NEW YORK –
Manufacturers of Blu-ray Disc hardware and software have been put on notice by key patent pool administrator One-Blue that it’s time to pay the piper for royalties owed on essential patents of the blue-laserbased HD disc technology.
And, in the current economic climate, with prices dipping lower and lower, the impact is already proving burdensome for some.
Just last month, Toronto-based Cinram International, the manufacturer and distributor of prerecorded media products, filed for Chapter 15 bankruptcy protection from U.S. creditors in an effort to reorganize abroad, after reaching a deal to sell most of its assets to units of Najafi Cos.
Cinram and eight affiliates produced more than 2.1 billion DVDs, 55 million Blu-ray Discs and 500 million CDs each year. It listed more than $500 million in debt and as much as $50 million in assets.
Cinram is but one of a long list of producers of Blu-ray Disc technology that have been approached by One- Blue in the last year for royalty payments.
One-Blue was spun off from Philips’ optical disc technologies licensing organization to establish a patent pool to simplify and maximize the collection for patent royalties on most Blu-ray Disc-related technology patents in the United States, Japan and Canada.
A separate related patent pool entity, called One-Red, was also established to handle red-laser-based technology licensing, including DVDs and CDs (the latter are due to expire soon), as well as the administration of Bluray licensing for all of the regions outside of the United States, Japan and Canada.
In addition to arranging and monitoring collections for royalties on new patents, One- Red will monitor pre-existing licensing arrangements, such as those established under the former 3C Group.
The One-Blue/One-Red bodies began the current licensing program a year ago, and now handle 15 licensors and 88 licensed manufactures from 15 countries.
The 15 licensors include Cyberlink, Dell, Fujitsu, Hewlett-Packard, Hitachi Consumer Electronics, JVC Kenwood, Koninklijke Philips Electronics N.V., LG Electronics, Panasonic, Pioneer, Samsung Electronics, Sharp, Sony, Taiyo Yuden and Yamaha.
Licenses are provided for a range of applications from Blu-ray players, Blu-ray recorders, PCs, PC software, prerecorded Blu-ray media and recordable media. Separately, licenses are issued for Blu-ray specific software extending to companies that produce recording and playback software for Blu-ray discs, such as Corel, Adobe or Rovi’s Roxio.
“These patents will be asserted against any one that is deemed to be making use of the essential patents,” William Lenihan, One-Blue IP licensing director, told TWICE. “There is an enormous ecosystem of programs and products, and the licenses are based on the platform itself, so you don’t get just one overlapping license.”
Lenihan said the 15 companies came together through One-Blue primarily because it was able “to slice and dice the patents in such a way that the IP generated from certain types of applications gets more favorable treatment, and therefore the ownership gets remunerated in a more favorable way.
“We showed that if we put it together, the sum of the parts is going to be much more favorable for all 15 of these companies” than handling the patent royalty collections on their own, Lenihan said.
The One-Blue and One-Red bodies are competing against another patent pool administrator called the BD4C Group, comprised of Warner Bros., Toshiba, Technicolor and Disney.
But where the One-Blue group has 1,073 essential patents solely for prerecorded discs, the BD4C group has “probably less than 400,” Lenihan said, “so it’s a game of who’s got more patents in one region, and we think we can justify a 9- and three-quarters-cent royalty rate for prerecorded media versus their active rate.”
Only a few remaining stragglers have not committed to either the One-Blue or BD4C groups. Among the more notable parties are Microsoft and Apple, which both have essential patents that address Blu-ray, Lenihan said.
From the licensee end, he said that for the most part, manufacturers have been cooperative in acquiring a license through the One-Blue or One-Red bodies to avoid litigation, but this varies by platform type.
Blu-ray player licensees have been among the most cooperative, he said, with one exception being Toshiba — the champion of the former rival HD DVD format and, along with Warner Bros., an essential patent holder in the BD4C patent pool.
“All of the companies have good expectations, and we would love that there be one merger, but now that there are so many more patents in the one group, it’s very unlikely that Toshiba or Warner will come into this program because they are getting more money for less patents in the way they issue as a stand-alone,” Lenihan said. “So hopefully, the pre-market forces will see that and start pressuring those companies to lower the royalty rates or merge with One-Blue.”
He added that collection issues also remain for a number of private-label Blu-ray Disc player products sold in the United States.
“We offer [private-label operators] what we call a brand-owner agreement, so if you are an importer and want to establish your own brand, we will offer a license through which that brand owner can pay the royalties themselves and get their third-party manufacturer to co-sign the agreement as a manufacturer but have the brand owner responsible for paying the license fees,” he said.
One-Blue will begin the process of patent enforcement for its 15 licensors in the next six to 12 months, with legal actions being filed first in the regions with the heaviest concentrations of patent positions, Lenihan explained.
One-Blue’s mission is to “make its patents accessible on reasonable, accessible and non-discriminatory terms.”
“These patents aren’t going to be in the hands of a troll,” Lenihan said, adding that One-Blue will not take the course of Walker Digital, which “has been suing the world on certain essential Blu-ray patents against the same people who are participating.”
“You’d be very, very short-sighted if you weren’t able to take advantage of these programs. It doesn’t get any better than this,” Lenihan said, adding that companies now are being lobbied to participate, “we are being very reasonable with them and supportive and giving them all the tools they need in which to implement this program.”
“We had an offer on the table last December, which expired, giving them a substantial discount if they signed up,” he said. “Predominantly, most of the Chinese Blu-ray player manufacturers did.”