics manufacturer has filed a class-action lawsuit against three principal members of a consortium that allegedly denied it the requisite licenses to make and sell DVD players.

The suit — filed Tuesday by Wuxi Multimedia against Philips Intellectual Property and Standards, Sony Corp. and Pioneer Corp. in U.S. District Court in Los Angeles — alleged that the trio, acting as the 3C Patent Group, violated provisions of the Sherman Act that prohibits anticompetitive measures.

Specifically, the suit alleged that the 3C Patent Group violated provisions set forth in 1998 by the U.S. Department of Justice that mandate DVD licenses be issued “on a nondiscriminatory basis,” and “ensure royalties are relatively small to the total cost of manufacturing,” among other requirements.

In addition to being denied a license agreement from Philips without explanation, Wuxi alleged that Sony, Philips and Pioneer conspired to avoid paying their own minimum $5 license fee and $4 royalty fee per manufactured DVD player, which constitutes an unfair advantage in the marketplace.

“They've got a $9 edge on every other DVD manufacturer out there,” said Tony Handal, lead attorney for Wuxi. “That's price fixing.”

Handal said a similar patent pool agreement regarding CD-R and CD-RW discs held by Sony, Philips and Pioneer was ruled unenforceable last year by the International Trade Commission.

The suit seeks an injunction against the patent pool in addition to treble the amount of all royalties ever paid by license holders.

“That's a lot of money,” said Handal. “But you've got to balance the rights of the patent holder against the rights of the consumers and manufacturers.”

At press time, representatives from Sony, Pioneer and Philips were not immediately available for comment.

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