Trouble ahead for APEX over licening fees?

[Nostradumbass]

ANALYSIS: Chinese DVD Player Makers Avoiding Patent Fees
January 22, 2002 (TOKYO) -- Some domestic companies are apparently considering filing lawsuits against Chinese firms selling DVD players without paying patent licensing fees on technology developed in Japan.
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/moren/165841

Japanese manufacturers of DVD players have seen sales deteriorate, particularly in the United States, as a result of competition from low-priced Chinese machines.

In the summer of 2001, Sony Corp. had to surrender its top position in the U.S. market for DVD players, where it once held about 40 percent, to a Chinese maker offering the APEX brand.

By supplying its players in volume to mass retailers at less than 100 dollars, over 30 percent below Japanese prices, the Chinese company has quickly grabbed nearly 30 percent of the market.

Leaving aside low production costs, Chinese companies can make their products cheaper by avoiding payment of licensing fees on patents. A number of patents associated with DVD players are held by the 6C group, which includes Matsushita Electric Industrial Co., Ltd. and Hitachi Ltd. Several related patents are also held by the 3C group, which includes Sony, Philips Electronics N.V. of the Netherlands and Pioneer Corp.

Licensing fees where paid amount to nearly 20 dollars per player, or 14 percent of the wholesale price, and include fees to use MPEG compression and Dolby sound technology. Chinese production for 2001 is projected at about 10 million DVD players, fully one-third of world production, on which approximately 140 million dollars to 200 million dollars in licensing fees goes unpaid annually.

It is difficult to identify specific culprits, however, because factories are springing up all over China to supply machines to be sold under well-known labels like APEX and Oritron.

Making matters worse, Japanese companies have no choice but to lower prices to compete.

Pioneer, which pioneered DVD players in 1996 in Japan and the U.S., reported a deficit in the sector for the July-September period of 2001, due mainly to collapsing prices in the U.S.

Even Funai Electric Co. Ltd., which enjoys a price advantage over the Chinese on VCRs, has been watching its DVD business sink for quite a while. "The fact that many Chinese makers refuse to pay for patents is a disturbing trend," says President Tetsuro Funai.

Digital products can be easily assembled from primary components, like computer chips, says Funai, making it easy to create a finished product without having a grasp of the overarching technology involved.

A representative of the 6C group has been negotiating with a Chinese counterpart since the autumn of 1999. The 6C group demands "four dollars or 4 percent of the wholesale price," as licensing fees for technology on which they hold the patent, but the Chinese did not even recognize the patents at first.

Adding patent fees to the prices of parts may be impractical, however, because when Japanese DVD makers were divided into several groups for the purpose of cross-licensing, it was decided that fees would be payable only on finished products.

China's membership in the World Trade Organization has made it easier to approach patent infringement issues, but many makers in the country are working to keep the prices they pay for use of patented technology to a minimum.

As a last resort, Japanese companies may bring suits against individual firms in U.S. courts to require payment of licensing fees. Another possibility is the imposition of a sales blockade. These measures will probably be ineffective, however, unless U.S. volume retailers can be brought on board.

By Ryoichi Emura, Nikkei Staff Writer

(The Nikkei Business Daily)

[Nostradumbass]

Date: Mon, 28 Jan 2002 09:04:58 +1100
From: Nathan Cochrane <ncochrane@theage.fairfax.com.au>
To: declan@well.com
Subject: Re: FC: Japanese firms mull patent challenge to cheap Chinese DVD
players


Hi Declan


Having used (and reviewed) just about every DVD player on the Australian
market, I'd say the reason why the Chinese are winning the marketing
game is because their DVD players are just better than the Japanese units.


The Apex is a marvel of technology, plays just about every 5.25-inch
silver disc format ever created and is eminently hackable. The Japanese
players have fewer features that people want, are overpriced, and most
importantly, are crippled by the oligopolistic film industry's insane
region coding format.


If the Japs want to get back in the race, compete in the market and
produce quality products for a good price that people want.


And get rid of region coding.

[next]

Thank you very very much.


Now for one of my earlier predictions - which was a user friendly MPEG player - when exactly will MPEG players arrive on the scene? Any guesses? I mean players that are not so reliant on various bit rates and resolutions....standards.....etc.


