Gao Wanjun, secretary-general of the China Electronic Acoustic Equipment Association (CEAEA), said his association is discussing the issue with Phillips, Sony and Pioneer.

"I expect to ink the negotiation within one year," he said.

In 1999, the world's major DVD developers sent notices to Chinese DVD makers, asking the makers to pay for using their patent.

The companies put forward a scheme in Beijing last November that makers of DVD-related products should sign patent-authorization agreements and pay a patent fee of a certain percentage of the price of their products.

Gao said the fee for Chinese makers has not been decided, but in other countries the three companies claim US$5 per DVD player.

"The US$5 patent fee will be a blow to Chinese DVD makers," said Gao.

More than 80 domestic DVD makers have entrusted the CEAEA to negotiate with the three companies concerning the patent fee.

If the agreement is signed, another seven DVD-related technology developers will follow suit.

Some say the heavy charges will also raise the price of the DVD in China significantly and will curb demand in the country, which is now the world's second largest DVD market next to the United States.

The prices of DVD machines continue to slide in the domestic market and have plummeted below 1,000 yuan (US$120). They used to cost around 3,000 yuan (US$360).

Shan Gensheng from Jinzheng company, China's major DVD maker, said, "If the fee is collected, a large number of small and medium-sized DVD manufacturers will break down."

However, the legitimacy of the patent fee is still being questioned by experts.

This is because foreign companies did not make clear whether Chinese patent authorities have approved their patent in China, said Liu Chuntian, a professor of the Renmin University of China and an expert on intellectual property rights.

According to Chinese law, there are some disputes over whether those companies' so-called patent can be regarded as technological innovation, he said.

Phillips' patent application, which was submitted five years ago, has still not been approved.

Some argue that the patent fee is justifiable, but the problem is just how much Chinese companies should pay.

Some insiders in the sector believe that those companies may hope to weaken the position of Chinese products in the international market.

Several years ago, VCD, another type of video disc player, was extremely popular in China. However, foreign companies at that time did not demand patent fees because few models were being exported.

But today Chinese DVD makers have undercut their foreign counterparts in overseas markets, backed by cheap raw materials and labour costs.

Gao believes that foreign companies need to come up with a solution to the problem, and fast.

Perhaps at this stage, Chinese DVD makers and other sectors need to address the problem that key technology lies in the hands of other companies.

It may be the real problem they need to tackle besides bargaining with foreign giants, said Gao.

(China Daily 10/09/2001)