Philips To Proceed With DVD Licenses

The U.S. Justice Department has cleared Philips to sell patent licenses to DVD hardware and software makers not members of the 10-company patent pool Philips represents. The pool was formed in 1996, after Philips and Sony broke away from stalled industry-wide DVD patent licensing talks and announced they would start licensing jointly, as they do with audio CDs. Soon they were joined by Pioneer, Matsushita and Toshiba, with Philips designated the official licensing agent. The licenses Philips manages include rights to essential patents for DVD-Video and DVD-ROM technologies and Philips MPEG-2 audio. Encoding and decoding of MPEG-2 video patents are not covered nor patents held by non-pool members such as Thomson.Up-front player and disc licenses cost $10,000 with half credited against royalties. DVD player royalties are 3.5 percent of net selling prices, but not less than $5 per unit. A $2.50 add-on charge applies to DVD players with Video-CD capability. Disc royalties are 5 cents each. Philips also has been authorized to license patents of Dolby Laboratoriesí AC-3 Dolby Digital technology. Player royalties are 20 cents per channel to a maximum of 60 cents per unit and 0.3 cents per disc.