Litigation May Force Delay in Toshiba-Canon TV Plant Construction

By Kyodo News International, Tokyo

Dec. 30–TOKYO — Canon Inc. and Toshiba Corp. may be forced to delay the planned construction of a factory to make panels for surface-conduction electron-emitter display or SED televisions in Hyogo Prefecture due to a patent suit in the United States, informed sources said Saturday.

While the two Japanese companies are promoting the SED-related businesses at their joint venture, Nano-Proprietary Inc., a U.S. firm which holds a patent related to the SED television technology and signed an agreement licensing Canon to use the technology, has prevented Canon from transferring the license to the joint company.

Canon considers the joint venture a subsidiary as the number of Canon-held shares surpasses that of Toshiba by a single share, but Nano-Proprietary argues in the suit that the joint venture is not a Canon subsidiary as Toshiba still has large influence.

It would bring about greater financial burden on the joint venture if the U.S. firm seeks patent royalty, leading the Japanese companies to revise or give up plans to start mass-manufacturing the display panels in 2008.

Although Canon asked a U.S. district court to recognize the venture as its subsidiary, the court turned down the request in November.

Canon has since held consultations with Toshiba on how to respond to the situation, and it is now considering increasing its equity stake in the venture, the sources said, adding there is the possibility that Nano-Proprietary may demand that Toshiba pay a royalty to it when procuring the display panels.

Canon and Toshiba have been planning to build the SED factory at a cost of 180 billion yen on the premises of an existing Toshiba plant in Taishi, Hyogo.

Toshiba and Canon want to start production at the factory in 2008 in time for the Beijing Olympics Games, they added.

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