Technicolor going after patent ripoffs

Technicolor has a team of 220 people dissecting every new smartphone and tablet for patent infringements. Photo / Thinkstock

When Apple's next iPhone hits store shelves, Technicolor's engineers will rush to get the handset - not to make calls or play games, but to rip it apart.

Technicolor, an unprofitable French company that invented the process for colour movies used in The Wizard of Oz and countless other classics, plans to cash in on its 40,000 video, audio and optics patents to turn its fortunes around.

The company has a team of 220 people dissecting every new smartphone and tablet from industry goliaths such as Apple, Samsung Electronics and HTC for patent infringements.

"We usually send manufacturers a big file, with photos of the guts of their products, pointing to where they've been using our technology without paying for it," said Beatrix de Russe, a lawyer and executive vice-president of intellectual property at Technicolor. "Once those images have sunk in, we can start negotiating."

Patents have become a technology industry battleground as mobile-phone, tablet and computer makers try to lure consumers with constant improvements to their video and sound.

Technicolor, which made the first colour movie 90 years ago, holds key patents in digital audio and video.

"Smartphones have become the focal point for lawsuits and licensing talks," said Yves Gassot, who heads consulting firm Idate Digiworld.

"It's because the market is so huge and is growing so quickly," Gassot said.

"At the same time, the smartphone is where you'll find all the cutting-edge technology jammed into one place."

Google, creator of the market-leading Android mobile phone technology, this month completed the US$12.5 billion ($16.4 billion) takeover of Motorola Mobility Holdings mobile-phone business and its 17,000 patents.

Samsung and Apple have sued each other in the past year on four continents over patent-infringement claims related to mobile technology and design.

Although Technicolor signed its first licensing deal in the 1950s, de Russe said, "it feels like the rest of the world has just woken up to why patents are interesting".

Patent licensing is the most profitable business of the company.

The licensing division had a 76 per cent operating profit margin last year, helped by 1200 contracts with television, computer and handset makers.

The company's overall operating profit margin, based on continuing operations, stood at 14 per cent. Licensing sales totalled €451 million ($740 million), about 13 per cent of total revenue.

Technicolor has been shifting business from outdated film processes to digital techniques and software for movie-making. The Paris-based company has refinanced its debt, sold assets in declining movie-equipment units, closed factories and cut jobs during the past two years.

For 2011, it posted a net loss of €323 million on sales of €3.5 billion, its fifth consecutive annual loss.

Third Point and Apollo Management Holdings, which together own 13.4 per cent of Technicolor according to data compiled by Bloomberg, have been pushing for a sale of the company's patent portfolio, Le Figaro newspaper reported last month.

The company is fighting in US courts with Taiwanese manufacturers over patents used in LCD computer monitors, after it filed a complaint with the International Trade Commission.

The process was started after several years of failed discussions.

- Bloomberg