BOSCH v HAUPTZOLLAMT HILDESHEIM
proceedingsare,so far as the parties to the main action are concerned, a step
in the action pending before the Finanzgericht Hamburg, the decision on
costs is a matter for that court.
On those grounds,
THE COURT (First Chamber)
in answer to the question referred to it by the Finanzgericht Hamburg by
order of 5 November 1976 hereby rules.
Article 3 (1) (a) of Regulation No 803/68of the Council is to be
interpreted as meaning that the normal price of goods includes
the value of a patented process where the protected process is
inseparably embodied in and constitutes the only economically
viable use of the goods.
Donner MertensdeWilmars Bosco
Delivered in open court in Luxembourg on 14 July 1977.
A. Van Houtte
Registrar
A. M. Donner
President of the First Chamber
OPINION OF MR ADVOCATE-GENERAL WARNER
DELIVERED ON 22 JUNE 1977
My Lords,
In this case the Court is once again
concerned with the interpretation of
Council Regulation (EEC) No 803/68 on
the valuation of goods for customs
purposes. The actual question that calls
for decision is however novel. It is as to
the inclusion, in the value of goods for
customs purposes, of the value of the
right to use a patent in respect of them.
The casecomes to the Court by way of a
reference for a preliminary ruling by the
Finanzgericht of Hamburg. The plaintiff
before that Court is Robert Bosch
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OPINION OF MR WARNER — CASE 1/77
GmbH, which I shall call 'Bosch'. The
defendant is the Hauptzollamt of
Hildesheim.
The facts are these.
An American company, Globe-Union
Inc., of Milwaukee, which I shall call
'Globe', is the patentee of a processfor
the manufacture of electric storage
battery cell components. The processis
one whereby (to quote from the
description of it given in paragraph
1.1.(a) of an Agreement to which I shall
refer more particularly in a moment)
'assembliesof cell plates and spacersare
clamped in assembled relationship,
portions thereof are fluxed or cleaned
while so supported, and molten metal is
formed in a mold and solidified
to rigidly support and electrically
interconnect selectedones of saidplates.
The process is called the 'COS process',
the letters 'COS' standing for 'cast-on
strap'. Globe is also the manufacturerand
the patentee of a machine which is
described (in paragraph 1.1.(b) of that
Agreement) as having been 'designed for
the expresspurpose of the practiceof the
COS Process'.In the Federal Republic of
Germany, there are two patents for the
machine and one for the process.We
have not been told what patents there
may be for them in other countries.
The Agreement that I have mentioned
was made on 20 May 1965 between
Bosch and G-U OverseasLtd., a British
subsidiary of Globe, which I shall call
'G-U O'. The Agreement recited, among
other things, that G-U O was for the
purposes of the Agreement sufficiently
entitled to the technical information and
patent rights of Globe with respectto the
COS process and machine, and that
Bosch desired to acquire the machine
and the right commercially to practise
the COS process, and to use therefor
Globe's technical information and patent
rights. (The machine was referred to in
the Agreement as 'COS Equipment').
Paragraph2.1 of the Agreement provided
that G-UO should, within 90 days,
furnish to Bosch certain technical and
other information to enable Bosch to
manufacture batteries using the COS
process and machine. It continued:
'G-U O will furthermore procure that
Globe will furnish to Bosch, upon its
request,one or two COS Equipment with
such features and at a price and on
conditions to be agreed upon between
G-U O, Globe and Bosch in advance'. I
do not pause to consider whether the
obligation thus imposed on G-U O was
legally enforceable,although it appearsto
have been (by virtue of paragraph 9.3 of
the Agreement) governed by English law
and the general principle of English law
is that an agreement to make an
agreementis unenforceable.
The other main relevant provisions of
the Agreement may be summarized as
follows.
