Dolby Labs ordered to halt unfair trade practices

SEJONG, Aug. 5 (Yonhap) -- South Korea's antitrust watchdog ordered Dolby Laboratories Inc. Wednesday to halt unfair trade practices related to the licensing of its technology that infringes on the rights of local companies.

According to the Fair Trade Commission (FTC), the company used its superior market position in the audio encoding and compression sector to compel partner companies to sign inherently unfair licensing contracts.

Some 90 local companies currently have licensing agreements with Dolby, including Samsung Electronics Co. and LG Electronics Inc. The U.S. company last year earned US$192.1 million in royalty payments from South Korean companies.

"Dolby's AC-3 audio compression format is an international technical standard that must be used to make digital audio devices," the FTC said.

"Dolby's contracts make it impossible for the licensee to even challenge in any way the intellectual property and ownership right, and restricts the sublicensing of technologies acquired by the partner company."

The FTC said that Dolby had clauses that would allow it to end the licensing agreement if the technology user ever threatened infringement or misused its intellectual property rights.

Dolby also makes it mandatory for the licensee to pay for all legal and auditing expenses related to the underreporting of licensed products, even if the scale of the underreporting is very small, the watchdog added.

The FTC said such provisions clearly capitalize on Dolby's dominant market position, forcing local companies to adhere to unfair rules.

"Dolby has been told to revise the terms of the agreements and to sign more balanced contracts," it said.

The action against Dolby could help create a more fair market in the audio encoding sector and better protect the rights of the licensee, the watchdog said, adding once changes are made, a licensee can technically engage in a legitimate legal dispute with Dolby without worrying about the former ending the existing agreement.

The FTC said it will keep close tabs on companies like Dolby that control industry standard technologies and abuse their positions.

yonngong@yna.co.kr
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