Domestic manufacturers will pay a US$3.50 royalty to Sony Corp., Pioneer Corp. and Royal Philips Electronics NV, which combine to form the "3C group," for each product exported to overseas markets, according to the China Acoustic Equipment Association.

"The patent dispute was settled recently after more than two years of negotiating with the 3C group over how high the fee should be," said an official with the association, which was entrusted by domestic producers to negotiate with the foreign companies.

More than 100 domestic manufactures of DVD machines will pay royalties under the five-year contract signed with the 3C group.

This is the second such agreement between domestic manufacturers and foreign patent holders signed this year. In March, Chinese manufacturers agreed to pay a US$4 royalty on every DVD machine exported to six other overseas electronics companies known as the 6C group, which includes Hitachi, Matsushita, Mitsubishi, Time Warner, Toshiba and the Victor Company of Japan Ltd.

Some domestic companies worry that the combined US$7.50 in royalty payments will cut profit margins and make their machines less competitive.

"The charges have greatly shrunk our profit margins on DVD players, which also decrease our competitiveness in the global market," said Fan Wenjian, a spokesman of Jiangsu Shinco Electronic Group, a leading DVD player manufacturer on China's mainland.

The export prices of made-in-China DVD players have increased by an average of US$10 since the deal with the 6C group was signed.

(Shanghai Daily October 11, 2002)