Under paragraph 2.2 Bosch was to be
provided by G-U O and Globe with
engineering and consultancy services,
including in particular visits by Globe
experts to the Bosch works 'with respect
to any detailed engineering for the first
COS Equipment and the installation
thereof. Those serviceswere, by virtue of
paragraph 5.7, to be charged for on the
basis of the actual expense incurred by
G-U O or Globe in their provision.
Under paragraph2.3 G-U O was to make
available to Bosch throughout the term
of the Agreement such of G-U O's and
Globe's technical information, whether
patented or unpatented, as would be of
assistance to Bosch's operations under
the Agreement; and under paragraph2.4
Bosch was given the right to inspect, at
any time during the two years following
the date of the Agreement, Globe's 'COS
Equipment' at any 'suitable' Globe plant.
By paragraph 4.1 G-UO granted to
Bosch a non-transferable, non-exclusive
licence, expressedto be 'under Globe's
and G-U O s Technical Information and
Patent Rights', (i) to manufacture,useand
sell in all countries of Continental
Europe batteries embodying, utilizing or
resulting directly from the technical
1484
BOSCH v HAUPTZOLLAMT HILDESHEIM
information made available to Bosch
under the Agreement or any feature or
features covered by the patent rights in
respect of the COS process or machine
and (ii) to use and sell batteries so
manufactured in Great Britain and
Ireland, and in all countries of Africa and
Asia, with certain exceptions. By various
provisions of the Agreement (in
particular paragraphs 2.5, 3.2 and 4.3)
Bosch undertook countervailing obliga­
tions as to secrecy and as to the
disclosure to G-U O of improvements,
whether patented or not, found by Bosch
concerning the use of the COS machine
or process. By clause 5.1 Bosch was to
pay to G-U O an initial sum of
US $ 10000 within one month of the
date of the Agreement. By clause 5.2, as
amended by a supplemental Agreement
made on 12 December 1968, Bosch was,
for the first five years of the life of the
Agreement, to pay to G-U O a royalty for
each battery sold under the licence, the
rates being US $1-15 for each 6-volt
battery and US $2-30 for each 12-volt
battery, with a minimum annual royalty
of US $ 7000. Under paragraph 5-3,
Bosch was, from the beginning of the
sixth year, to pay royalties at half those
rates and then only for batteries in the
manufacture of which any of the licensed
patent rights had been used.
The Finanzgericht has found as a fact
that the technical information to be
given by G-U O to Bosch under the
Agreement included data as to the
preparation of the flux, as to the
temperature of the lead baths and as to
the composition of the lead alloys to be
used in the COS process.
On 4 June 1974 Bosch applied to the
defendant for customs clearance of a
COS machine supplied by Globe. The
machine was entered under Heading
85.11 B of the Common Customs Tariff,
which comprises 'Electric welding,
brazing and soldering machines and
apparatus and similar electric machines
and apparatus for cutting, for any
material'. The (conventional) rate of duty
on such goods under the CCT was
7-5%. The defendant provisionally
valued the machine at DM 271 107-25
and, on that basis, assessedthe customs
duty at DM 20 333, which sum Bosch
paid. The defendant also assessedBosch
to German 'import turnover tax'
(Einfuhrumsatzsteuer) of DM 32 058-40,
but with that this Court is not concerned.
The valuation of DM 271 107-25was,as I
understand it, made up of a sum of DM
228 476-25representing the price paid by
Bosch for the machine (US$84 254-95)
and a sum of DM 42 631 described as a
supplement in respect of royalties
payable by Bosch under the Agreement
of 20 May 1965 (as amended).
The valuation was challenged by Bosch. I
need not take up Your Lordships time
with a detailed account of the
administrative processes that followed.
Suffice it to say that they culminated in a
decision (Einspruchentscheidung) of the
defendant dated 4 March 1975, under
which the supplement of DM 42 631 was
reduced to DM 27 099-43 and Bosch
was thereby rendered entitled to a
reimbursement of DM 1123-40.
