Canon's deal to license Nano-Proprietary's carbon nanotubes was signed back in 1999, but the Texas-based company said that Canon's 2004 partnership with Toshiba broke that contract.

Judge Samuel Sparks of the U.S. District Court for the Western District of Texas awarded the case in Nano-Proprietary's favour and gave the company the right to dissolve the licence agreement. This Samsung insiders say this has opened up the door for them to investigate the possibility of obtaining a licence to produce SED TVs.

Judge Samuel Sparks claimed that Canon violated an agreement with Texas-based Nano-Proprietary when it formed a joint venture company with Toshiba to manufacture SED TVs. In 1999 when Nano-Proprietary licensed Canon the process to develop SED TV screens Canon set up a joint venture company with Toshiba to produce SED TVs using contributions from both manufacturers in addition to Nano-Proprietary's licensed carbon nanotube technology.

Nano-Proprietary, which sought further compensation from Toshiba, said its license agreement with Canon didn't extend to a third party and sued Canon to halt the use of its technology in 2005.

In a late effort to comply with the agreement last month, Toshiba relinquished its interest in SED, Inc., leaving Canon in control. But Judge Sparks still ruled that Nano-Proprietary had a right to cancel the license with Canon. The ruling stated that "breach is measured at the time it occurs, not at the time of trial."

Representatives of Canon and Toshiba have not responded to queries for comment. The SED technology uses tiny particles to bombard a screen with electrons to create images. This gives the SEDs a sharper resolution than traditional LCD or plasma models, but allows them to be much thinner than traditional CRTs.

Canon had hoped to fully demonstrate the technology at this year's Consumer Electronics Show, with products being released during 2007.

However, barring an overturning of the decision at appeal, Canon will need to sign a new deal with Nano-Proprietary before any products can come to market.

Damages in the case are still to be decided.