Under the proposal, Toshiba Corporation (Toshiba) will offer package licenses on behalf of itself, Hitachi Ltd., Matsushita Electric Industrial Co. Ltd., Mitsubishi Electric Corporation, Time Warner Inc., and Victor Company of Japan Ltd. (collectively, the Licensors). The license will allow makers of DVD-Video and DVD-ROM discs and players to use the technology the six firms own that is essential for compliance with DVD-Video and DVD-ROM Standard Specifications.

In a business review letter issued today by Joel I. Klein, Assistant Attorney General in charge of the Antitrust Division, the Department said the proposed patent pool is designed to capture efficiencies that may come from joint licensing of complementary technologies. It will reduce the costs associated with obtaining licenses on the six firms' essential patents, while raising little possibility of competitive harm.

A DVD is the same size as a compact disc, but with more than seven times the capacity. Utilizing compression technology, a single DVD-Video disc can hold a two-hour feature film.

The Standard Specifications were established by the six Licensors and four other firms to define the Digital Versatile Disc for video and ROM applications. These Specifications also include rules, conditions and mechanisms for players to read the discs and convert them into images for screen display. The Standard Specifications implicate the intellectual property rights of a number of firms, including the Licensors.

Through the license from Toshiba, makers of discs and players that comply with the Standard Specifications will be able to license the essential patents of all six Licensors in a single transaction. The license will tell potential licensees exactly what patents are in the portfolio, and that a license on each portfolio patent is available independently from its owner.

The Licensors have retained patent experts to review their patents to ensure that the license conveys rights only to patents that licensees will need in order to comply with the Standard Specifications. Based on information they receive from the Licensors and others in the industry, the experts will determine which of the Licensors' patents are necessary for compliance with the Standard Specifications. By doing this, the Department noted, the expert will help ensure that the patent pool does not combine patents that would otherwise be competing with each other.

This is the Department's second request to form a DVD-Video and DVD-ROM patent pool. In December 1998, the Department approved the DVD pool formed by Koninklijke Philips Electronics N.V., Sony Corporation of Japan, and Pioneer Electronic Corporation of Japan.

Under the Department's Business Review Procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the Division will challenge the action under the antitrust laws.

A file containing the business review request and the Department's response may be examined in the Legal Procedure Unit of the Antitrust Division, Suite 215, Liberty Place, 325 7th Street, N.W., U.S. Department of Justice, Washington, D.C. 20004. After a 30-day waiting period, the documents supporting the business review will be added to the file.