If you feel that Vizio should shave $30 off the price of its TVs, listen up: The Irvine TV company agrees. You could help the company by supporting Vizio’s petition to the U.S. Federal Communications Commission, which is accepting comments until Monday.
On Monday, the FCC will move to the next stage of deciding whether to modify its policies about digital television patent licensing.
At issue are royalty fees that Vizio and other TV makers pays patent owners of the ATSC digital TV tuner, a technology required in every TV sold in the United States. Vizio says it sets aside $30 per TV to pay royalty fees related to the ATSC tuner. That’s pretty steep if it’s Vizio’s new 19-inch VA19L for $249. The extra fee is 12 percent of the total cost. And even if the price goes down — it’s $199.99 at Costco.com — Vizio still has to pay $30 for that single digital tuner.
But that’s not the outrageous part, at least from Vizio’s perspective. The company says foreign companies are buying up digital TV patents and demanding excessive fees randomly. Vizio says it is being unfairly singled out because of its success — it went from 2002 start-up to the nation’s top 3 TV brand last year.
“The fact that in the second quarter of 2008, we received recognition for being the number one in market share (in plasma TVs), we were identified as a potential target for both valid and invalid claims,” said Laynie Newsome, VIZIO co-founder and vice president of sales, marketing and communications.
“When you look at the amount of money of royalties to the cost of the whole (TV), it’s a disproportionate percentage. It’s extremely burdensome. It became more of an issue to us that the consumer should pay so much more money.”
Vizio obviously has its own spin on this. But the company is under attack. On April 10, Japan’s Funai Electric Co., which acquired some digital TV patents from Thompson and RCA, won a ruling by the U.S. International Trade Commission to stop Vizio from importing digital TVs to sell in the United States.
President Obama has until around June 10 to review and revise the case. Until then, Vizio is continuing to ship TVs, paying Funai $2.50 charge per set. Vizio is appealing, arguing that the same patent was ruled invalid last month by the U.S. Patent and Trademark Office. Funai competes with Vizio in the U.S., selling TV brands Sylvania and Emerson.
Vizio hopes the FCC can do something. Last year, the company joined the Coalition United to Terminate Financial Abuses of the Television Transition to demand that ATSC patent holders offer licenses for a “reasonable” amount. In other countries, foreign governments limit ATSC royalties to a few dollars per TV — $3 in Japan, nothing in Brazil.
“American consumers are paying higher prices for Digital TV sets and we think someone should stand up for them,” said Amos Snead, CUT FATT’s spokesman. “This rampant overcharging will continue for decades unless and until the FCC takes action.”
Brazil and Japan use a non-ATSC digital TV standard, as are many other countries around the world.
Westinghouse Digital, another HDTV maker, is CUT FATT’s only other member. It, too, says it pays nearly $30 in royalty fees for ATSC tuners. It says it is getting pressure from “more than a couple, closer to 10 companies” who are seeking royalty fees.
“Our lowest price (for a TV) is $150 and it could be lower,” said Arthur Moore, Westinghouse’s spokesman. “Ultimately, we think the FCC has a role because these patents are driven by the mandatory FCC standard. The FCC could actually step in and mandate a structure such as a patent pool and benchmark reasonable and non-discrimatory license rates.”
Who owns the patents?
But a lot about the issue is unclear, such as how many patents are part of digital TV tuners? No one seems to know. Is Funai or these other foreign patent holders going after other TV companies?
Funai did not respond to requests for an interview.
But there is one patent company out there trying to simplify the process for TV firms everywhere. MPEG LA put together an ATSC patent pool and charges a $5 to companies who want to use digital tuners.
But, said Larry Horn, MPEG LA’s chief executive, it’s voluntary. Patent holders don’t have to participate and MPEG LA doesn’t actively seek out patents. Patents must be submitted and then reviewed by MPEG LA. Thus, it’s not a complete ATSC patent pool. Still, there are more than 100 patents in the portfolio and paying MPEG LA $5 is much easier than working on individual agreements with the 7 patent owners.
“Patents are given because people spent money on research and development. People who pay royalties are trying to do the right thing. They understand that these technologies don’t just become available,” Horn said. ”We’re offering a service to the market to make patents widely available at reasonable rates.”
Vizio does pay MPEG LA fees for the ATSC tuner. Westinghouse said that it is negotiating with the group.
“All the evidence in the world suggests that the U.S. TV market is vibrant, dynamic and competitive. The consumer has truly benefited. I don’t think royalties have done anything to affect consumer purchases,” Horn said. ” …One of the reasons why TVs enjoy such fair and vibrant competition is royalties are low. Manufacturers are able to compete on the quality of TVs.”
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