CELEX: 61977CC0001
Language: en
Date: 1977-06-22 00:00:00
Title: Opinion of Mr Advocate General Warner delivered on 22 June 1977. # Robert Bosch GmbH v Hauptzollamt Hildesheim. # Reference for a preliminary ruling: Finanzgericht Hamburg - Germany. # Value for customs purposes of patented processes. # Case 1-77.

BOSCH v HAUPTZOLLAMT HILDESHEIM
  proceedings are, 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 803/68 of 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               Mertens de Wilmars                     Bosco
 Delivered in open court in Luxembourg on 14 July 1977.
 A. Van Houtte                                                           A. M. Donner
 Registrar                                                 President of the First Chamber
             OPINION OF MR ADVOCATE-GENERAL WARNER
                         DELIVERED ON 22 JUNE 1977
My Lords,                                   the inclusion, in the value of goods for
                                            customs purposes, of the value of the
In this case the Court is once again        right to use a patent in respect of them.
concerned with the interpretation of
Council Regulation (EEC) No 803/68 on       The case comes to the Court by way of a
the valuation of goods for customs          reference for a preliminary ruling by the
purposes. The actual question that calls    Finanzgericht of Hamburg. The plaintiff
for decision is however novel. It is as to  before   that  Court    is   Robert    Bosch
                                                                                     1483
 ---pagebreak---                                   OPINION OF MR WARNER —CASE        1/77
GmbH, which I shall call 'Bosch'. The               furnish     to   Bosch   certain  technical  and
defendant         is    the   Hauptzollamt       of other     information     to   enable  Bosch  to
Hildesheim.                                         manufacture batteries using the COS
                                                    process and machine. It continued:
The facts are these.
                                                    'G-U O will furthermore procure that
An      American       company,    Globe-Union      Globe will furnish to Bosch, upon its
Inc., of Milwaukee, which            I shall   call request, one or two COS Equipment with
'Globe', is the patentee of a process for           such features and at a price and on
the manufacture of electric storage                 conditions to be agreed upon between
                                                    G-U O, Globe and Bosch in advance'. I
battery cell components. The process is
one whereby (to quote from                      the do not pause to consider whether the
description of it given in paragraph                obligation thus imposed on G-U O was
 1.1.(a) of an Agreement to which I shall           legally enforceable, although it appears to
refer more particularly in a moment)                 have been (by virtue of paragraph 9.3 of
'assemblies of cell plates and spacers are           the Agreement) governed by English law
clamped         in     assembled     relationship,   and the general principle of English law
 portions thereof are fluxed or cleaned              is that an agreement to make an
while so supported, and molten metal is              agreement is unenforceable.
 formed       in     a    mold  and      solidified
 to     rigidly support and            electrically The other main relevant provisions of
 interconnect selected ones of said plates.          the Agreement may be summarized as
                                                     follows.
The process is called the 'COS process',
 the letters 'COS' standing for 'cast-on
 strap'. Globe is also the manufacturer and          Under paragraph 2.2 Bosch was to be
 the patentee of a machine which is                  provided by G-U O and Globe with
 described (in        paragraph  1.1.(b)   of that   engineering and consultancy services,
 Agreement) as having been 'designed for             including in particular visits by Globe
 the express purpose of the practice of the          experts to the Bosch works 'with respect
 COS Process'. In the Federal Republic of            to any detailed engineering for the first
 Germany, there are two patents for the              COS Equipment and the installation
 machine and one for the process. We                 thereof. Those services were, by virtue of
 have not been told what patents there                paragraph 5.7, to be charged for on the
 may be for them in other countries.                 basis of the actual expense incurred by
                                                     G-U O or Globe in their provision.
