Philips and Ritek settle CD patent dispute

Ritek, one of the world's largest makers of blank CDs, and Philips, which holds key CD patents, have ended a dispute that had threatened to slow shipments of CD-Rs.

The two companies have agreed terms for a new system designed to prevent manufacturers from avoiding royalty payments to Philips, according to reports in the China Times and other media.

Under existing licences, CD makers pay a few cents in royalties to Philips for each disk they make because the company owns many key patents on CD design and manufacture.

However, the CD manufacturers are unhappy with Philips' attempts to introduce a new licensing regime.

The new scheme, dubbed 'Veeza', increases the burden on manufacturers by requiring them to provide proof of licence compliance on every shipment of discs.

Discs will be marked with a Veeza logo, and cartons labelled with a serial number. 

"The big difference with the old way of licensing is that under Veeza a shipment will be licensed and not a company. All shipments should be accompanied by a mandatory authenticity document," Philips announced.

Major Taiwanese CD makers Ritek and CMC initially refused to sign up to the Veeza plan, leading to the termination of their licences to manufacture CD-Rs and pre-recorded CDs. 

CMC, Ritek and two other manufacturers have been removed from Philips' online list of CD-R licensees, Digitimes reported yesterday. However, Ritek now appears to have acceded to Philips' requirements, according to today's reports. 

In return for the extra work required, Philips has lowered its standard CD-R royalty by half a cent from US$0.03 to US$0.025.

Philips invoices manufacturers for royalty fees every month, based on the manufacturers' reports of the number of discs made.

The company uses the Veeza licence verification system, together with spot checks and auditing, to check that these reports are accurate.

Philips hopes that pre-recorded CDs and DVDs may also be licensed under a scheme similar to Veeza in the future. However, most manufacturers have so far declined to sign up for this plan, Digitimes reported last week.

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