Intellectual Property Office approbated Gigastorage’s Compulsory Licensing of Philips’ Five CD-R patents.

Intellectual Property Office of the Ministry of Economic Affairs has approved on July 26 the compulsory licensing applied by Gigastorage Corp. concerning five CD-R patent rights cases owned by Philips Electronics.  The licensing period took effect from the day licenses were approbated until each term of the five patent rights was due.  However, the licensing should centralize on supplying the demands of domestic market.

 

Gigastorage, on July 30, 2002, filed the application for compulsory licensing according to the stipulation of Paragraph 1, Article 78 of the contemporary Patent Law “in the case of an applicant’s failure to reach a licensing agreement with the patentee concerned under reasonable commercial terms and conditions within a considerable period of time,” resulting from the failure of several negotiations with Philips for the license fees of CD-R discs.  Owing that the case would have a great impact on our disc-making industries and was also involved with patent right issues of foreign companies, Intellectual Property Office had been actively playing the role as a coordinator for both sides in anticipation of achieving a win/win situation and seeking for a reasonable solution through consultations of both parties.  However, agreement was never procured.

 

From 1997 to the first half-year of 2003, the factory prices of CD-R discs had dropped from five USD per disc to 0.19 USD per disc.  Intellectual Property Office believed that it was apparently unreasonable for Philips to continue calculating royalties at a fixed amount when market prices were highly volatile.  Hence, reconsideration and adjustments were necessary.  United States International Trade Commission had a consensus with our Fair Trade Committee regarding this issue.  The process of inspection would be striving for balance between the benefits of technology owners and technology users so as to accelerate development of our domestic industries.

 

Intellectual Property Office expressed that since March 2001, Gigastorage had requested extensive negotiations with Philips in terms of using percentage of factory prices as a basis for royalty calculation.  Until April 2002, both parties had spent over a year negotiating, and no conclusion was drawn up to date.  Intellectual Property Office reckoned that this case should conform to what stipulated in Paragraph 1 Article 78 of the Patent Law at that time, and therefore granted Gigastorage the compulsory licensing of Philips’ five patent rights admitted in our country.  Nevertheless, the employment of compulsory licensing did come with a price tag.  Gigastorage would still need to negotiate with Philips and remunerate them with a fair amount of compensation.  If Philips was dissatisfied with the result of approval, they would be able to file petition to the Ministry of Economic Affairs through Intellectual Property Office within thirty days after the approval statement arrived. 

 

Philips had cancelled Gigastorage’s patent license of producing discs in 2001.  Next year, Gigastorage applied for compulsory licensing with Intellectual Property Office accusing Philips of abusing patent rights by which means to counteract Philips’ legal actions in case that Philips filed a complaint of right infringement, petitioned provisional shut down of the factory, prohibited producing and selling and so on series of legal actions.  After long-term disputes both internally and overseas, United States ITC had finally come to the decision that Philips had been abusing their patent rights and that they were not allowed to restrict Gigastorage from exporting discs to United States market for sale.  Gigastorage gained the preliminary victory, which was, then followed by Intellectual Property Office’s granting of compulsory licensing, and this was certainly a huge boost to the morale of the company.  This case was said to have positive influences on our disc-making industries as well. 

 

Three years ago, Philips, Sony Japan and Taiyo Yuden integrated all their CD-R patent rights and licensed them to disc manufacturers in Taiwan via package authorization.  The three companies had thus violated Article 14 of Fair Trade Law.  Furthermore, as a result of misusing their monopolizing statuses and charging high and unreasonable royalties regardless of market prices, they were penalized with NT$14 million by Fair Trade Commission for violating Article 10 of the said law. (2004.7)

CYJ/CHT