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CAPITAL CURRENTS: The story behind the undeserved black eyes

Thu, 07/31/2008 - 8:05pm
Jeffrey Krauss, President of Telecommunications and Technology Policy

Patent trolls raise the costs for everyone else

Back in April, the FCC gave seven TV set makers black eyes by imposing fines totaling $3.4 million for violating the V-chip rules. Reading the FCC orders, you find that the specific V-chip rule that was violated was the portion of Section 15.120(d) that says, “Digital television receivers shall be able to respond to changes in the content advisory rating system.”

Jeffrey KraussSay what? Who cares about changes in the rating system? What’s really going on here? Why did the FCC give these companies a poke in the eye? Well, in point of fact, it wasn’t easy to find out what was really going on. These were actions of the FCC’s Enforcement Bureau. Unlike FCC rulemaking proceedings, you can’t simply download the files of an enforcement action from the FCC Web site. They’re confidential. You have to file a Freedom of Information Act request, so I did. The FCC doesn’t have the resources to arbitrarily start investigating issues as arcane as the ability of TV sets to adapt to changes in V-chip rating systems. Somebody complained. Who was it?

The first candidate that came to mind was the Coalition for Independent Rating Services (CIRS). This was the organization that lobbied Congress and the FCC to permit program ratings systems that are alternatives to the one employed by the broadcast industry. The broadcast industry ratings system has several different levels (e.g., G-General, PG-Parental Guidance Suggested, MA-Mature Audience) and each level can have a suffix for further detail (V-violence, S-sexual content, L-language and D-suggestive dialog).

But for the groups making up the CIRS coalition, this doesn’t go far enough. They want a ratings system with additional detailed descriptors for other “lifestyle” characteristics such as smoking, alcohol and drugs. Not only should parents have the ability to block programming that glamorizes certain lifestyles that CIRS abhors, but program suppliers should be required to assign ratings for these characteristics, the coalition believes.

So under Section 15.120(d), if the broadcast industry agreed to expand its ratings system to include additional descriptors, the expanded ratings system could be downloaded into digital TVs. Just don’t count on that happening anytime soon.

But I wasn’t able to find any evidence that CIRS was the source of the complaint to the FCC that some TV sets might not have the download capability. Instead, what I did find, in the FOIA material from the FCC, was an e-mail dated May 2007 to two FCC staffers that starts, “As part of our V-chip technology licensing program….” It goes on to say, “We have periodically provided you with testing reports indicating models which do not comply with 15.120(d)….” And further, “I can provide a demonstration of our testing process, as well as samples of digital receivers that in our estimation are manufactured in willful disregard of FCC regulations.”

Aha. The phrase “V-chip technology licensing program” means that this is a patent issue. And with a little help from some friends, I found an FCC filing from the Wi-Lan V-chip Corp., which owns U.S. patent 5,828,402, entitled, “Method and apparatus for selectively blocking audio and video signals.”

This patent covers work by Tim Collings, a professor at Simon Fraser University, who describes himself as “inventor of the V-chip.” Collings’ company, Tri-Vision International, had patent licensing agreements with some 50 consumer electronics companies including Sony, Hitachi, Pioneer, Philips and Toshiba, before it was acquired by Wi-Lan in July 2007 for 17 million shares of Wi-Lan stock. At that time, Wi-Lan stock was selling for about $5 a share (symbol WIN.TO). Today, it’s down to $1.85. Ouch.

So what business is Wi-Lan in? Maybe these quotes from a recent Reuters news article will make it clear: “Canadian technology licensing company Wi-Lan Inc has launched a new round of patent infringement lawsuits, targeting Motorola Inc, Research In Motion, and UTStarcom Inc.” “In late 2007, the company launched litigation against 22 major technology manufacturers, including Apple, Dell, Hewlett-Packard and Intel, claiming patent infringement.” “Wi-Lan has been accused of being a patent troll, a pejorative term that refers to a company that doesn’t make anything, but holds patents and exists solely to sue others in the industry.”

What’s remarkable is that the companies that the FCC fined for V-chip non-compliance were already listed as licensees by Tri-Vision. It’s hard to understand what Wi-Lan gained by having the FCC punish those companies. Maybe the companies were not paying the royalties on the non-compliant TV receivers. Whatever the motivation, Wi-Lan was able to get the FCC to do the dirty work, and Wi-Lan’s fingerprints are almost invisible. In any case, it cost the TV manufacturers more than just the amount of the FCC fines. Probably for some of the companies, the lawyers’ fees exceeded the fines. It damaged the companies’ reputations. And all because some TV set models didn’t have a capability that will probably never be needed. Patent trolls, ambulance chasers and other predators only succeed in doing one thing well – raising the costs of goods and services for everyone else.

 jkrauss@krauss.ws

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