Against that decision Bosch now appeals
to the Finanzgericht, claiming that there
should be no supplement at all and, in
the alternative, that, if there should be
one, the defendant's computation of it is
still excessive.
It appears that, in the argument before
the Finanzgericht, an important part has
been played by a decision of the
Bundesfinanzhof dated 7 August 1962
(Aktenzeichen VII 89/60 U, Bundes-
steuerblatt III 1962, p. 549). The
Bundesfinanzhof there held that, if, in
connexion with the purchaseand import
of a machine manufactured under a
patent, the right to a patented process
was also assignedor a licence to use that
right was granted, the consideration for
such assignment or grant formed part of
the value of the machine for customs
purposes, at any rate if the machine,
owing to the special characteristicsof its
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OPINION OF MR WARNER — CASE 1/77
construction and to the mode of its
operation, embodied the patented
process so that a person entitled to use
the machine could, by operating it, also
operate the patented process without
taking any further step in order to do so.
That decision of the Bundesfinanzhof
was however given in interpretation of
the German Zolltarifgesetz of 16 August
1951, a statute which antedated not only
Regulation No 803/68 but even the entry
into force of the BrusselsConvention on
the Valuation of Goods for Customs
Purposes. It is a common feature
of the Zolltarifgesetz, of the Brussels
Convention and of Regulation No
803/68 that they all based or base the
value of goods for customs purposeson
the concept of their 'normal price'. But
the particular provision of the
Zolltarifgesetz that was in point in the
case before the Bundesfinanzhof was
paragraph 6 (4), the wording of which
was wider and less precise than that of
the corresponding provisions of the
Brussels Convention and of Regulation
No 803/68. Paragraph 6 (4) provided, so
far as material: The normal price shall
include the right to use the patent... in
respect of the goods if the imported
goods are the object of any such right'.
('Im Normalpreis ist einbegriffen das
Recht zur Benutzung des Patents... an
den Waren, wenn die eingeführten
Waren Gegenstand eines solchen
Rechtes sind). It is also to be observed
that the reasoning of the
Bundesfinanzhof was in large part
founded on earlier authorities relating to
German customs legislation and to the
German law of patents.
So far as German law is concerned the
Zolltarifgesetz appears to have been
overridden by a Statute of 17 December
1951 providing for three Brussels
Conventions on customs matters,
including that on the Valuation of
Goods, to become applicable in
Germany: the 'Gesetz über internationale
Vereinbarungen auf dem Gebiete des
Zollwesens'.
As Your Lordships know, the Brussels
Conventions bind all the Member States
of the Community, and a large number
of other Statesbesides.The Convention
on the Valuation of Goods contains in
Annex I the 'Definition of Value' which,
by Article II of the Convention, each
Contracting Party undertook to introduce
into its domestic law and, in Annex II,
the 'Interpretative Notes' which, by
Article HI, each Contracting Party
undertook to introduce into its domestic
law and, in Annex II, the 'Interpretative
Notes' which, by Article HI, each
Contracting Party undertook to conform
to in applying the Definition of Value. I
need not read Annex I, becauseits terms
are reflected in those of Regulation No
803/68, to which I shall come. I need
only recall that the Definition of Value
there set out prescribes,asthe measureof
the value of imported goods for customs
purposes,the price that they would fetch
on a sale in the open market between a
buyer and a seller independent of each
other, and that it then refines on that
concept, which it labels 'the normal
price'. I must, however, read part of one
of the Interpretative Notes in Annex II,
namely Note 5. This is as follows:
The object of the Definition of Value is
to make it possible in all cases to
calculate the duties payable on the basis
of the price at which imported goods are
freely availableto any buyer on a sale in
the open market at the port or place
of introduction into the country of
importation. It is a concept for general
use and is applicable whether or not the
goods are in fact imported under a
contract of sale, and whatever the terms
of that contract.