 The Agreement that I have mentioned                  Under paragraph 2.3 G-U O was to make
 was made on 20 May 1965 between                      available to Bosch throughout the term
 Bosch and G-U Overseas Ltd., a British               of the Agreement such of G-U O's and
 subsidiary of Globe, which I shall call              Globe's    technical    information, whether
 'G-U O'. The Agreement recited, among                patented or unpatented, as would be of
 other things, that G-U O was for the                 assistance to Bosch's operations under
  purposes of the Agreement sufficiently              the Agreement; and under paragraph 2.4
 entitled to the technical information and            Bosch was given the right to inspect, at
  patent rights of Globe with respect to the          any time during the two years following
  COS process and machine, and that                   the date of the Agreement, Globe's 'COS
  Bosch desired to acquire the machine                Equipment' at any 'suitable' Globe plant.
  and the right commercially to practise              By paragraph 4.1 G-UO granted to
  the COS process, and to use therefor                Bosch a non-transferable, non-exclusive
  Globe's technical information and patent            licence, expressed to be 'under Globe's
  rights. (The machine was referred to in             and G-U O s Technical Information and
  the Agreement as 'COS Equipment').                  Patent Rights', (i) to manufacture, use and
                                                      sell   in    all   countries   of   Continental
  Paragraph 2.1 of the Agreement provided             Europe batteries embodying, utilizing or
  that G-UO should, within 90 days,                   resulting directly from the technical
  1484
 ---pagebreak---                                      BOSCH v HAUPTZOLLAMT HILDESHEIM
   information      made     available   to   Bosch      on such goods under the CCT was
   under the Agreement or any feature or                 7-5 %.     The      defendant       provisionally
   features covered by the patent rights in              valued   the   machine       at DM     271 107-25
   respect of the COS process or machine                 and, on that basis, assessed the customs
   and (ii) to use and sell batteries so                 duty at DM 20 333, which sum Bosch
   manufactured       in   Great      Britain    and     paid. The defendant also assessed Bosch
   Ireland, and in all countries of Africa and           to    German        'import      turnover      tax'
  Asia, with certain exceptions. By various              (Einfuhrumsatzsteuer) of DM 32 058-40,
   provisions      of    the     Agreement        (in    but with that this Court is not concerned.
  particular paragraphs 2.5, 3.2 and 4.3)                The valuation of DM 271 107-25 was, as I
   Bosch undertook countervailing obliga­                understand it, made up of a sum of DM
  tions as to secrecy and as to the                      228 476-25 representing the price paid by
  disclosure to G-U O of improvements,                   Bosch for the machine (US $84 254-95)
  whether patented or not, found by Bosch                and a sum of DM 42 631 described as a
  concerning the use of the COS machine                 supplement in             respect of royalties
  or process. By clause 5.1 Bosch was to                payable by Bosch under the Agreement
  pay to G-U O an initial sum of                        of 20 May 1965 (as amended).
  US $ 10 000    within    one     month    of   the
  date of the Agreement. By clause 5.2, as              The valuation was challenged by Bosch. I
  amended by a supplemental Agreement                   need not take up Your Lordships time
  made on 12 December 1968, Bosch was,                  with     a    detailed       account      of    the
  for the first five years of the life of the           administrative processes that followed.
 Agreement, to pay to G-U O a royalty for               Suffice it to say that they culminated in a
 each battery sold under the licence, the               decision (Einspruchentscheidung) of the
 rates    being US $1-15        for each      6-volt    defendant     dated     4   March    1975,   under
 battery and US $2-30 for each 12-volt                 which the supplement of DM 42 631 was
 battery, with a minimum annual royalty                 reduced    to   DM       27 099-43    and    Bosch
 of US $ 7 000. Under paragraph 5-3,                   was     thereby     rendered      entitled    to    a
 Bosch was, from the beginning of the                  reimbursement of DM 1123-40.
 sixth year, to pay royalties at half those
 rates and then only for batteries in the              Against that decision Bosch now appeals
 manufacture of which any of the licensed              to the Finanzgericht, claiming that there
 patent rights had been used.                          should be no supplement at all and, in
                                                       the alternative, that, if there should be
The Finanzgericht has found as a fact                  one, the defendant's computation of it is
 that    the  technical     information     to    be   still excessive.
