China's Patent Reexamination Board will this week hear arguments against one of the key patents in the 4C DVD patent pool in a public interest case brought by a Chinese academic.
Zhang Ping, a professor at Beijing University, filed a request to the State Intellectual Property Office's Reexamination Board in December urging it to invalidate the patent, which is owned by Dutch electronics company Philips. Four more patent specialists joined her case in January.
The Patent Reexamination Board will hold an oral hearing in the dispute on Thursday.
Zhang has been a vocal critic of patent pools, in which individual patents essential to the production of a certain product are bundled together and licensed to manufacturers as a package. She argues that patent pools often include questionable patents and can hinder China's economic development by requiring manufacturers to pay high royalties to foreign IP owners.
The DVD player industry has been the focus of much of the attention of Chinese anti-patent pool campaigners because fierce domestic competition has led to price slashing and tight profit margins, making patent royalties to overseas IP owners an increasingly large percentage of manufacturing costs.
Zhang told MIP that if Philips' patent is declared invalid, then the so-called "essential patents" in patent pools will be called into question. "Patent pools, which are advanced as a method to resolve "patent thickets", only promote competition and social welfare if the pool harbours truly essential patents," she said.
The 4C pool includes patents owned by Sony, Pioneer, Philips and LG and charges $3.50 for each DVD unit produced, which the group says is lower than the cost of taking out a separate licence from each of the individual patent owners participating in the patent pool.
But even if the academic succeeds in persuading the Patent Reexamination Board to invalidate one of Philip's 4C patents, it will not cut the cost of a licence to the 4C DVD patent pool.
"A negative decision will not affect our ability to collect royalties for DVD players and will not affect the legitimacy of 4C patent pool licensing," Ben Shi, a spokesperson for Philips, told MIP: "The royalty of the patent pool won't change if one patent is taken from the list of patents licensed by the patent pool, either due to invalidation or expiration, or when an essential patent is added to the pool."
Zhang Ping says this is unreasonable and discourages people from challenging questionable patents in patent pools.
"Even if a questionable patent is declared invalid, typically, royalties are unchanged. It seems as if that unless the last so-called essential patent is declared invalid or expires, the licensing policy will stand unchanged. Therefore, by imposing prohibitive costs on the opponent and by offering little fruit to the challenger, patent pools are protected from challenge and public supervision," she said.
Shi said that if the Reexamination Board rules against Philips, the company intends to appeal. And he said he was confident that officials would focus on the merits of the case, rather than being "influenced by any political or public sentiment".
Philips is being advised by China Patent Agent.
