Originally Canon had entered an agreement with Toshiba to jointly produce SED TV's at an old Toshiba plant. Now it has beeen revealed that Nano-Proprietary a US firm which holds a patent related to the SED television technology and signed an agreement licensing Canon to use the technology, has prevented Canon from transferring the license to the joint company, the paper said.

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According to Forbes Magazine Canon and Toshiba have been forced to delay the planned construction of the joint venture factory to make panels for surface-conduction electron-emitter display or SED televisions in Hyogo Prefecture due to the patent suit in the US.

Canon considers the joint venture a subsidiary as the number of Canon-held shares surpasses that of Toshiba (other-otc: TOSBF.PK - news - people ) by a single share, but Nano-Proprietary argues in the suit that the joint venture is not a Canon subsidiary as Toshiba still has large influence.

Although Canon asked a US district court to recognize the venture as its subsidiary, the court turned down the request in November, the report said.

Canon has since held consultations with Toshiba on how to respond to the situation, and it is now considering increasing its equity stake in the venture, the report said, adding there is the possibility that Nano-Proprietary may demand that Toshiba pay a royalty to it when procuring the display panels.

Canon and Toshiba have been planning to build the SED factory at a cost of 180 bln yen on the premises of an existing Toshiba plant in Taishi, Hyogo.