Philips welcomes Ritek participation in Veeza scheme

Royal Philips Electronics NV yesterday claimed a victory in its Veeza patent-licensing program as Ritek Corp (錸德), the nation's leading optical disc maker, became the first local vendor to sign up for the scheme.

"Ritek's entry into Veeza is a positive development in the optical disc industry because Veeza will make it harder to sell unlicensed CD-R discs," Philips said in a statement released yesterday.

It said Ritek's participation demonstrates willingness from a first-tier manufacturer to contribute to a healthier CD-R market.

Philips announced in January that it was cutting its CD-R royalty by 44 percent to US$0.025 per unit, as part of its Veeza agreement to curb the illegal use of its patented technology.

The program will enable the industry to easily differentiate licensed discs from unlicensed ones.

Yesterday's announcement was a surprise, as local disc makers -- Ritek, CMC Magnetics Corp (中環), Prodisc Technology Inc (精碟科技) and Daxon Technology Inc (達信) -- on June 5 filed a legal complaint with the local Fair Trade Commission against Philips's Veeza.

They claimed Philips had violated Taiwan's Fair Trade Act (公平交易法), and that the company had also been aggressively asking them to accept "unreasonable conditions for patent licensing." Philips has recently revoked CD-R patent licenses belonging to CMC, Ritek, Prodisc and Lead Data Inc (利碟), according to a list of CD-R licensees published on Philips Intellectual Property and Standards' global Web site.

The move came after local makers failed to comply with existing licensing contracts, while Ritek lost its license because its contract expired in May, the DigiTimes reported on its Web site yesterday.

"As no Taiwan-based makers have accepted Veeza so far, revoking the licenses is interpreted as Philips applying pressure on CD-R disc makers in Taiwan," DigiTimes said, quoting industry sources.

The revocation of licenses will prevent exports of CD-R discs to Europe and the US, and local makers are now discussing possible resolutions, the report said.

A CMC spokesperson said the company and Phillips are still negotiating on the contract terms.

Philips yesterday also announced its plans to extend the Veeza scheme to cover DVD-R, by offering more than 40 percent discount on royalties to US$0.035 from US$0.06 per disc.

The new rate will start from this quarter to benefit those "compliant licensees" and is expected to take full effect in the third quarter next year.

CD-R technology allows users to record digital information onto a compact disc. Philips introduced the discs in 1988, but it claimed there have been a number of infringements of its copyright.

In March last year, it lost injunction lawsuits against Gigastorage Corp (國碩科技) and Princo Corp (巨擘科技) concerning the sale of CD-R and CD-RW discs to the US.

In January 2001, Philips canceled a technology transfer license with CMC and Ritek, in response to a NT$8 million (US$242,873) fine by the Fair Trade Commission.