Why Americans don’t make TVs anymore
There is no question that the past few decades have brought a decline in American manufacturing. Though the automobile industry may be the most commonly referenced example, some forget that in the past our nation manufactured a variety of products, including consumer electronics. One of the most expensive and most popular American purchases is the television.
Television manufacturing is beginning to reemerge in the U.S., but manufacturers are being stifled. Abusive licensing patent pools threaten to slow innovation and economic growth charging consumers for technology they may never use.
Zenith was the last well-known American made television brand, until it sold off shares to LG, a Korean company in 1995. LG owned 100 percent of Zenith by 1999, eventually putting 1,200 workers at Zenith’s Melrose Park facility out of a job.
Back in 2012, Element Electronics, a Minnesota-headquartered company, began to assemble televisions in Detroit in a facility employing 100 people.
Though a majority of the parts are from China, where many of Element Electronics’ competitor’s televisions are manufactured, the televisions are assembled in the United States. In 2013, Element announced plans to build a second assembly facility in South Carolina that will employ 500 more people over the next 5 years.
Whether the television is built in Michigan, South Carolina, China, or Taiwan, the manufacturers all share a common hurdle that ultimately falls on the shoulders of the American consumer — high licensing fees.
Patent pools, like the more commonly discussed patent trolls, do not manufacture anything. Rather, patent pools collectively license complimentary patents, that often comprise a technology standard. Most patent pools help create efficiencies in the licensing process by providing innovators easier access to the licenses they require from one source, fostering innovation.
Unfortunately, some patent pools abuse their exclusive rights to license these technology standards. For example, for-profit MPEG LA’s ATSC pool is charging an excessively high licensing fee. The Federal Communication Commission mandates that all television and television receiver equipment manufacturers include certain technology standards in their products that are manufactured to receive a digital broadcast television signal.
MPEG LA charges a royalty of $5 for every ATSC license sold, which, in this case, is required for the sale of every television and cable box. According to the Coalition United to Terminate Financial Abuses of the Television Transition, this fee is $4 too high. European and Japanese standards and licensing fees for similar technologies cost manufacturers approximately $1. Normally, the marketplace would self-correct through consumer choice of a lower-priced alternative. In this case, however, the free-market is not a factor because the FCC requires the inclusion of the ATSC license, which institutes a government sponsored monopoly and windfall for MPEG LA.
MPEG LA doesn’t shy away from attacking the few American companies who remain in the television manufacturing space. The California-based Sceptre Incorporated was sued by MPEG LA for infringement of the ATSC standard this past July.
These troll-like actions not only harm those who are employed by the targeted company, but they also discourage investment and innovation.
Unfortunately, it is unlikely that the U.S. will be able to compete with Asia in television manufacturing in the near future.
As efforts return home and the country looks to improve the economy through manufacturing and job creation, we need to encourage innovation, not stifle it. Patent pools like MPEG LA that abuse their FCC mandated ATSC license slow innovation while consumers ultimately pay the price.
Julie Hopkins is a partner and chair of the IP Practice Group at Tydings & Rosenberg LLP.