But the application of the Definition
implies an enquiry into current prices at
the time of valuation. In practice, when
imported goods are the subject of a bona
fide sale, the price paid or payable on
that sale can generally be consideredas a
valid indication of the normal price
mentioned in the Definition. This being
so, the price paid or payable can
1486
BOSCH v HAUPTZOLLAMT HILDESHEIM
reasonably be used as a basis for
valuation, and Customs Administrations
are recommended, to accept it as the
value of the goods in question,subject:
(a) to proper safeguards aimed at
preventing evasion of duty by means
of fictitious or colourable contracts or
prices; and
(b) to such adjustments of that price as
may be considered necessary on
account of circumstances of the sale
which differ from those envisagedin
the Definition of Value.'
Article IV of the Convention provides
that each Contracting Party may adapt
the text of the Definition of Value (a) by
inserting therein such provisions of the
Interpretative Notes as it may consider
necessaryand (b), not only by giving the
text such legal form as may be essential
to render it operative in its domestic law,
but also 'by adding complementary
provisions clarifying the purport of the
Definition'.
As the preamble to Regulation No
803/68 (OJ L 148/6 of 28. 6. 1968)
makes abundantly clear, the object of
that Regulation is to adapt the Definition
of Value and the Interpretative Notes to
the needs of the customs union created
by the EEC Treaty, so as to ensure the
uniform application of the Common
Customs Tariff throughout the Member
States.
Articles 1 to 8 of the Regulation in part
reproduce and in part complement the
Definition of Value.
Article 1 (1) provides:
'For the purposes of applying the
Common Customs Tariff, the value for
customs purposesof the goods imported
shall be taken to be the normal price,
that is to say,the price which they would
fetch, at the time referred to in Article 5
[that is, in general, at the time of
importation], on a sale in the open
market between a buyer and a seller
independent of each other.'
Article 1 (2) and Articles 2 to 8 are
devoted to refining on the concept
defined by Article 1 (1), by laying down
in great detail the terms and other
characteristics of the hypothetical sale
there postulated.
Thus, Article 1 (2) prescribes the
assumptions to be made as to place of
delivery, as to which party to the sale is
to bear the costs, charges and expenses
incidental to it and to delivery, and as to
which is to bear the burden of internal
duties and taxes.
Article 2 (1) provides:
'A sale in the open market between a
buyer and seller independent of each
other presupposes:
(a) that the price is the sole
consideration; by consideration is
meant not only the fulfilment of a
legal or contractual obligation, but
also any other form of consideration;
(b) that the price is not influenced by
any commercial, financial or other
relationship, whether by contract or
otherwise, between the seller or any
natural or legal person associatedin
business with him and the buyer or
any natural or legal person associated
in businesswith him (other than the
relationship createdby the sale itself);
(c) that no part of the proceeds of any
subsequent resale, other disposal or
use of the goods will accrue, either
directly or indirectly, to the seller or
any natural or legal person associated
in businesswith him.'
Article 2 (2), which was one of the
provisions in point in the recent case
before this Court of Firma Farbwerke
Hoechst AG v Hauptzollamt Frankfurt
am Main/West (Case 82/76, not yet
reported), defines the circumstances in
which two persons are to be deemed to
be associated in business with one
another.
Article 3, Your Lordships also remember
from that case, deals with industrial
1487
OPINION OF MR WARNER — CASE 1/77
property rights. Your Lordships will
particularly remember that it deals
elaborately with trade marks. In contrast
it deals with patents succinctly, by
paragraph 1. Unfortunately there are
slight differences in the wording of that
provision in the texts in the different
official languages of the Community.
Those differences originate in a
discrepancy between the two authentic
texts of the BrusselsConvention, namely
the English and French texts.
The English text (of Article HI of Annex
I to the Convention) is reflected in the
English and German texts of Article 3
(1). It reads so far as material:
'When the goods to be valued... are
manufactured in accordance with any
patented invention ... the normal price
shall be determined on the assumption
that it includes the value of the right to
use the patent ... in respect of the
goods.'
