Sharp to Monetize Patents Amid Focus on Ultra HD TVs, Smart Home

(Bloomberg) -- Sharp Corp.'s U.S. legal battle with Hisense Electric Co. marks the start of an aggressive new campaign by the Japanese electronics company to obtain royalties on its patents as the company focuses on ultra-high-resolution televisions and “smart home” devices.

The Osaka-based Sharp plans to be more assertive when it comes to demanding patent royalties and may even start filing lawsuits against anyone found using Sharp inventions without permission, a company executive said in an interview.

“As devices become more sophisticated and complex and interconnected, device developers really need to pay more attention to what patents are out there,” said Rey Roque, vice president of strategic business development for Sharp Electronics in Santa Ana, California. “You'll see us asserting our rights -- whether that leads to more litigation I can't say at this time.”

Sharp's main patent case so far has been against Hisense over Wi-Fi enabled televisions. The U.S. International Trade Commission last week agreed to investigate a complaint that Hisense is infringing Sharp patents.

Hisense is fighting the patent infringement allegation in a proceeding that could lead to a ban on U.S. imports of some of its televisions. The company filed legal papers blaming Foxconn Technology Co. for Sharp's new push. Foxconn bought a controlling stake of Sharp in August 2016, turning the electronics maker into a profitable company.

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In 2015, Hisense signed an agreement to take over Sharp's manufacturing facility in Mexico and obtain the rights to sell televisions under the Sharp brand in the U.S. Sharp has filed a lawsuit accusing Hisense of selling low-quality products with the Sharp name.

“After the acquisition, Sharp and its new owner had second thoughts about the relinquishment of the Sharp brand for the U.S. market and began a multifaceted effort to recover or undermine the rights that Hisense acquired,” Hisense said in a Sept. 13 filing with the U.S. trade agency.

Roque declined to go into detail about the Hisense dispute, but said the company would consider litigation on a “case-by-case basis.” The Japanese electronics company does license its patents to “industry leaders,” Roque said, without naming companies.

The electronics market is increasingly tense as companies try to protect their profit margins while consumers demand lower prices. That could lead to efforts to cut the amount of royalty payments made on components or features.

“In the past, a radio was a radio and a television was a television,” Roque said. “With technological improvements, they're really becoming more interconnected and part of larger ecosystems.”

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The push to protect its patents runs parallel to the company's new focus. Sharp in August unveiled its new high-resolution televisions known as 8K, which the company says display images 16 times the resolution of HD TVs and at “ultimate reality, with ultra-fine details even the naked eye cannot capture.”

Sharp is also looking to extend so-called smart home devices that help people regulate heating or appliances in their homes from afar beyond the home through connected devices so that “appliances will become our partners in addressing the needs of both individual households and society as a whole.”

Sharp does have some experience with intra-industry patent battles over new technologies. Almost a decade ago, it was embroiled in patent fights with Sanyo Electric Co., AU Optronics Corp. and Samsung Electronics Co. over liquid-crystal displays. All of those cases settled.

Still, Sharp is more often the defendant in lawsuits where patent owners file cases against large tech companies in hopes of big paydays.

While the big concern is enforcing Sharp's patent rights in the U.S., the company may go outside the U.S. as well, Roque said.

Sharp has been operating in the U.S. since the 1960s and conducts its research in both countries, moving far beyond its early roots in consumer electronics. It typically ranks in the top 50 recipients of U.S. patents. In 2016, it received 818 patents, down from 969 in the year-earlier period, according to figures compiled by the Intellectual Property Owners Association.

“We want to protect that innovation and not have just another company misappropriate it,” Roque said.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman