Patent royalties threaten new mobile service

JoongAng Daily. May 26, 2004
By
Yum Tae-jung, Wohn Dong-heePatent royalties are posing threats to a new digital mobile broadcasting service in
Korea before it is even launched. Digital mobile broadcasting, or DMB, is a service that enables users to view television through cellular phones by means of satellite transmission.
TU Media Corp. announced yesterday that Toshiba Corp., the Japanese company that holds the core technology for satellite mobile broadcasting, is demanding royalties for terminals sold in
Korea. TU said Toshiba requested royalties of 2 percent per terminal for all gadgets that will use the satellite broadcasting service. TU Media is a consortium led by SK Telecom that will control digital mobile broadcasting in
Korea. The service is scheduled to begin in September.
“We have talked with handset producers such as Samsung Electronics, and we have made a decision not to accept Toshiba’s request,” an official at TU Media said. “Next week, we plan to visit
Japan and discuss this.”
TU Media and cellular phone manufacturers said that they plan to negotiate on paying a fixed royalty for a certain bulk number of handsets, instead of on each handset.
Aside from royalties imposed on systems technology, there are royalties on voice compression, and separate fees that must be paid to Qualcomm, which holds patents for code division multiple access, or CDMA, technology. Korean companies commercialized the technology for the first time, and had paid more than 2 trillion won ($1.7 billion) in royalties to Qualcomm as of March.
Increasing cellular phone exports to
Europe are also triggering royalty claims. Phones shipped to Europe must support the Global System for
Mobile communication, or GSM, the European standard. Recently, however, companies that claim to hold the source technologies are asking Korean handset makers for royalties.
In most cases, cellular phone production works on a cross-license basis, where companies exchange technologies. Large companies, such as Samsung Electronics, do not have much to worry about since they already hold many GSM-related patents that they can swap, but smaller companies may be faced with higher royalty costs.

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