The French text, which is reflectedin the
French and Italian texts of Article 3 (1),
reads:
'Lorsque les marchandises a evaluer...
sont fabriquees d'après un brevet
d'invention ... la determination du prix
normal se fera en considérant que
celui-ci comprend la valeur du droit
d'utiliser, pour lesdites marchandises,le
brevet...'
Thus, in the English and German texts
the goods are referred to as having been
manufactured in accordance with the
invention, the mention of the patent
being adjectival, whereas in the French
and Italian texts they are referred to as
having been manufactured in accordance
with the patent, the mention of the
invention being there adjectival. The
Danish and Dutch texts of Article 3 (1)
go even further in this direction: they
refer only to the patent. As Your
Lordships will see,in the context of the
present case, the English and German
texts make rather better sense than the
others.
To complete the outline of Articles 1 to
8 of the Regulation: Article 4 provides
that, subject to exceptions in the caseof
goods imported in split consignments,
The normal price shall be determined
on the assumption that the sale is a sale
of the quantity to be valued'; Article 5
defines the material time for valuation;
Articles 6 and 7 contain definitions
relevant for the purposesof Article 1 (2);
and Article 8 deals with transport costs.
Article 9 et seq.of the Regulation give
effect to the intimation in Interpretative
Note 5 of the BrusselsConvention that,
in practice, when imported goods are the
subject of a bona fide sale,the price paid
or payable on that sale can generally,
subject to proper safeguards and
adjustments, be taken as a valid
indication of the 'normal price'.
Article 9 provides:
1. The price paid or payable may be
accepted as the value for customs
purposesif:
(a) the contract of sale is executed
within the period specified in
Article 10,
(b) the price corresponds,at the time
it is agreed upon, to prices on a
salein the open market between a
buyer and a seller independent of
each other, and
(c) that price is adjusted,if necessary,
to take account of circumstances
of the sale which differ from
those on which the normal price
is based.
2. Adjustments under paragraph 1 (c)
may in particular be required with
reference to:
(a) the costs, charges and expenses
mentioned in Article 1 (2),
(b) reductions in price granted in
favour of sole agents or sole
concessionaires or any other
person operating in comparable
circumstances,
(c) abnormal rebates and any other
reduction from the ordinary
competitive price.'
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BOSCH v HAUPTZOLLAMT HILDESHEIM
(Article 10 provides in effect that, subject
to exceptions, Article 9 is to apply only
where the date of the contract does not
precede the material time for valuation
by more than six months).
I need not, I think, trouble Your
Lordships with any of the subsequent
Articles of the Regulation. The problem
with which the Finanzgericht is
confronted in this caseis whether, and if
so to what extent, the price paid by
Bosch under its contract for the purchase
of the machine (US $8425495 or DM
228 476-25) should be adjusted pursuant
to Article 9 (1) (c) of the Regulation 'in
order to take account of circumstancesof
the sale which differ from those on
which the normal price is based'. The
question referred to this Court by the
Finanzgericht is 'whether Article 3 (1) of
Regulation (EEC) No 803/68 of the
Council ... is to be interpreted as
meaning that the normal price also
includes the value of a patented process
embodied in an appliance within the
meaning of the judgment of 7 August
1962 of the Bundesfinanzhof No VII
89/60 U, Bundessteuerblatt III 1962,
p. 549'.