I love standards but I was one of the first on here to bolt from them. By that I mean opposing the earlier arguments about how it was so important to stay within VCD specs and to purchase a VCD player as opposed to a DVD player. That was a short 6 months ago. I like the progress.

Opinions?

[next]

....and flamed?....sure I've made my share of comments that deserved flaming. But on balance I've been not too far off from reality. I'm glad I did not take the VCD player advice and am thus stuck in a dead end.

But moderaterators have been know to change their positions.

[homerpez]

I'm not sure I agree with the statement about the Chinese players being BETTER, but I don't know what's floating around Australia...

I do know the Chinese players are more accepting of every format... now it appears we know WHY... because to them it costs them nothing to simply add compatability for one more!

While I'm not too keen on licensing, etc, fees, royalties, it does seem phenomenally unfair to Japanese/American companies if China isn't playing by the rules. If one has to pay, they all should. Or, none should.

Actually, most Chinese units (not to bash them or anything) are made much more cheaply than the average Japanese unit. Though I'd be the first to admit that many Japanese electronics have seen better years.

[tendtend]

It's marketing! The Japanese defeated USA using their low price of electronics about 15 year ago. After that, Japanese increased their price (can you find any Japanese thing cheaper now?). They should have known at the very beginning that APEX did not pay the license fee if APEX reall did not, not after Apex increased to 30% marketing!

[Xesdeeni]

Here's a tip:

When you form a comittee of many companies and get together to create a standard and then ask everyone to join in and play with the rest of the "team" for the benefit of the world, DON'T FILE A PATENT ON THE TECHNOLOGY SO YOU CAN PENALIZE EVERYONE STUPID ENOUGH TO JOIN YOU!

There should be a law against setting up the rest of the world with the "you can only play in the most popular sandbox if you pay me for the priviledge."

I normally rail against China for ignoring patents, copyrights, and the like, but in this case, the patents should never have been granted (a patent on a particular technique of compressing MPEG...sure, but not just the fact that you compressed or decompressed it; I think I heard that even the ->ISO<- file format itself is patented), and it was ridiculous of the companies involved to file such patents in the first place and charge other companies to get into the act. What a crock!

Xesdeeni

[Vejita-sama]

Think this is bad, check out the patent law concerning genes, DNA sequences, and vectors

Here's a good eg. lets say your the first person to cut someone open and see a kidney. Well then you patent the kidney (hey you didn't create it, you don't know what it does or how it works but you found it first right). Now no one can even look at a kidney (including the one in their body) w/o your permission. It's like the patent gives you control/ownership over a small part of my body (no joke, check out the problems w/ the BRCA1 <aka breast cancer> genes).

I think we all believe in patents and believe they serve a good purpose. But as you said, some of them should never have been granted.

[tendtend]

200% agree with Vejita! A published standard should not file a patent. It's a common knowledge. If you want to file a patent, do not publish it as a standard--should keep it as your commercial secrete, just like Coca Cola.

[jaw2957]

I hate to disagree because I also hate this concept, but patents are necessary evil. If a company isn't assured payback for all the research and developement for the technology, than why do it? If its going to get ripped off as soon as it hits the marketplace, then most corporations would sit around for something new to come out, and rip em off. Technology would not come to a standstill, but we would definitely not be advancing at the rate we are. As for Vejita-sama's reply, I'll be damned if I can't look at my own body parts! I can understand patenting a procedure, or even treatment(like for cancer), but I hardly doubt you can patent a body part. I just filed a patent for the vagina. Noone touch it without paying me first!!!

[Bullworth]

Unfortunately I have to agree with jaw. Without patents many smaller, less resourceful companies would be unable to compete since the bigger ones would immediately be able to make it cheaper and undersell them.
While I think that companies like Sony are getting what they deserve for flooding us with crappy, overpriced products I also agree that they have the right to collect patent and royalty fees for all the money they spent developing the technology.
I haven't bought a big-name brand product in a long time, with a few exceptions, because the quality isn't what it used to be. If they want to get back in the act I'd gladly pay more if I knew I was getting the most bang for my buck.