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Sony, Samsung to cross-license patents

Sony Corp. and Samsung Electronics said on Tuesday they had agreed to share patents  and tap each other's vast patent portfolios of basic technologies.
/ Source: Reuters

Sony Corp. and Samsung Electronics said on Tuesday they had agreed to share patents on basic technology to speed up product development and avoid adding to a growing number of cross-border patent disputes.

The cross-licensing deal allows the Japanese and South Korean electronics giants to tap each other's vast patent portfolios of basic technologies.  However, it will exclude key technologies that help differentiate their products, such as those related to Sony's hit PlayStation game consoles.

The move follows a string of legal actions between Japanese, South Korean and Taiwanese electronics makers over alleged patent infringements, underscoring the heated battle for market share in flat-screen televisions and other key digital consumer products.

"With this agreement with Samsung, we aim to keep clear of unnecessary conflicts and compete only in those areas where we really need to compete," Sony Executive Vice President Yoshihide Nakamura told reporters.

Toshiba Corp., Japan's second-largest electronics conglomerate, filed a suit last month against South Korea's Hynix Semiconductor Inc. in the United States and Japan, claiming infringement of patents related to memory chips.

In another recent spat, Matsushita Electric Industrial Co. Ltd. filed for an injunction to halt sales in Japan of LG Electronics Inc.'s plasma panels, saying LG's panels infringed its patents. LG Electronics filed a countersuit.

Sony and Samsung started negotiations on the cross-licensing deal in December 2003. The agreement is broad, covering 94 percent of Sony's 13,000 U.S. registered patents, and a similar percentage of Samsung's 11,000 U.S. registered patents.

The remainder are viewed as "differentiation technology patents" and will remain the sole property of each company. They include patents on the PlayStation's architecture and Samsung's home networking technology.

"It removes uncertainty from the products they are developing, and they won't have to waste money fighting in the courts over patents that are inconsequential to their main strategic objectives," said Damian Thong, technology analyst at Dresdner Kleinwort Wasserstein.

Trend setter?
Cross-licensing agreements are common in the electronics and chip industries, but normally involve only one product or a specific technological field.  But the fast-paced market for digital electronics is forcing makers to rethink their product development strategies to lower costs and boost speed.

Analysts say the wide-ranging deal between Samsung and Sony could be the start of a trend.  "To date it hasn't been common at all.  These guys are serious competitors and historically they would be protecting this stuff from each other like you wouldn't believe," said Peter Godwin, a partner at law firm Herbert Smith in Tokyo.  "This isn't something that has happened a lot, but it may be the precursor to a lot of companies doing the same thing."

Patents to be shared include technologies on data compression, DVD, DRAM and flash memory chips. The agreement excludes thin film transistor liquid crystal display (TFT-LCD) and organic light emitting diode (OLED) display patents.  OLED screens are a promising next-generation display.

Vice President Nakamura said Samsung would pay an undisclosed amount to Sony as part of the agreement, suggesting that Sony's patent portfolio is more valuable.

"We have been aware that Samsung's strength in technology and patents has improved dramatically in recent years.  Both of us have been of the understanding that we need to form a cooperation in one form or another," Nakamura said.

"In digital electronics, basic technologies are pretty much common.  To retain competitiveness, we need to improve our differentiating technologies and offer value-added products," Nakamura said.

Sony and Samsung have an LCD joint venture, called S-LCD, that is scheduled to begin mass production of panels by the end of June.  It is the world's first "seventh-generation" operation, cutting panels from motherglass measuring 1.87 by 2.2 metres to produce LCDs a lower cost than "sixth-generation" plants.

Sony said TFT-LCD technology was left out of the cross-licensing agreement because it was covered in the deal to create S-LCD.