Wave Issue 9035 4/05/99 Article 11-01

***Joint DVD Licensing Program of Philips , Sony and Pioneer in
Operation
(February 17)

Royal Philips Electronics, acting on behalf of its system
partners Sony Corp. and Pioneer Electronic Corp., has started a
patent license program for manufacturers who produce and sell
players and discs under the DVD system standard, created by the
10 companies including Philips, Sony and Pioneer (DVD). By
acquiring licenses from Philips under this program, manufacturers
will be allowed to use the Philips, Sony and Pioneer patents for
their products under the DVD-Video and/or DVD-ROM standards in
the worldwide market.

The licensing program handled by Philips has taken effect
following a review by the U.S. Department of Justice. Under this
program, prospective licensees can enter into an agreement with
Philips to obtain a substantial part of the necessary patent
licenses for their own player and/or disc manufacturing.

The licenses granted by Philips include rights to essential
patents for DVD- Video and DVD-ROM technologies. They also
include a license under MPEG2 audio patents from Philips, IRT and
CCETT for the use of MPEG2 audio technology, but do not include
encoding or decoding of MPEG2 Video nor any essential patents of
other parties, for which separate licenses are required.

The royalty conditions of the DVD player patent licensing program
are the payment of an initial fee of $10,000, of which $5,000 is
creditable against running royalties; plus a royalty of 3.5
percent of the net selling price of each player manufactured and
sold, with a minimum of $5 per player. An additional royalty of
$2.50 for each Video CD-compatible DVD-Video player will be due.

The conditions for the DVD disc patent licensing program are the
payment of an initial fee of $10,000 of which $5,000 is
creditable against running royalties; plus a royalty of $0.05 per
DVD-Video or DVD-ROM disc manufactured and sold.

Apart from the DVD patent licensing program, Royal Philips
Electronics, acting on behalf of CCETT and IRT, has started a
patent licensing program for the use of their essential patents
for AC-3. The conditions of this license program are: for discs a
running royalty of $0.003 per disc and for players a running
royalty of $0.20 per audio channel with a maximum of $0.60 per
player.

The licensing programs will provide for the payment of a
reasonable royalty by the users of the patent rights as a
remuneration for the considerable investments in research,
development and other efforts in the area of optical recording
technologies, as well as in the present and future research and
development of new technologies. Under the licensing program,
Philips licenses the patented technologies at non-discriminatory
standard terms and conditions to all interested parties.

Additional services which may also be made available to licensees
include expertly developed starter kits, disc evaluation
facilities, an independent format verification service and test
disc sets.

Independent from this licensing program, licensees may also need
to obtain additional licenses from other companies and
organizations. These include, among others, the other companies
of the DVD Forum, for licenses under specific patents for DVD-
Video and DVD-ROM; and MPEG LA for licenses under the MPEG2 Video
patents. Manufacturers seeking to obtain licenses under any of
the patents referred to above should contact the relevant
licensors for further information about conditions, costs and
procedures to be followed.