The U.S. District Court for Western District of Texas Thursday said Canon’s venture with Toshiba Corp. to make televisions based on the technology resulted in “material breach” of the license agreement, according to a court document on Nano-Proprietary’s Web site. Nano-Proprietary has the right to end the agreement, according to the ruling, dated Thursday.

Canon last month agreed to buy Toshiba Corp.’s 49.9 percent stake in a venture to make surface-conduction electron-emitter display, SED, flat-panel televisions using the technology. Canon had expected the purchase to allow it to avoid a lengthy legal dispute. The move came too late to stop Nano-Proprietary from canceling the licensing agreement, which cost Canon US$5.6 million, Judge Sam Sparks wrote in the ruling.

“If Canon loses the license, the investment in the business so far will be for nothing,” said Mitsuhiro Osawa, a Tokyo-based analyst at Mizuho Investors Securities Co. “On the other hand, that would save the company the years of losses the SED TV business would probably have.” He rates the company “neutral.”

The decision may hamper Canon’s plan to enter the US$86 billion flat-panel display market in the fourth quarter this year. Canon is betting the surface-conduction electron-emitter display technology, which produces clearer images and consumes less power than plasma and liquid-crystal displays, will help them compete against Sharp Corp., the world’s biggest maker of LCD televisions, and Matsushita Electric Industrial Co., the biggest manufacturer of plasma TVs.

“Our understanding is that it’s not the final verdict, so we cannot comment on the decision,” said Richard Berger, Canon’s spokesman.

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