given by G-U O to Bosch under the
Agreement included data as to the                      It appears that, in the argument before
preparation of the flux, as to the                     the Finanzgericht, an important part has
temperature of the lead baths and as to                been played by a decision of the
the composition of the lead alloys to be               Bundesfinanzhof dated 7 August 1962
used in the COS process.                              (Aktenzeichen VII 89/60 U, Bundes-
                                                      steuerblatt      III     1962, p.       549). The
On 4 June 1974 Bosch applied to the                    Bundesfinanzhof there held that, if, in
defendant      for   customs     clearance    of   a  connexion with the purchase and import
COS machine supplied by Globe. The                    of    a   machine      manufactured        under    a
machine was entered under Heading                     patent, the right to a patented process
85.11 B of the Common Customs Tariff,                 was also assigned or a licence to use that
which       comprises       'Electric     welding,    right was granted, the consideration for
brazing and soldering machines and                    such assignment or grant formed part of
apparatus and similar electric machines               the    value  of   the    machine     for  customs
and apparatus for cutting, for any                    purposes, at any rate if the machine,
material'. The (conventional) rate of duty            owing to the special characteristics of its
                                                                                                     1485
 ---pagebreak---                                     OPINION OF MR WARNER —CASE        1/77
construction      and     to   the   mode     of   its  As Your Lordships know, the Brussels
operation,       embodied          the     patented     Conventions bind all the Member States
process so that a person entitled to use                of the Community, and a large number
the machine could, by operating it, also                of other States besides. The Convention
operate the patented process without                    on the Valuation of Goods contains in
taking any further step in order to do so.              Annex I the 'Definition of Value' which,
                                                        by Article II of the Convention, each
That    decision     of    the   Bundesfinanzhof        Contracting Party undertook to introduce
was however given in interpretation of                  into its domestic law and, in Annex II,
the German Zolltarifgesetz of 16 August                 the 'Interpretative     Notes' which, by
 1951, a statute which antedated not only               Article HI, each         Contracting Party
Regulation No 803/68 but even the entry                 undertook to introduce into its domestic
into force of the Brussels Convention on                law and, in Annex II, the 'Interpretative
the    Valuation      of    Goods    for   Customs      Notes' which, by Article HI, each
Purposes.      It    is    a    common        feature   Contracting Party undertook to conform
of the Zolltarifgesetz, of the Brussels                 to in applying the Definition of Value. I
Convention and of Regulation No                         need not read Annex I, because its terms
 803/68 that they all based or base the                 are reflected in those of Regulation No
value of goods for customs purposes on                   803/68, to which I shall come. I need
 the concept of their 'normal price'. But               only recall that the Definition of Value
 the     particular        provision       of     the   there set out prescribes, as the measure of
 Zolltarifgesetz that was in point in the                the value of imported goods for customs
 case   before     the     Bundesfinanzhof        was    purposes, the price that they would fetch
 paragraph 6 (4), the wording of which                   on a sale in the open market between a
 was wider and less precise than that of                 buyer and a seller independent of each
 the corresponding provisions of the                     other, and that it then refines on that
 Brussels Convention and of Regulation                   concept, which      it labels  'the normal
 No 803/68. Paragraph 6 (4) provided, so                 price'. I must, however, read part of one
 far as material: The normal price shall                 of the Interpretative Notes in Annex II,
 include the right to use the patent ... in              namely Note 5. This is as follows:
 respect of the goods if the imported
 goods are the object of any such right'.                The object of the Definition of Value is
 ('Im Normalpreis ist einbegriffen das                   to make it possible in all cases to
  Recht zur Benutzung des Patents ... an                 calculate the duties payable on the basis
  den Waren, wenn die eingeführten                       of the price at which imported goods are
 Waren        Gegenstand          eines      solchen      freely available to any buyer on a sale in
  Rechtes sind). It is also to be observed                the open market at the port or place
  that      the         reasoning         of       the    of introduction into the country of
  Bundesfinanzhof was in large part                       importation. It is a concept for general
  founded on earlier authorities relating to              use and is applicable whether or not the
  German customs legislation and to the                   goods are in fact imported under a
  German law of patents.                                  contract of sale, and whatever the terms
                                                          of that contract.
  So far as German law is concerned the
  Zolltarifgesetz appears to have been                    But the application of the Definition
  overridden by a Statute of 17 December                  implies an enquiry into current prices at
   1951    providing        for three Brussels            the time of valuation. In practice, when
  Conventions         on       customs       matters,      imported goods are the subject of a bona
  including that on the Valuation of                       fide sale, the price paid or payable on
  Goods,      to     become         applicable       in    that sale can generally be considered as a
  Germany: the 'Gesetz über internationale                 valid indication of the normal price
  Vereinbarungen auf dem Gebiete des                       mentioned in the Definition. This being
  Zollwesens'.                                             so, the price paid or payable can
   1486
 ---pagebreak---                                   BOSCH v HAUPTZOLLAMT HILDESHEIM
  reasonably     be   used    as   a  basis  for    Article 1 (2) and Articles 2 to 8 are
  valuation, and Customs Administrations            devoted to refining on the concept
  are recommended, to accept it as the              defined by Article 1 (1), by laying down
  value of the goods in question, subject:          in great detail the terms and other
  (a) to    proper    safeguards     aimed    at    characteristics of the hypothetical sale
      preventing evasion of duty by means           there postulated.
