WASHINGTON - A small Pennsylvania company's patent lawsuits could hamstring the government's $1.5 billion effort to make the transition to digital television easier on consumers' wallets.
Rembrandt Inc. owns a patent on technology that it says is part of the digital television broadcasting standard used by the TV networks. Rembrandt is suing 14 companies, including Walt Disney Co.'s ABC, General Electric Co.'s NBC Universal, CBS Corp., and News Corp.'s Fox Broadcasting for patent infringement and wants millions of dollars in royalties.
The American Antitrust Institute, a nonprofit advocacy group, asked federal regulators last month to bar Rembrandt from enforcing its patent. Otherwise, Rembrandt's suits could add "tens of millions" of dollars to the cost of digital TV, most of which will likely be passed on to consumers, the group said.
"This is a massive tax that Rembrandt is trying to place on the transition to digital TV," said David Balto, an antitrust attorney who co-wrote a petition the AAI submitted March 26 to the Federal Trade Commission.
The AAI argues that Rembrandt is violating antitrust and fair competition laws by abusing the monopoly provided by its patent.
In recent years, the FTC has required companies to license their patents and set maximum royalties in several cases that involve technology standards. The standards let different companies make compatible products.
Broadcasters will switch to digital-only signals Feb. 17, 2009, after which analog TVs without cable, satellite, or converter boxes won't work. The government is offering $40 vouchers to help pay for the boxes.
Rembrandt has also sued five cable operators, including Comcast Corp., and is in litigation with Harris Corp., one of the companies that makes digital transmitters used by the networks to broadcast digital signals.
The royalties Rembrandt is demanding could be passed onto consumers as higher prices for TVs and for cable service, Balto said.
"We don't believe that we're infringing the patents that Rembrandt purchased from others," a Comcast spokeswoman said. The patents are "invalid and unenforceable."
Representatives of Fox Broadcasting and ABC declined to comment.
Michael Cohen, an attorney for Rembrandt, declined to comment on many aspects of the complaint. But he disputed that the company is seeking an excessive royalty.
Rembrandt acquired the patent in 2004 from Paradyne Corp., a spinoff from AT&T Inc., which developed the technology and obtained the patent.
At the core of the AAI's complaint is that Rembrandt reneged on a commitment AT&T made when it owned the patent. AT&T was a member of an industry group that agreed on a digital television standard in 1995. The FCC then mandated that standard for all digital broadcasters the following year, meaning that the networks can't use other technologies.