20,000 DVD DEVICES SEIZED - COMPANY ALLEGEDLY DIDN'T PAY LICENSE FEES

Mercury News

Investigators seized 20,000 DVD recorders from a Fremont company that was allegedly manufacturing them without paying the proper licensing fees

No one has been arrested yet in the June 8 seizure at Fremont-based Cyberhome, said James Sibley, deputy district attorney with the High Technology Crimes Unit in Santa Clara County.

The raid occurred after a complaint by Philips Electronics two weeks ago. The company alleges Cyberhome kept making the DVD recorders even though it had stopped paying Philips for the licensing fees, which are $2 to $5.25 per unit, Sibley said. Cyberhome allegedly owes Philips $22 million.

The electronics company phoned the district attorney's office and said, ``We've done everything we could civilly,'' Sibley recalled. ``Can anyone stop them?''

Members of a five-county computer crime task force, along with agents from the FBI and Immigration and Customs Enforcement, executed a warrant June 8.

Sibley said it's an example of the growing problem of U.S. companies losing their intellectual property rights to offshore manufacturers that don't abide by licensing laws.

``I think it's very big,'' Sibley said of the seizure, ``probably one of the first major criminal enforcement efforts in what is becoming an ongoing nightmare in the tech industry with offshore manufacturing in China and Taiwan, where intellectual property rights are somewhat less respected.''

Attempts to reach Cyberhome were unsuccessful.

Philips was the biggest victim in the operation, though companies such as Dolby and Sony were also affected, Sibley said. People use the machines to record television shows on DVDs.

It took eight tractor-trailers to carry away the confiscated machines. California Penal Code allows the manufacture, possession or sale of more than 1,000 units bearing a counterfeit mark to be punishable by up to three years and fines of up to $500,000.