      of fictitious or colourable contracts or
      prices; and                                  Thus, Article          1    (2) prescribes the
 (b) to such adjustments of that price as          assumptions to be made as to place of
      may be considered necessary on               delivery, as to which party to the sale is
      account of circumstances of the sale         to bear the costs, charges and expenses
      which differ from those envisaged in         incidental to it and to delivery, and as to
      the Definition of Value.'                    which is to bear the burden of internal
                                                   duties and taxes.
 Article IV of the Convention provides
 that each Contracting Party may adapt             Article 2 (1) provides:
 the text of the Definition of Value (a) by
 inserting therein such provisions of the          'A sale in the open market between a
 Interpretative Notes as it may consider           buyer and seller independent of each
 necessary and (b), not only by giving the         other presupposes:
 text such legal form as may be essential          (a) that      the      price     is   the    sole
 to render it operative in its domestic law,            consideration; by consideration is
 but also 'by adding complementary                      meant not only the fulfilment of a
 provisions clarifying the purport of the               legal or contractual obligation, but
 Definition'.                                          also any other form of consideration;
                                                   (b) that the price is not influenced by
 As the preamble to Regulation No                      any commercial, financial or other
 803/68 (OJ L 148/6 of 28. 6. 1968)                    relationship, whether by contract or
 makes abundantly clear, the object of                 otherwise, between the seller or any
 that Regulation is to adapt the Definition            natural or legal person associated in
 of Value and the Interpretative Notes to              business with him and the buyer or
 the needs of the customs union created                any natural or legal person associated
 by the EEC Treaty, so as to ensure the                in business with him (other than the
 uniform application of the Common                     relationship created by the sale itself);
 Customs Tariff throughout the Member             (c) that no part of the proceeds of any
 States.                                               subsequent resale, other disposal or
                                                       use of the goods will accrue, either
Articles 1 to 8 of the Regulation in part              directly or indirectly, to the seller or
reproduce and in part complement the                   any natural or legal person associated
 Definition of Value.                                  in business with him.'
Article 1 (1) provides:                           Article 2 (2), which was one of the
                                                  provisions in point in the recent case
'For     the    purposes   of    applying   the   before    this   Court of      Firma Farbwerke
Common Customs Tariff, the value for              Hoechst AG v Hauptzollamt Frankfurt
customs purposes of the goods imported            am Main/West (Case 82/76, not yet
shall be taken to be the normal price,            reported), defines the circumstances in
that is to say, the price which they would        which two persons are to be deemed to
fetch, at the time referred to in Article 5       be     associated     in    business   with  one
[that is, in general, at the time of              another.
importation], on a sale in the open
market between a buyer and a seller               Article 3, Your Lordships also remember
independent of each other.'                       from     that    case,    deals   with  industrial
                                                                                              1487
 ---pagebreak---                                  OPINION OF MR WARNER —CASE      1/77
property rights. Your          Lordships will     To complete the outline of Articles 1 to
particularly remember          that it deals      8 of the Regulation: Article 4 provides
elaborately with trade marks. In contrast         that, subject to exceptions in the case of
it deals with patents succinctly, by              goods imported in split consignments,
paragraph 1. Unfortunately there are              The normal price shall be determined
slight differences in the wording of that         on the assumption that the sale is a sale
provision in the texts in the different           of the quantity to be valued'; Article 5
official languages of the Community.              defines the material time for valuation;
Those       differences     originate    in    a  Articles     6    and   7    contain   definitions
discrepancy between the two authentic             relevant for the purposes of Article 1 (2);
texts of the Brussels Convention, namely          and Article 8 deals with transport costs.
the English and French texts.
