Last year, a number of companies that hold MPEG-2 video-related patents, including Mitsubishi, Samsung and JVC, filed suit against Vizio, claiming that the company owed licensing fees for components used in their TVs. In its defense, Vizio stated that their suppliers, the actual manufacturers of the parts, were responsible for the royalties. Vizio later settled, saying that it had entered into an MPEG-2 Patent Portfolio License.

Now, earlier this year, Vizio and Westinghouse filed a complaint with the FCC, alleging that unspecified TV manufacturers are “abusing RAND (reasonable and non-discriminatory) licensing obligations” concerning the patents required to manufacture DTV products. The complainants are calling on the Commission to impose fines on those companies and to “adopt rules curbing further abuse.” The complaint was filed by the “Coalition United to Terminate Financial Abuses of the Television Transition” (“CUT FATT”), and was signed by Douglas Woo, CEO of Westinghouse Digital. A simultaneous press release by Vizio pledges their support as well. So far, the Commission has not responded.

As the complaint appears to come from two companies that are outside of the "club" of essential patent holders, it may represent frustration in paying royalties that the patent holders don’t have to pay. The filing goes on to ask the FCC to declare that, "ATSC royalty demands that exceed international comparables are presumed to violate the FCC’s RAND requirements." The petition cites a number of references, including a 2006 article in the Chinese business magazine 21st Business Herald, which described a State Intellectual Property Office (of China) list of digital TV set royalty claims amounting to $23 per unit. The article attributed a "sharp increase in royalties" to major patent holders Thomson and Sony.

The petition also requests the FCC to form a license pool for all essential ATSC patents. Currently, the intellectual property required to sell an ATSC product come from a mishmash of patent holders, including MPEG-LA, Zenith, Dolby, and others. When it was formed back in 1993, the "Grand Alliance" companies developing the US HDTV standard had hoped to develop a licensing pool that would provide a "one-stop-shop" for licensees. The pool was never formed, and each company holding intellectual property went on its own to collect from patent users. Eventually, an independent licensing group was formed–MPEG-LA–to license MPEG and other essential patents for a multitude of companies. While MPEG-LA later agreed to license various patents needed for ATSC products, membership is completely voluntary, so the pool doesn’t cover all essential patents. MPEG-LA’s ATSC Patent Portfolio License currently includes patents owned by Philips, LG, Mitsubishi, Panasonic, Samsung, Scientific-Atlanta and Zenith.

The filing also mentions that "the Consumer Electronics Association and several other parties have alerted the FCC to problems involving DTV patent licensing practices…," but in fact, the referenced CEA communication pertained to the V-chip licensing program, stating that the V-chip license holder participated but did not disclose to the FCC the ownership of an essential patent.

The Chinese government has already rejected the ATSC standard for DTV in China, claiming excessive royalties as one factor. (They rejected DVB and ISDB as well.) Now, the FCC is being asked to base a petition on a claim that "reasonable" fees would be those comparable to what is paid for DVB or ISDB. Whether or not there is a disparity in royalties, however, it is not the purview of the Commission to set international standards for licensing. And claims of $20-30 in royalties seem to fly in the face of simple economics — ATSC DTV converters, sold at market for between $30 and $50, could hardly carry such a burden, even when considering display-related patents. Nonetheless, we’ll see how the Commission reacts to this issue — but keep in mind that they currently have their hands full processing analog shutoff requests in light of the DTV transition delay.