TIPS^®  Taiwan Intellectual Property Special

China Updates

Four Taiwanese DVD Discs Manufacturers Sues Philips

80% of the CD-R and DVD-R discs in the world are manufactured in Taiwan, but since the core technology is controlled by Philips’ patents, the Taiwanese manufacturers have to pay a considerable amount of royalty to Philips each year. However, the profit of manufacturing these discs is becoming minimal in recent years, while the royalty fee is as high as 25% of the producer price (royalty fees normally accounts for 5% of the producer price). After several unsuccessful negotiation rounds, four Taiwanese manufacturers, namely, Daxon Talent, Ritek, CMC Magnetic, and ProDiscs, jointly filed a lawsuit against Philips for collecting unreasonable royalty fees, and requested compensation for the damage resulted from the unfair royalty agreement.

In reality, Philips only collects royalty fees for the same technology from Taiwanese manufactures, but not from companies in China or India. It is apparent that the Taiwanese manufacturers, who pay the royalty fees, will not be able to compete in the international market with companies in the same industry that do not need to pay royalty fees.