                                                  Article 9 et seq. of the Regulation give
The English text (of Article HI of Annex
                                                  effect to the intimation in Interpretative
I to the Convention) is reflected in the
                                                   Note 5 of the Brussels Convention that,
English and German texts of Article 3
                                                   in practice, when imported goods are the
(1). It reads so far as material:
                                                  subject of a bona fide sale, the price paid
                                                   or payable on that sale can generally,
'When the goods to be valued ... are
                                                   subject      to    proper      safeguards     and
manufactured in accordance with any
                                                   adjustments, be taken as a valid
patented invention ... the normal price
                                                   indication of 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              Article 9 provides:
goods.'                                             1. The price paid or payable may be
                                                       accepted as the value for customs
The French text, which is reflected in the
                                                       purposes if:
 French and Italian texts of Article 3 (1),            (a) the contract of sale is executed
 reads:
                                                            within     the    period   specified   in
                                                            Article 10,
 'Lorsque les marchandises a evaluer...
 sont fabriquees         d'après    un brevet          (b) the price corresponds, at the time
 d'invention ... la determination du prix                   it is agreed upon, to prices on a
 normal se fera en considérant que                          sale in the open market between a
 celui-ci comprend la valeur du droit                       buyer and a seller independent of
                                                            each other, and
 d'utiliser, pour lesdites marchandises, le
 brevet...'                                            (c) that price is adjusted, if necessary,
                                                            to take account of circumstances
 Thus, in the English and German texts                      of    the   sale   which    differ  from
  the goods are referred to as having been                  those on which the normal price
  manufactured      in  accordance     with  the            is based.
  invention, the mention of the patent              2. Adjustments under paragraph 1 (c)
  being adjectival, whereas in the French               may in particular be required with
  and Italian texts they are referred to as             reference to:
  having been manufactured in accordance               (a) the costs, charges and expenses
  with the patent, the mention of the                       mentioned in Article 1 (2),
  invention being there adjectival. The                (b) reductions in price granted              in
  Danish and Dutch texts of Article 3 (1)                   favour     of    sole  agents    or   sole
  go even further in this direction: they                   concessionaires        or    any    other
  refer only to the patent. As Your                          person operating in comparable
  Lordships will see, in the context of the                 circumstances,
  present case, the English and German                  (c) abnormal rebates and any other
  texts make rather better sense than the                    reduction       from     the    ordinary
  others.                                                    competitive price.'
   1488
 ---pagebreak---                                     BOSCH v HAUPTZOLLAMT HILDESHEIM
 (Article 10 provides in effect that, subject         right,    in      fact,    as      to    that.     The
  to exceptions, Article 9 is to apply only           Finanzgericht adds that, if the question it
 where the date of the contract does not              has    referred     to   this    Court     is   to   be
  precede the material time for valuation             answered in the affirmative, it will reduce
 by more than six months).                            the    supplement         as    assessed      by    the
                                                      Defendant.          This      is      because       the
  I  need     not,   I   think,    trouble   Your     Finanzgericht takes the view, on the
  Lordships with any of the subsequent                facts, that the COS process is only partly
 Articles of the Regulation. The problem             'embodied' in the COS machine in the
 with     which       the     Finanzgericht      is   sense     of    the      rule     laid    down       by
 confronted in this case is whether, and if           the     Bundesfinanzhof.             In    order      to
 so to what extent, the price paid by                 manufacture batteries according to that
  Bosch under its contract for the purchase           process, it is necessary to have, not only
 of the machine (US $84 254 95 or DM                  the   machine       and   the    directions     for  its
 228 476-25) should be adjusted pursuant             use, but also the further technical data
 to Article 9 (1) (c) of the Regulation 'in           relating to the preparation of the flux,
 order to take account of circumstances of           the temperature of the lead baths and the
 the   sale   which     differ  from    those   on   composition of the lead alloys, none of
 which the normal price is based'. The               which are 'embodied' in the machine.
 question referred to this Court by the
 Finanzgericht is 'whether Article 3 (1) of
                                                      In my opinion, my Lords, the question
 Regulation (EEC) No 803/68 of the
                                                     referred by the Finanzgericht cannot be
 Council ... is to be interpreted as
                                                     answered by a simple 'Yes' or 'No'. I
 meaning that the normal price also
                                                     leave aside the obvious point that this
 includes the value of a patented process
                                                     Court, whose rulings on Community law
 embodied in an appliance within the
                                                     have to be applied by the Courts and
 meaning of the judgment of 7 August
  1962   of   the  Bundesfinanzhof        No   VII
                                                     Tribunals of all the Member States, and
 89/60    U,    Bundessteuerblatt      III   1962,   so applied uniformly, would be rendering
                                                     the   task   of   those    Courts      and Tribunals
 p. 549'.
