Canon Loses SED TV Patent Ruling

A federal judge has ruled Canon violated its patent license agreement with Nano-Proprietary, putting a bigger cloud over the future of SED televisions.

Judge Samuel Sparks of the U.S. District Court for the Western District of Texas has ruled against (PDF) electronics giant Canon in a patent dispute with Nano-Proprietary over technology planned for use in SED flat-screen televisions.

Canon originally licensed Nano-Proprietary’s technology with an eye towards manufacturing surface-conduction electron emitter displays (SED) for televisions; SED panels have the potential to offer brighter pictures than LCD displays while consuming less power. The problem is that Canon doesn’t actually make televisions, so the company got together with Toshiba (which does make televisions) set up a joint venture called SED Inc., aimed at developing SED TVs.

Nano-Proprietary filed suit against Canon over the joint venture, claiming Canon’s license for its technology could not be extended to cover SED, Inc., since another company (Toshiba) would hold significant decision-making power over the company. In response, last month Canon bought out Toshiba’s interest in SED, Inc., making the operation a wholly-owned subsidiary of Canon.

Judge Sparks was unimpressed with Canon’s enveloping of SED, though, writing “Canon’s recent restructuring of SED as a wholly owned subsidiary is ineffective to prevent termination because this effort to cure the breach [...] occurred more than a year and a half after Canon was on notice of its breach.”

The trial will now move on to a damages phase, where Judge Sparks has already written that it would be “absurd” to merely grant Nano-Proprietary the $5.5 million purchase price of the license back after Canon had enjoyed the license since 1999. “Rolling back the contract to the $5.5 million purchase price would not only allow Canon to flout the licensing agreement witn impunity, but would actually reward this conduct.”

The ruling puts another cloud over the development of SED TVs, which Canon still says it plans to introduce in limited quantities to the Japanese market in the last quarter of 2007. Canon and Nano-Proprietary might be able to work out a new licensing agreement, but at the moment Canon has no concrete plans to begin large-scale SED TV production. Between the investment necessary to ramp up to mass-market production and the no-doubt considerably license fee Canon would have to pay for the technology, getting SED TVs to market might be a no-win proposition for Canon.