Notice of initiation of an examination procedure concerning obstacles to trade within the meaning of Council Regulation (EC) No 3286/94, consisting of measures adopted by the Separate customs territory of Taiwan, Penghu, Kinmen and Matsu affecting patent protection in respect of recordable compact discs
Date: 2007-03-01
Institutions: European Commission
Subjects: TRIPS, Taiwan, common commercial policy, complaint to the Commission, patents licence, record

C 47/10

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Official Journal of the European Union

1.3.2007

V

(Announcements)

PROCEDURES RELATING TO THE IMPLEMENTATION OF THE COMMON
COMMERCIAL POLICY

COMMISSION

Notice of initiation of an examination procedure concerning obstacles to trade within the meaning
of Council Regulation (EC) No 3286/94, consisting of measures adopted by the Separate customs
territory of Taiwan, Penghu, Kinmen and Matsu affecting patent protection in respect of recordable
compact discs

(2007/C 47/11)

On 15 January 2007, the Commission received a complaint
under Article 4 of Council Regulation (EC) No 3286/94 (1)
(hereinafter ‘the Regulation’).

1. Complainant

The complaint was lodged by Koninklijke Philips Electronics N.
V. (hereinafter ‘Philips’).

Philips is a company formed in accordance with the law of the
Netherlands, having its registered office in Eindhoven, the Neth-
the core technologies for
erlands. Philips invented some of
‘CD-Rs’) and holds a
recordable compact discs (hereinafter
number of patents
these technologies. The
complaint alleges that the Separate customs territory of Taiwan,
Penghu, Kinmen and Matsu (hereinafter referred to as ‘Chinese
Taipei’) has illegally granted compulsory licences in respect of
those patents.

in respect of

Philips is a Community enterprise within the meaning of Arti-
cles 4(1) and 2(6) of the Regulation.

2. Product and intellectual property rights concerned

The complaint concerns intellectual property rights in the form
of patents which the complainant licenses to third parties for
the manufacture of CD-Rs. CD-Rs are an optical
storage
medium for digital data or music. The complainant developed
some of the core technologies for CD-Rs and has sought patent
protection in respect of five inventions linked to CD-R tech-
nology. The complainant has obtained patent protection for
these five inventions in Chinese Taipei.

(1) Council Regulation (EC) No 3286/94 of 22 December 1994 laying
down Community procedures in the field of the common commercial
policy in order to ensure the exercise of the Community's rights under
in particular those established under the
international trade rules,
auspices of
(OJ L 349,
the World Trade Organisation (WTO)
31.12.1994, p. 71). Regulation last amended by Council Regulation
(EC) No 356/95 (OJ L 41, 23.02.1995, p. 3).

3. Subject

The complaint
focuses on the grant by the authorities of
Chinese Taipei of compulsory licences in respect of the complai-
nant's CD-R patents to Gigastorage Corporation (hereinafter
‘Gigastorage’) a producer of CD-Rs in Chinese Taipei.

Article 76 of the Patent Act of Chinese Taipei provides for the
granting of compulsory licences in certain specified circum-
stances. Pursuant to this provision, Gigastorage filed an applica-
tion for compulsory licences in respect of five patents held by
the complainant with the Intellectual Property Office (herein-
after ‘IPO’) of Chinese Taipei on 30 July 2002. On 26 July 2004
the IPO granted Gigastorage's
request. This decision was
appealed to the Ministry of Economic Affairs of Chinese Taipei
on 26 August 2004. On 16 June 2006 the Ministry of
Economic Affairs rejected the appeal.

4. Allegations of Obstacles to Trade

The complainant considers that
the measures described in
Section 3 constitute an obstacle to trade within the meaning of
Article 2(1) of the Regulation.

the decision of

the IPO, as
The complainant alleges that
confirmed on appeal by the Ministry of Economic Affairs,
is
inconsistent with several provisions of the World Trade Organi-
sation Agreement on Trade Related Aspects of Intellectual Prop-
erty Rights (hereinafter ‘TRIPs’).

The complainant alleges that the measures are inconsistent with
Article 28(1)(a) of the TRIPs Agreement because the exclusive
rights pertaining to the patent holder on the basis of that provi-
sion have not been respected. Article 31 of the TRIPs Agree-
ment permits the granting of compulsory licences in respect of
the subject matter of a patent. However, the complainant alleges
Article 31 has been incorrectly applied by the granting of
compulsory licences in circumstances not provided for under
that provision.