The Finanzgericht explains in its Order
for Referencethat, if, as it is inclined to
think, that question is to be answeredin
the negative, it will accept Bosch's
contention that no supplement is to be
added to the price of the machine in
respect of the royalties payableby Bosch
under the 1965 Agreement. This is
because,in the view of the Finanzgericht,
no part of those royalties was attributable
to the useby Bosch of the patents for the
machine. In the light of the parties'
submissions,the Finanzgericht has come
to the conclusion that those royalties
were wholly attributable to other rights
acquired by Bosch under the 1965
Agreement, so that the price it paid for
the machine must be taken to have
included the consideration for the use of
the patents for the machine. This Court
is not of course concerned with the
question whether the Finanzgericht is
right, in fact, as to that. The
Finanzgericht adds that, if the question it
has referred to this Court is to be
answeredin the affirmative, it will reduce
the supplement as assessed by the
Defendant. This is because the
Finanzgericht takes the view, on the
facts, that the COS processis only partly
'embodied' in the COS machine in the
sense of the rule laid down by
the Bundesfinanzhof. In order to
manufacture batteries according to that
process,it is necessaryto have, not only
the machine and the directions for its
use, but also the further technical data
relating to the preparation of the flux,
the temperature of the lead baths and the
composition of the lead alloys, none of
which are 'embodied' in the machine.
In my opinion, my Lords, the question
referred by the Finanzgericht cannot be
answered by a simple 'Yes' or 'No'. I
leave aside the obvious point that this
Court, whose rulings on Community law
have to be applied by the Courts and
Tribunals of all the Member States,and
so applied uniformly, would be rendering
the task of those Courts and Tribunals
more difficult than it need be if it were
to formulate a ruling by reference to a
Judgment of a Court, however eminent,
of one of the Member States. The
substantial difficulty is that the
Bundesfinanzhof's Judgment of 7 August
1962 was given in interpretation, not of
Regulation No 803/68, but of an earlier,
and differently worded, national statute,
and in the context of its own national
system of customs legislation and patent
law. It would be surprising to find that a
rule thus establishedcould be transposed,
without any modification, into Com­
munity law, but equally surprising to find
that nothing akin to it existed in
Community law.
So I think that this Court must approach
the interpretation of Regulation No
803/68, so far as regards the problem
posed by the present case,with a proper
respect for the thinking of the
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OPINION OF MR WARNER — CASE 1/77
Bundesfinanzhof, but with an awareness
too that the problem is not quite the
same as that with which the
Bundesfinanzhof was confronted. In
particular this Court cannot overlook that
the interpretation that it places on
Regulation No 803/68 must be capable
of practical application in all the
Member States, despite any divergences
between their respective patent laws. A
Community lawyer's natural instinct,
when faced with such a requirement, is
to resort to a comparative study of the
relevant laws of the Member States.I
have however come to the conclusion
that, in the present instance, the
uncertainties are so many that such a
study would be fruitless. To give but one
example, it remains an open question in
English law whether a patent for a
process is infringed by the sale of a
machine that cannot be used except in a
manner infringing the patent (see per
Clauson J. in Cincinnati Grinders Inc. v
B.SA. Tools Ltd. (1930) 48 R.P.C. at
p. 58, Terrell on the Law of Patents(12th
Ed.) § 360 and Blanco White on Patents
for Inventions (4th Ed.) § 3 - 210).
Moreover, it may be that Regulation No
803/68 in so far as it reproduces the
Definition of Value in the Brussels
Convention (and, as I have indicated, the
relevant words of Articles 3 (1) are
intended to do so) should be interpreted
also in the light of the laws of those
Stateswhich, whilst not being Members
of the Community, are Contracting
Parties to the Convention. Their number
however is such that I do not think that
a meaningful comparative study of their
laws would be a practical possibility. I
suspect that the authors, not only of the
Brussels Convention, but also of
Regulation No 803/68, came to the same
conclusion and that that is why they
sought to frame the provisions both of
the Convention and of the Regulation in
terms both non-technical and precise.
The task of this Court is to interpret
those terms and, in my opinion, that task
will best be performed by adhering
strictly to them. I observethat there is an
indication in the Order for Reference
that the Finanzgericht takes the same
view.
