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.