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Official Journal of the European Union

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third party offers ‘reasonable’

In particular, the complainant argues that Article 31 has been
incorrectly applied in the following respects. First, it alleges that
no justification is available under Article 31(b) of the TRIPs
Agreement. The complainant alleges that the measures at issue
effectively require a patent holder to grant a licence to a third
terms. The
party where that
complainant alleges that such a substantive requirement cannot
be derived from the terms of Article 31(b) which the complaint
alleges is purely procedural. The complainant also alleges that
the measures rely on a misapplication of the ‘reasonableness’
test in Article 31(b) of the TRIPs Agreement by analysing only
the reasonableness of the commercial terms from the perspec-
tive of
the licence while
ignoring that the patent holder had successfully concluded licen-
sing agreements with a number of other producers operating in
the same market as the proposed user of
the licence. The
complainant further alleges that the analysis of the reasonable-
ness of the terms offered leading to the measures was flawed
because it was found that the terms were unreasonable in light
of the cost structure of the proposed user of the licence without
analysing whether other factors led to the proposed user not
being able to reach agreement with the complainant.

the individual proposed user of

Second, the complainant alleges that the Chinese Taipei has
failed to respect Article 31(c) of the TRIPs Agreement by failing
to specify the purpose for which the licence was granted and by
failing to limit the scope and duration of the use of the licence
to such a purpose. Third,
the
Article 31(f) of
the TRIPs Agreement has been incorrectly
the compulsory licences
applied by authorising the use of
concerned for export given that they had knowledge at the
timing of granting the licences that Gigastorage would use the
licences to produce for export.

the complainant alleges that

the Commission is satisfied that

In light of the factual information available and the evidence
submitted,
the complaint
contains sufficient prima facie evidence of the existence of obsta-
cles to trade within the meaning of Article 2(1) of the Regu-
lation.

5. Allegation of adverse trade effects

The alleged obstacles to trade identified in the complaint appear
to deny the complainant the enjoyment of its patent rights in
respect of CD-Rs and therefore can be considered as causing
and threatening to cause adverse trade effects.

The complaint contains evidence that the measures have actual
adverse trade effects and contains estimates of the losses which
the complainant has suffered as a result of the compulsory
licenses granted by the measures at issue. The complaint further
alleges a threat of adverse trade effects arguing that other CD-R
producers in Chinese Taipei will be encouraged to request
compulsory licences, and that this effect might even extend to
producers in other WTO Members, given the highly competitive
and global nature of the market for CD-Rs. The complainant
also alleges that the measures complained of create, or threaten
to create, adverse effects for the EC licensees of the complai-
nant's patents who compete with CD-R exports from Chinese
the measures
Taipei. Finally,

the complainant argues

that

complained of threaten to create adverse trade effects for all EC
patent owners who are charging royalties to licensees in Chinese
Taipei or countries likely to be influenced by this interpretation
of the relevant provisions of the TRIPs Agreement.

The Commission considers that the complaint contains suffi-
cient prima facie evidence of the adverse trade effects of the
measure on the complainant and a sector or
sectors of
economic activity in the Community within the meaning of
article 2 (4) of the Regulation.

6. Community Interest

Community industry is estimated to invest approximately EUR
195 billion annually in research and development with 2
million persons employed in such activities. Patents are one of
the fruits of such investment and it is consequently of impor-
tance to the Community to protect intellectual property rights
and ensure that international agreements protecting intellectual
property rights are correctly enforced. Enforcing such agree-
ments is particularly important where there is a risk, as alleged
by the complainant, of the measures at issue creating a prece-
dent for other WTO Members.

In view of the above, it is considered to be in the Community's
interest to initiate an examination procedure.

7. Procedure

after due

consultation of

the Advisory
Having decided,
Committee established by the Regulation, that there is sufficient
evidence to justify initiating an examination procedure for the
purpose of considering the legal and factual issues involved, and
that this is in the interest of the Community, the Commission
has commenced an examination in accordance with Article 8 of
the Regulation.

Interested parties may make themselves known and make
known their views in writing on specific issues raised by the
complaint, providing supporting evidence.

Furthermore, the Commission will hear the parties who so
request in writing when they make themselves known, provided
that they are primarily concerned by the result of the procedure.

This notice is published in accordance with Article 8(1)(a) of the
Regulation.

8. Time limit

Any information relating to the matter and any request for a
hearing should reach the Commission not later than 30 days
following the date of publication of this notice and should be
sent in writing to:
European Commission
Directorate-General for Trade
Mr. Jean-François Brakeland, DG Trade F.2
CHAR 9/74
B-1049 Brussels
Fax (32-2) 299 32 64