"It's time to start collecting money," Hase said, so that the owners of essential patents for the DVD standard can recoup their research and development investment.

Spelling out the DVD Forum's strict policing activities, Hase warned, "We're prepared to stop imports of unlicensed DVD players and bring lawsuits to those who are shipping DVD players without a licensing agreement."

The move is already causing uproar among system OEMs in China and in Taiwan that have been producing DVD players without a license.

At a time when DVD system manufacturers face tough price competition around the world, the DVD Forum's move will put manufacturers without DVD intellectual property (IP) at a disadvantage, and could deepen the disparity between the IP haves and have nots.

The overall royalties could be could be taxing for a DVD player manufacturer, reaching as high as 10 percent of a player's hardware cost, according to Hase. A manufacturer could owe royalty payments to two separate DVD patent pool organizations, and to MPEG LA, Dolby Laboratories, and a few other individual companies.

Since the DVD Forum failed to form a one-stop shop for DVD IP licensing, two competing patent pooling organizations are independently carrying out licensing programs and collecting royalties.

One group called 6C is composed of six companies — Toshiba Corp; Matsushita Electric Industrial Co. Ltd., Victor Co. of Japan (JVC), Mitsubishi Electric Corp., Hitachi Ltd. and Time Warner Inc. — and alone is asking for 4 percent royalties per a hardware unit, according to Hase. A separate DVD patent pool, called 3C — comprised of Royal Philips Electronics, Sony Corp. and Pioneer Corp. — is demanding 3.5 percent royalties per a hardware unit. In addition, MPEG LA is seeking royalties from manufacturers using patents related to MPEG-2 video, while Dolby is after those who implement Dolby Digital in their DVD players. Both Thomson and DiscoVision own patents involving optical disc technology, and each is looking to collect separate royalties. There is also a licensing fee for a copy protection system used within a DVD player.

Unlicensed imports banned

Working on behalf of the 6C group, the DVD Forum has already convinced the U.S. government to halt the import of unlicensed DVD players from an Asian manufacturer, Hase said.

At the same time, royalties have begun to flow in from many companies in Japan, the United States and Europe, Hase said. "We will be very adamant about going after those who do not have a DVD license or those who haven't paid royalties. Because otherwise it would be hugely unfair to those who already do." Hase accused some Asian OEMs that do not hold the proper DVD licenses of unfairly cutting the cost of players by paying no royalties to IP owners.

The DVD Forum will also be rolling out much tougher verification activities for DVD software and hardware, Hase said. Rather than waiting for vendors to bring their products to the DVD Forum for verification, "we are now going out and purchasing players and disks on our own from all over the world, in order to conduct verification tests," he said. The goal is to maintain better compatibility among DVD products that bear a DVD logo, and to reduce the number of poor quality products in the market, Hase said. "We are prepared to evoke a DVD license from them, if necessary."

Shipments of DVD players last year exceeded 16 million units worldwide, according to Masao Sugimoto, executive corporate engineering adviser for Pioneer. Michael Vitelli, president of the consumer electronics group at Sony Electronics, predicted at the CES that the figure will grow to 25 million units by the end of 2002.

More CES coverage.