Vizio Asks FCC to Force Funai to License Its DTV Patent

The order would run until FCC decides a petition filed last month by the Coalition United to Terminate Abuse of Television Transition (CUT FATT) (CED Jan 5 p1), Vizio said. CUT FATT’s petition argued that some holders of DTV-related patents, including Funai, are charging “excessive” licensing fees. To our knowledge, CUT FATT’s only members are Vizio and Westinghouse Digital. Westinghouse executive

Funai is charging a $5 per unit fee for the ‘074 patent it bought from Thomson in 2007 that covers a technology that allows a DTV tuner to speed switching of channels by referring to data stored in a table. The data are used to build a map of identifying information found in packets in a data stream.

Funai filed an ITC complaint in October 2007, seeking to bar several companies, including Vizio, from importing TVs that violate the ‘074 patent. An ITC administrative law judge in November issued a preliminary decision finding products from Vizio and the other companies violated parts of the ‘074 patent. A final ITC determination is due by April 10, Vizio said.

The ITC and FCC decisions also would come as the U.S. prepares for the June 12 analog cutoff. An FCC decision on CUT FATT’s petition remains pending. CUT FATT initially asked the FCC to open the petition to comments, a spokesman said. Vizio also has filed an antitrust suit against Funai (CED Feb 20 p3), alleging that it conspired with Thomson to “divide the fruits” of the ‘074 patent.

“If the Commission does not order Funai to comply with its RAND obligations, Vizio will suffer irreparable harm,” Vizio said. “The loss of revenue from those potential TV sales cannot be made up for extended periods of time since other manufacturers’ receivers may last for many years. Similarly, Vizio’s loss of market position - precisely at the time when the market is at its peak - will be irreparable.”

If Vizio agreed to Funai’s demands it would absorb “higher costs, a practical impossibility given the very low margins in the television industry,” Vizio said. Vizio would have to raise prices to offset higher costs, resulting in it losing sales “it would have otherwise achieved,” the company said. If Vizio increased prices and the FCC later found Funai violated RAND requirements, it isn’t clear that the Commission could require Funai to refund “the difference between a reasonable rate and the extortionate rate that Funai is demanding,” Vizio said.

Funai’s $5 fee is equal to the rate charged by the entire MPEG LA-administered ATSC pool that covers at least 32 patents, Vizio said. The patents are held by seven companies -- LG, Mitsubishi, Panasonic, Philips, Samsung, Scientific- Atlanta and Zenith Electronics, a separate licensing arm of LG. MPEG-4 technology, which is being used to deliver DTV signals to mobile devices, carries a 25 cents per unit fee, Vizio said. The FCC also has found that “at least” 17 ATSC participants claim ownership of essential patents that “may amount to thousands of claims in hundreds of patents,” Vizio said. “If licensing one single patent for five dollars is deemed to be reasonable, then the sum of Funai’s and hundreds of other equally reasonable demands would far exceed the retail price of all by the largest and most expensive digital televisions,” Vizio said.

While the FCC hasn’t previously required a patent-holder to offer a license on RAND terms, “there can be no doubt that it has the authority to do so,” Vizio said. The FCC hasn’t questioned its authority to approve standards that require licensing on reasonable terms, Vizio said. In adopting the ATSC standard, the FCC required that patent-holders commit to providing “reasonable licensing terms to all comers,” it said. The FCC can enforce the requirement if a licensor “ignores it” by charging “unreasonable or discriminatory” license fees, Vizio said.