It was conceded in argument on behalf
of Bosch that there was one casewhere a
patent for a process could, for the
purposes of Article 3 (1) of Regulation
No 803/68, be assimilated to a patent for
a machine. This was where the machine
was so constructed that its use
automatically entailed the carrying out of
the patented processand where there was
technically no way of carrying out that
process otherwise than by using the
machine. Bosch distinguished that case
from other caseswhere, for instance,the
process could be carried out otherwise
than by using the machine, or the
machine could be used otherwise than
for carrying out the process,or where the
use of the machine was only part of the
process,or where the machine could not
be used to carry out the processwithout
other knowledge covered by a patent for
the process.The present case,said Bosch,
was of the last kind, since the machine
here in question could not effectively be
used for the processwithout knowledge
of the data as to the preparation of the
flux, the composition of the lead alloys
and the temperature tolerances within
which the work must be performed.
In my opinion that concession was
rightly made. As was pointed out by
Bosch, where the carrying out of a
process involves nothing more and
nothing less than the use of a particular
machine, no genuine commercial
purpose is servedby taking out a patent
for the processin addition to the patent
for the machine. In such a case, the
invention of the machine and the
invention of the processare one and the
same invention. A patent for that
invention cannot be excluded from the
scopeof Article 3 (1) simply becauseit is
in form a patent for a process. The
invention remains, despite the form of
the patent, one 'in accordance with'
which the machine has been
manufactured,within the terms of Article
3(1).
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BOSCH v HAUPTZOLLAMT HILDESHEIM
The Commission told us, in its written
Observations, that, under the German
law of patents, it is not possible to take
out a patent for a process having the
same content as a patent for a machine.
In a helpful paper that it submitted after
the hearing at the request of the Court,
the Commission examined the position
as to that under the legal systemsof the
other Member States.The conclusion to
be drawn from that examination was that
the rule was substantially the same in all
the Member States,so that, in theory at
least, cases of such double-patenting
should be rare. There are however
variations in the detailed application of
the rule as between the Member States,
and one knows, of course, that,
particularly in this field, what happens in
practice does not always coincide with
what the law envisages.Indeed, were it
otherwise, there would never be litigation
in which the validity of a patent was
challenged on the ground of 'prior
claim'; or, at all events,such a challenge
would never succeed. In truth, the
application of the rules against
double-patenting gives rise to such
complexities that it would be unrealistic
to suppose that there can never be
overlap between a patent for a machine
and a patent for a process.(As to that I
need perhaps refer only to the position
in England, which is discussedin Terrell,
op. cit., §§ 256 — 264 and Blanco White,
op. cit., §§ 4 — 301 — 312. In the latter,
§§ 4 — 304 & 4 — 309 are particularly
in point).
Although the concessionmade by Bosch
was thus, in my opinion, rightly made, I
do not think that it went far enough,
becauseit did not cover a casewhere the
invention protected by a patent for a
process includes the use of a particular
machine and something else. In such a
case, it seems to me, in so far as the
invention is of the machine, it is not
excluded from Article 3 (1). The
Commission submitted that, in such a
case, the value of the right to use the
patent in respectof the machine must be
segregated from the value of the right
to use the patent in other respects. I
agree.
Where I disagree with the Commission
is in the reasoningaccording to which it
reaches that conclusion. The Com­
mission's view is on the one hand that
Article 3 (1) is to be given a narrow
interpretation, excluding all patents for
processes,unless they be processesby
which the imported goods themselves
have been manufactured, but, on the
other hand, that it is implicit in Article 1
(1) of the Regulation that where a
patented process covers the use of a
particular machine the value of the right
so to use the machine forms part of its
'normal price'.
In approaching the interpretation of
Article 3 (1) the Commission focussesits
attention on the reference to the goods
having been 'manufactured in accordance
with' a patented invention. From this the
Commission deducesthat Article 3 (1) is
not concerned with any use of the goods
after their manufacture and importation.
But this approach seemsto me, with all
respect to the Commission, to confuse
the use of a patent in respect of goods
(which is what Article 3 (1) refers to) and
the use of the goods themselves. Take
the simple case of a patented machine.