                                                     more difficult than it need be if it were
                                                     to formulate a ruling by reference to a
The Finanzgericht explains in its Order
 for Reference that, if, as it is inclined to        Judgment of a Court, however eminent,
                                                     of    one    of     the    Member        States.    The
 think, that question is to be answered in
                                                     substantial         difficulty       is    that      the
 the negative, it will accept Bosch's
                                                     Bundesfinanzhof's Judgment of 7 August
contention that no supplement is to be
                                                      1962 was given in interpretation, not of
added to the price of the machine in
                                                     Regulation No 803/68, but of an earlier,
 respect of the royalties payable by Bosch
                                                     and differently worded, national statute,
under the 1965 Agreement. This is                    and    in  the   context of its         own    national
because, in the view of the Finanzgericht,
                                                     system of customs legislation and patent
no part of those royalties was attributable
                                                     law. It would be surprising to find that a
to the use by Bosch of the patents for the
                                                     rule thus established could be transposed,
machine. In the light of the parties'
                                                     without any modification, into Com­
submissions, the Finanzgericht has come
                                                     munity law, but equally surprising to find
to the conclusion that those royalties
                                                     that nothing akin to it existed in
were wholly attributable to other rights
                                                     Community law.
acquired by Bosch under the 1965
Agreement, so that the price it paid for
the    machine     must     be   taken   to  have    So I think that this Court must approach
included the consideration for the use of            the interpretation of Regulation No
the patents for the machine. This Court              803/68, so far as regards the problem
is   not   of   course    concerned     with   the   posed by the present case, with a proper
question whether the           Finanzgericht is      respect      for      the     thinking        of     the
                                                                                                        1489
 ---pagebreak---                                    OPINION OF MR WARNER —CASE     1/77
Bundesfinanzhof, but with an awareness               that the Finanzgericht takes the same
too that the problem is not quite the                view.
same       as    that    with       which      the
Bundesfinanzhof         was    confronted.       In  It was conceded in argument on behalf
particular this Court cannot overlook that           of Bosch that there was one case where a
the interpretation that it places on                 patent for a process could, for the
Regulation No 803/68 must be capable                 purposes of Article 3 (1) of Regulation
of practical application in all the                  No 803/68, be assimilated to a patent for
Member States, despite any divergences               a machine. This was where the machine
between their respective patent laws. A              was     so    constructed    that    its  use
Community lawyer's natural instinct,                 automatically entailed the carrying out of
when faced with such a requirement, is               the patented process and where there was
to resort to a comparative study of the              technically no way of carrying out that
relevant    laws   of  the   Member      States.   I process otherwise than by using the
have    however     come    to   the   conclusion    machine. Bosch distinguished that case
that, in the present instance, the                   from other cases where, for instance, the
uncertainties are so many that such a                process could be carried out otherwise
study would be fruitless. To give but one            than by using the machine, or the
example, it remains an open question in              machine    could    be used otherwise than
English law whether a patent for a                   for carrying out the process, or where the
process is infringed by the sale of a                use of the machine was only part of the
machine that cannot be used except in a              process, or where the machine could not
manner infringing the patent (see per                be used to carry out the process without
Clauson J. in Cincinnati Grinders Inc. v             other knowledge covered by a patent for
B.SA. Tools Ltd. (1930) 48 R.P.C. at                 the process. The present case, said Bosch,
p. 58, Terrell on the Law of Patents (12th           was of the last kind, since the machine
Ed.) § 360 and Blanco White on Patents               here in question could not effectively be
for Inventions (4th Ed.) § 3 -210).                  used for the process without knowledge
Moreover, it may be that Regulation No               of the data as to the preparation of the
803/68 in so far as it reproduces the                flux, the composition of the lead alloys
Definition      of   Value    in    the   Brussels   and the temperature tolerances within
Convention (and, as I have indicated, the            which the work must be performed.
