Dolby Laboratories, omnipresent audio tech name in the entertainment industry, faces 270 million won ($230,000) in fines by South Korean antitrust watchdog for unfairly obstructing the use of its patented technology essential for set-top box manufacturing amid conflict over royalty issue.

The Fair Trade Commission (FTC) announced on Thursday that it would issue a correction order and a fine of 270 million won against Dolby and its Korean operation for violating the Fair Trade Act.

Dolby is an `essential patent holder` with standard patent rights for digital audio coding technology such as AC-3, which is adopted as a standard by Korean terrestrial broadcasting. This means it is impossible to provide related products in Korea without using Dolby`s patented technology.

Dolby charges royalties only to manufacturers of end-products where its technology is used, and regular audits are conducted to ensure that they are properly paid.

Dolby conducted a royalty audit on Gaon Media, a Korean set-top box maker, in September 2017, but soon came into a conflict with the company over the issue of unpaid royalties. As the conflict was not resolved, Dolby abruptly blocked Gaon Media from using its patented technology guaranteed through a license agreement.

Dolby eventually stopped authorizing the use of its technology from June 2018 until the end of September when Gaon Media agreed with Dolby. In an email sent to the headquarters by Dolby Korea, it was found that Dolby used the suspension of BP3 platform approval during its negotiations with Gaon Media.

Gaon Media had no choice but to agree to the audit results and pay the unpaid royalties according to Dolby`s request without a fair negotiation opportunity, and therefore suffered losses such as a decrease in set-top box sales and a delayed delivery, the FTC said.

By Minu Kim

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