Beware of the trolls

If you have purchased an ATSC-compliant television, hidden in that cost is between $20 and $30 in patent licensing fees, most going to Asian electronics companies and “patent trolls” — companies that buy up patents the first chance they get in efforts to corner the market. If your new set cost $1000, $30 doesn't sound like much. However, according to Myra Moore, president of research-consulting firm Digital Tech Consulting, about $11 to $12 of every set-top box sold goes to DTV patent holders. That's 39 percent of the total product cost!

TV set makers VIZIO and Westinghouse Digital have formed a consumer group called the Coalition United to Terminate Financial Abuses of the Television Transition, or CUT FATT for short. The coalition claims that patent abuses by DTV manufacturers will result in American consumers being “overcharged more than $1 billion” on TV sets sold between 2008 and 2009.

Amos Snead, spokesman for CUT FATT, said, “We're not asking the FCC for price controls. What we're asking for is transparency.” CUT FATT has asked the FCC to adopt a patent-pool system, much like those used in Europe and Asia that allow set makers to pay a flat rate of about $1 per set for the rights to all the necessary patents.

The FCC appears to be unprepared for any investigation into overcharges. In a 2008 congressional inquiry, former Chairman Kevin Martin said, “The FCC is shockingly ignorant of the technology the government forces Americans to buy.” While the FCC had been notified of the possible overcharges, “… the FCC has not yet taken any action to investigate alleged abuses or impose appropriate remedies,” he continued.

This issue of DTV technology rights ownership has always been cloudy. Rumors of who owned what and how much they would be paid were widely talked about, but without much clarity.

In a 2002 article by Keith Winstein, “MIT Getting Millions for Digital TV Deal,” the author said, “MIT will receive $30 million from Dolby Laboratories, the result of Dolby's selection as the national standard for digital television audio in the U.S.” He further noted the obvious self-interest of MIT professor of electrical engineering Jae S. Lim, saying Lim “… cast MIT's 1993 vote in favor of Dolby's technology in the television industry ‘Grand Alliance’ … [Lim] is expected to receive more than $8 million from Dolby's payments to MIT, said Jack Turner, the associate director of the Technology Licensing Office.”

Hmm. Would you vote for or against something that would pay you $8 million and your employer $30 million?

Now we get to a company called Rembrandt. This company (euphemistically a patent troll) holds a patent it purchased from AT&T (referred to as the 627 patent) that involves signal interleaving, a technology that is integral to the ATSC DTV system.

Rembrandt is now claiming in a series of patent infringement suits that it is entitled to 0.5 percent royalties on “all revenues derived from the use of the ATSC standard.” Basically, this would be a 0.5 percent tax on all network and broadcaster DTV revenues. Companies currently being sued include networks ABC, CBS, FOX and NBC; large cable companies Adelphia, Cablevision, Charter and Comcast; and DTV set maker Sharp Electronics.

An excellent brief of the suit's history is available at the Web site of Broadcast Engineering's FCC Update writer, Harry Martin. (See Harry Cole, the article's writer, provides this perspective of the patent troll: “Rembrandt does not produce anything. It does not sell anything bought or processed, nor does it buy anything sold or processed, nor does it process anything sold, bought or processed, nor does it repair anything sold, bought or processed … All the company does is speculate on patents, which it purchases on the secondary market in the hope that one such patent will hit it big.”

Let's hope the DTV trolls meet our version of the biggest of the “Three Billy Goats Gruff” in court. Her name is Judge Judy, and she loves DTV.

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