Deviated, Unsound, and Self-Retreating: A Critical Assessment of the Princo V. Itc En Banc Decision

I. INTRODUCTION II. PHILIPS CD-R/CR-RW DISPUTE AND THE EN BANC DECISION III. MISUSE ABRIDGED: DEVIATING FROM PRECEDENTS AND LEGISLATIVE HISTORY A. Over-Construing Previous Decisions B. Deviating from Supreme Court Precedent C. Neglecting Legislative History IV. UNSOUND POLICY DECISION: CONSTRAINING EQUITABLE FLEXIBILITY V. FUNCTIONAL SELF-RETREAT: A GAP WITH ANTITRUST A. Retreating from Anticompetitive Behaviors B. Functional Needs to Complement Antirust C. Requirement on Standing Has to Be Established VI. CONCLUDING REMARKS I. INTRODUCTION For the past few years, the licensing dispute between Philips and Taiwan CD-R and CD-RW manufacturers, such as Princo and Gigastorage, has been a powerful generator of new developments in the field of patent and competition in various countries around the world. For instance, in Germany, it stimulated the Supreme Court to deal with the applicability of antitrust defenses to injunctive relief in the context of patent infringement lawsuits, the issue that the same court left open in its Standard-Spundfass decision in 2004. The Court made use of this occasion--the Orange-Book-Standard case in 2009--to opine upon contending positions on that issue, and ruled for further extending antitrust defenses to injunctive relief claims, and meanwhile, set up prerequisites for raising such defenses on the basis of abusing dominant positions by refusal to license. (1) In Taiwan, where the present series of controversies initially burst out, the Fair Trade Commission is the key enforcer of antitrust law. In 2001, the Commission found that Philips maintained an excessive royalty rate as to patents that were essential for local manufacturers to comply with CD-R/CD-RW specifications--the Orange Book standards--and, consequently, abused its monopolistic position in the technology market. (2) This case represents a very rare instance where a monopolist was held to be abusing its intellectual property (IP) exploitatively, and, until now, was still under dispute in Taiwan judicial proceedings. (3) Additionally, the Taiwan Intellectual Property Office once granted compulsory licenses on Philips' patents at dispute to local CD-R producers, but was later reversed on appeal and vacated by the Taipei Administrative High Court. (4) Turning back to the United States, the Philips CD-R/CD-RW licensing dispute arose chiefly from the exclusionary order proceedings, which is a court-style procedure administered by the U.S. International Trade Commission (ITC) aiming to forestall IP-infringing products from entering into the United States. (5) The U.S. Court of Appeals for the Federal Circuit (Fed. Cir.) possesses appellate jurisdiction over this class of cases arising from the ITC proceedings, as it does in patent infringement ligation. (6) Since 2005, the Fed. Cir. brought out three consecutive major decisions adjudicating the present dispute, culminating at the Princo Corporation v. ITC en banc decision in 2010. (7) These decisions substantially changed the landscape of the patent-misuse doctrine in general, and tying arrangement as a defense to patent infringement litigation in particular. They broke away from the traditional dichotomy between coercion and voluntariness in judging the legitimacy of mandatory package licenses. (8) Instead, in the Philips-series cases, the Fed. Cir. consistently held that tying arrangements between patents should be analyzed under rule of reason, and put emphasis on actual or probable foreclosure of both technically and commercially viable alternative technologies. (9) What is unique in the Princo en banc rehearing decision is that the court expanded the impact that the present dispute brought about concerning the entire array of patent-misuse. The majority of the Fed. Cir. unequivocally held that only restrictions on the licensee's use of the patented invention would possibly constitute patent misuse. …