THIS REMBRANDT PAINTS A VERY UGLY PICTURE

Our federal lawmakers and regulators are sure worked up about this DTV transition.

Fearing that some constituent somewhere may miss a couple of days of TV due to the Feb. 17, 2009, analog cut-off, they are pressuring broadcasters, cable operators and consumer electronics retailers to conduct massive public awareness campaigns to complement the government’s own considerable efforts.

The feds must think that the only thing keeping the country from descending into anarchy is the pacifying effects of Oprah, American Idol and Whacked Out Videos.

Given this high level of official alarm, I find it perplexing that the feds seem to be shrugging off what could be the most serious threat to TV broadcasting’s digital future.

That threat would be Rembrandt Technologies. This Philadelphia firm sees itself as a noble slayer of “patent pirates.” But others see it has a patent troll, a sketchy outfit that acquires patents and attempts to milk them for more than they are worth through aggressive litigation.

As TVNEWSDAY reported last June, Rembrandt has acquired one of many ATSC patents and has taken the broadcast networks, a TV set manufacturer and others to court charging infringement and demanding heavy license fees.

How heavy? In the case of the networks, would you believe one-half of 1 percent of their total revenue? Calculate that if you can.

ATSC, in case you don’t know, is the digital broadcast standard that the TV industry jointly developed and that the FCC duly adopted as the national standard that TV stations must use starting next February.

Every digital transmitter and TV set is built to the standard and to the parcel of patents it encompasses.

The infringement suits have all been consolidated in a federal court in Delaware.

At the same time, Rembrandt is battling Harris, one of the major digital TV transmitter manufacturers, in a Delaware state court. At issue there is whether Rembrandt breached an agreement to license its ATSC patent on a “fair, reasonable and non-discriminatory” (FRAND) terms.

It’s the contention of Harris and all the defendants in the infringement case that Rembrandt must license the patent on a FRAND basis—that is, cheaply—because the original holder of the patent, AT&T, agreed to do just that.

Under the aegis of the Advanced Television Systems Committee, AT&T was one of several companies that agreed in 1995 to consolidate their technologies and patents to produce a single DTV system. All promised FRAND licensing.

But through a series of transactions, the AT&T patent has wound up in the hands of Rembrandt, which feels it can renege on the original FRAND deal. I don’t know what Rembrandt’s legal theory is, but I can tell you that all the defendants are taking the litigation seriously, very seriously.

While the feds may be overly concerned about consumer confusion in the transition, they may be too little concerned about the Rembrandt threat.

Rembrandt litigation, I’m told, is unlikely to derail the DTV transition. It will likely take years (and millions in legal fees) to get to a judgment.

But it could wreck broadcasters’ promising digital future.

TV stations have invested billions on building out their new ATSC broadcast infrastructure. They now hope to earn a return on that investment through multicasting or mobile broadcasting or whatever.

If Rembrandt ultimately prevails, it would become the silent partner in every the broadcasters’ digital ventures, siphoning off large chucks of revenue.

Rembrandt would also get a piece of every TV set sale.

The transmitter manufacturers have indemnified the broadcasters who have bought their hardware, but there is undoubtedly a limit to their liability. Determining who actually ends up paying Rembrandt would likely trigger still more litigation.

A Rembrandt victory would also undermine all standards-setting bodies like the ATSC that rely on participating companies to license patents on reasonable terms.

When the FCC adopted the ATSC standard in 1996, it did so on the presumption that the patents would be made available on FRAND terms.

“We remain committed to this principle and if a future problem is brought to our attention, we will consider it and take appropriate action,” the FCC said at that time.

Well, it’s now the future and there is a problem. As I reported in June, Harris has bought it to the FCC’s attention and so far it has gotten no “appropriate action.”

At the very least, that action should be a statement from FCC Chairman Kevin Martin or perhaps the entire commission stating that there is a compelling public interest in transmitter and set manufacturers being able to build ATSC products and in broadcasters and consumers being able to buy them without being gouged by holders of an obscure patent.

Better yet, the FCC ought to move to enjoin Rembrandt from trying to enforce its patent on terms other than what AT&T originally agreed to.

If the FCC doesn’t have the stomach for it, perhaps the Federal Trade Commission does. It could tackle this using its authority to regulate anti-competitive and deceptive business practices.

Harris, for one, was heartened by an action of the FTC last month.

That agency nailed a patent firm called Negotiated Data Solutions for reneging on a patent licensing commitment to a standard-setting organization—the IEEE—and trying to obtain more favorable terms from users.

The FTC found that the conduct constituted “an unfair method of competition” and “an unfair or deceptive act”—terms of art from the antitrust world.

The stakes were high in the case. The patent relates to the Ethernet, an almost universally used computer networking standard.

The stakes are also high in DTV.

Using the Negotiated Data precedent, ATSC users may be able to persuade the FTC to take up the case.

But I’d like to see the FCC take the lead. It adopted the ATSC standard. It’s responsible for protecting it.

So, I hereby bring the problem to the FCC’s attention once again.

Now, how about some “appropriate action?”

The headliners for the Broadcasters Foundation of America Golden Mike Awards gala a week from Monday (Feb. 25) at the Waldorf-Astoria in New York are Vanessa Williams (Ugly Betty) and Tom Bergeron (Dancing with the Stars). She’ll sing; he’ll preside.

But the real reason to come is to rub shoulders with the TV industry brass that is turning out to honor the Golden Mike winner, Disney-ABC’s Anne Sweeney.

The guest list includes Hearst-Argyle Television’s David Barrett, Hubbard’s Stan Hubbard, NBC Universal’s Jeff Zucker, CBS TV Stations President Tom Kane, Scripps’ Ken Lowe, NAB’s David Rehr, News Corp.’s Peter Chernin, Cox Television’s Andy Fisher, Group M’s Marc Goldstein, Young’s Deb McDermott, ABC News’s David Westin and Barbara Walters, ABC Affiliate Board President Ray Cole and ABC Entertainment President Steve McPherson.

No, I take that back. The real reason to come is not to smooze, but to support the good work of the Broadcasters Foundation, which provides financial aid to broadcasters who find themselves in acute need. Over the past five years, it’s given away more than $3 million.

The money keeps going out, so it needs more coming in.

Here’s my advice: shuffle some numbers around in the budget, buy a bunch of tickets by calling BFA at 203-862-8577 and reward some of your employees and business associates with a night out in the Big Apple.