posted 03-21-2002 04:10 AM
ABOUT ROYALTIES OF DVD PLAYERS
To Whom It May Concern:
There are a lot of rumors around in recent days about the issue of DVD patents. The patent holders especially 6C and 3C are claiming that Chinese DVD player manufacturers are unjustifiably taking over the majority of market share by avoid paying patent fees. It seems imperative for Chinese DVD manufacturer to clarify some facts and clearly state its stand.
Since1999, China’s manufacturers are taking a positive attitude to negotiate royalty issues with 3C and 6C, and Chinese manufacturers have clearly expressed their desires to pay the royalties as long as it is a fair play. Since the majority of the patent rights are integrated in the loader and encoding/decoding chip-sets, Chinese sides suggested a most easy and practical way to collect the royalties, that is, to add the royalties on the key parts because the key parts suppliers are no more than ten, on the other hand, the assemblers are more than hundreds. If some assemblers pay the royalties and some not, it will make an unfair competition in the market.
Although 3C and 6C claimed China’s DVD player manufacturers should pay them royalties for the patents used in the machine, few people noted the fact that China’s manufacturers are just assemblers in the field, all the key parts such as loader, decoder chipset are supplied by 3C and 6C themselves or their related and/or associated companies. However, the benefit groups refused the suggestion and persisted on charging the patent fee to the DVD player assemblers rather than the loader and chip-set suppliers.
There is one more fact that worth notice, that is, some members of the benefit groups are leading suppliers of DVD players themselves, which may well explain why the benefit groups would prefer the tremendous trouble to deal with hundreds of DVD assembly manufacturers to settlement the royalties by easier and practical way to collect the royalties from the a fewer key parts and chipsets suppliers.
The benefit groups have to admit that they have a so call “cross licensing” between each other. But benefit groups have always refused to open the black box of the content of this “cross licensing”. It is dubious whether they are paying patent fees to each other or how much is paid. Many of the 6C and 3C members are both component suppliers and DVD player manufacturers. If there is a special rate between each other, that will constitute an unfair competition. Chinese DVD player suppliers will be in an inferior position to compete with their opponents.
The stubborn position of 3C and 6C result in another issue in question, that is, whether the royalties have been included in the price of the DVD loaders and chip-sets that are sold to China’s assemblers. If so, the benefit groups are guilty for double charging the patent fee. In the market, the price of the benefit parties’ DVD player is about 30% higher than Chinese DVD player’s price, we think it is reasonable because China’s labor cost and system cost for operating is lower than the developed countries. The $19.60 royalties claimed by the benefit parties is just around 30%. Therefore, we have reason to suspect or believe the benefit groups are charging the royalties doubly.
What deserves mentioned is the patent holders including 6C and 3C are asking altogether US$20 patent fee which is based on the price of DVD players four years ago when it was as high as US$400. Now, the price of DVD players has dropped to a significantly low price. The retail price in some chain stores in the US, it could be as low as around $70 US dollars. We doubt if the consumers in the world especially in US and Europe where the royalties are stirred up in high noise are willing to pay extra 20 dollars for a DVD player. Meanwhile, we would like to believe that the governments of related countries would stand on the stand to protect the benefit of their consumers instead of that of the few benefit groups. Chinese manufacturers have put forward their proposal to the benefit groups settle patent fee at a reasonable rate with benefit groups, but the latter even refused to consider.
Just like other “made in China” products, the China’s DVD players have gradually won the hearts of consumers worldwide from the reliable quality, good performance and reasonable price. The actual reason that Chinese DVD players are sold at price lower than Japanese products is not because Chinese enterprises are not paying the patent fee, but because the more reasonable manufacturing cost. The competitors should pay more attention on how to improve their productive efficiency.
China’s manufacturers hereby would like to state that we are willing to pay the DVD patent fee as long as it is fair, justify, open (transparent), practical and not hurting consumers’ rights and interests. But we refused to be treated unfairly because of such under table manipulation as “cross licensing” and other deliberately covered transactions among members some of the patent holders.