Could patent sharing replace the lawsuit as a competitive business strategy?

A cross-licensing agreement reached last week between Sony Corp. and Samsung Electronics Co. is unprecedented in scope for large manufacturers.

The accord will give the two companies free access to each other's patent portfolios, including those held by the subsidiaries of the two electronics giants.

The combined Japanese-South Korean library of intellectual property represents a huge war chest of technical know-how-one that officials at other manufacturers admit could shake up the industry. By doing away with patent negotiations on largely basic technologies, Sony and Samsung can accelerate the development of cutting-edge products and bring them to market much faster.

The agreement will also free them from costly and time-consuming patent disputes.

``We will be able to quickly solve patent problems with rapidly growing Samsung before they develop into lawsuits, speeding up the product development process,'' says Yoshihide Nakamura, senior general manager of Sony's Intellectual Property Division.

Sony will make available to the South Korean company 13,000 patents registered in the United States, while Samsung will offer 11,000 patents, paying a royalty to Sony to make up for the gap in patent value.

Sony was ranked ninth in terms of the number of patents it registered in the United States in 2003, while Samsung was placed 11th, according to IFI Claims Patent Services.

Rivals will be watching closely to see how the agreement strengthens the clout of Sony and Samsung in mainstay products such as flat-panel TVs and DVD players-in the past, a source of patent friction between the two companies.

Not everything is going on the table. Some brand-defining technologies have been excluded from the agreement.

Sony is keeping 6 percent of its patent portfolio to itself, including technologies related to PlayStation video game consoles and charge-coupled devices used in digital cameras. The agreement also does not apply to patents related to next-generation organic electroluminescence display panels.

Samsung is excluding patents related to liquid crystal display (LCD) panels and network home appliances.

Patent negotiations have become the bane of any company trying to launch an IT product.

When Sony produced a VHS videocassette recorder two decades ago, it concluded licensing contracts with just three patent holders, say company officials.

Today, patent agreements with as many as 35 companies are needed to produce a DVD player.

The complex nature of digital products means dealing not only with rival electronics manufacturers, but also with patent holders in other industries, such as computer and camera makers.

Other domestic electronics makers have concluded cross-licensing agreements with foreign companies, but these have been largely limited to specific technology areas.

Hitachi Ltd. formed cross-licensing contracts for computer-related technologies with IBM Corp. in 1996 and Hewlett-Packard Co. in 2003. Toshiba Corp. has inked an agreement with a South Korean company that covers flash memory technology.

Too often, though, technology sharing attempts have developed into protracted court battles.

After three years of legal proceedings, Nikon Corp. and two European makers of chipmaking equipment agreed in September to conclude a cross-licensing agreement over patents related to steppers, devices used to print circuit patterns onto silicon wafers.

ASML Holding NV of the Netherlands and Carl Zeiss SMT AG of Germany also agreed to pay $87 million (9.14 billion yen) and $58 million, respectively, to Nikon for a settlement of their disputes.

It seems that patent suits remain part of doing business for high-tech manufacturers.

In October, Honeywell International Inc. of the United States lodged complaints against Sony, Toshiba, Fujitsu Ltd. and 31 other electronics companies over infringement of its LCD technologies.(IHT/Asahi: December 21,2004)