The unlicensed manufacture of the
machine would be an infringement of
the patent. But so would the unlicensed
sale or hire of the machine after its
manufacture, and its unlicensed use then
in the commercial production of other
goods. So there is a use of the patent in
respect of the machine, not only when it
is manufactured, but when it is
subsequently sold, hired, or put into
production. The referencein Article 3 (1)
to 'the right to use the patent ... in
respectof the goods' must be intended to
cover all these.The situation in the type
of casewith which these proceedingsare
concerned differs from that only
inasmuch as, the patent being one for a
process,it is necessaryto enquire to what
extent, if any, the invention that it
protects is really that of the machine.
1491
OPINION OF MR WARNER — CASE 1/77
To seek to solve that problem by
reference to Article 1 (1) of the
Regulation is open to two major
objections.
The first is that it ignores the structure of
Articles 1 to 8 of the Regulation. Article
1 (1), as I have pointed out, only gives a
general definition of the concept of the
'normal price'. Articles 1 (2) and 2 to 8
refine on that definition, working out the
details of its application in relation to
specific matters. The matter of industrial
property rights, and in particular of
patents, is dealt with by Article 3. That
being so there is no room for implying
anything further about patents in Article
1 (1) itself. Of course each of the
provisions of the Regulation must be
interpreted in the light of the others,but
that is not to saythat any of them can be
interpreted as implicitly dealing with a
matter which is the express province of
another.
The second and graver objection is that
Regulation No 803/68 is fiscal legis­
lation. Its purpose and its effect are to
define fiscal liabilities. It would be
contrary to all principle to hold that such
liabilities could be imposed or increased
by implication.
The very argument of the Commission
evinces a difficulty inherent in its
approach. The Commission naturally
realized that it was not enough to say
that this case was implicitly covered by
Article 1 (1). It must propound a
principle from which that could be
deduced. The principle it propounded
was that the acquisition of goods at their
'normal price' implied that the purchaser
would acquire them free from restrictions
on their user. Since we are avowedly in
the realm of implication it is, perhaps,
neither here nor there to point out that
no such principle is expressedin Article
1 (1). It is however,I think, even on that
footing, a valid criticism that the
principle so propounded is inconsistent
with the Commission's own conclusions,
for the Commission accepts that there
are circumstancesin which the existence
of a patent for a processwill restrict the
freedom of a purchaser of a machine to
use it, without the value of the right to
use that patent forming part of the
'normal price' of the machine. The truth
is that there is nothing in the concept of
the 'open market', and it is on that, I
think, that the Commission mainly
relied, that connotes that a purchaser of
goods in that market will acquire them
free from restrictions on their user. For
instance the rule of English law is that a
sale of a patented article by the patentee,
in any market, is presumed to carry with
it the right for the purchaser to use the
article in any way he chooses,but that
that presumption is rebutted if at the
time of the sale the purchaser has notice
of restrictions on its use imposed by the
patentee, whether by contract or
otherwise (see National Phonograph Co.
of Australia, Ltd. v Menck [1911] A.C.
336, Goodyear Tyre and Rubber Co.
(G. B.) Ltd. v Lancashire Batteries Ltd.
[1958] 1 W.L.R. at p. 861 and Dunlop
Rubber Co. Ltd. v Longlife Battery
Depot, ibid., at p. 1037).Of course,where
and in so far as Article 3 (1) applies, it
requires such restrictions to be ignored
in computing the 'normal price' of the
article. But nothing to the same effect
can legitimately be read into Article 1 (1)
taken by itself or, for that matter, into
any other provision of the Regulation.
In the result I am of the opinion that Your Lordships should answer the
question referred to the Court by the Finanzgericht by saying that Article 3
(1) of Regulation No 803/68 is to be interpreted as meaning that the normal
price of an appliance includes the value of the right to use a patent for a
process if and to the extent to which the scope of the patent is such as to
protect the invention of the appliance itself.
1492