relevant words of Articles 3 (1) are
intended to do so) should be interpreted              In my opinion that concession was
also in the light of the laws of those               rightly made. As was pointed out by
States which, whilst not being Members                Bosch, where the carrying out of a
of the Community, are Contracting                     process involves nothing more and
Parties to the Convention. Their number               nothing less than the use of a particular
however is such that I do not think that              machine,       no    genuine     commercial
a meaningful comparative study of their               purpose is served by taking out a patent
 laws would be a practical possibility. I             for the process in addition to the patent
suspect that the authors, not only of the             for the machine. In such a case, the
 Brussels     Convention,        but     also     of  invention     of  the   machine     and  the
 Regulation No 803/68, came to the same               invention of the process are one and the
 conclusion and that that is why they                 same invention. A patent for that
 sought to frame the provisions both of               invention cannot be excluded from the
 the Convention and of the Regulation in              scope of Article 3 (1) simply because it is
 terms both non-technical and precise.                in form a patent for a process. The
The task of this Court is to interpret                invention remains, despite the form of
 those terms and, in my opinion, that task            the   patent, one 'in     accordance with'
 will best be performed by adhering                   which      the      machine      has    been
 strictly to them. I observe that there is an         manufactured, within the terms of Article
 indication    in  the   Order     for  Reference     3(1).
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 ---pagebreak---                                 BOSCH v HAUPTZOLLAMT HILDESHEIM
The Commission told us, in its written            to use the patent in other respects. I
Observations, that, under the German              agree.
law of patents, it is not possible to take
out a patent for a process having the             Where I disagree with the Commission
same content as a patent for a machine.           is in the reasoning according to which it
In a helpful paper that it submitted after        reaches     that    conclusion.    The    Com­
the hearing at the request of the Court,          mission's view is on the one hand that
the Commission examined the position              Article 3 (1) is to be given a narrow
as to that under the legal systems of the         interpretation, excluding all patents for
other Member States. The conclusion to            processes, unless they be processes by
be drawn from that examination was that           which the imported goods themselves
the rule was substantially the same in all        have    been   manufactured,      but,  on    the
the Member States, so that, in theory at          other hand, that it is implicit in Article 1
least, cases of such double-patenting             (1) of the Regulation that where a
should     be   rare.  There     are    however   patented process covers the use of a
variations in the detailed application of         particular machine the value of the right
the rule as between the Member States,            so to use the machine forms part of its
and     one     knows,    of    course,     that, 'normal price'.
particularly in this field, what happens in
practice does not always coincide with            In approaching the interpretation of
what the law envisages. Indeed, were it           Article 3 (1) the Commission focusses its
otherwise, there would never be litigation        attention on the reference to the goods
in which the validity of a patent was             having been 'manufactured in accordance
challenged on the ground of 'prior                with' a patented invention. From this the
claim'; or, at all events, such a challenge       Commission deduces that Article 3 (1) is
would     never    succeed.   In    truth,    the not concerned with any use of the goods
application      of    the     rules      against after their manufacture and importation.
double-patenting gives rise to such                But this approach seems to me, with all
complexities that it would be unrealistic         respect to the Commission, to confuse
to suppose that there can never be                the use of a patent in respect of goods
overlap between a patent for a machine            (which is what Article 3 (1) refers to) and
and a patent for a process. (As to that I         the use of the goods themselves. Take
need perhaps refer only to the position           the simple case of a patented machine.
in England, which is discussed in Terrell,        The     unlicensed       manufacture    of    the
op. cit., §§ 256 — 264 and Blanco White,           machine would be an infringement of
op. cit., §§ 4 — 301 — 312. In the latter,         the patent. But so would the unlicensed
§§ 4 — 304 & 4 — 309 are particularly             sale   or  hire   of   the   machine   after   its
in point).                                         manufacture, and its unlicensed use then
                                                   in the commercial production of other
Although the concession made by Bosch             goods. So there is a use of the patent in
was thus, in my opinion, rightly made, I           respect of the machine, not only when it
do not think that it went far enough,              is   manufactured,        but   when     it     is
because it did not cover a case where the          subsequently sold, hired, or put into
invention protected by a patent for a              production. The reference in Article 3 (1)
process includes the use of a particular           to 'the right to use the patent ... in
machine and something else. In such a              respect of the goods' must be intended to
case, it seems to me, in so far as the             cover all these. The situation in the type
invention is of the machine, it is not             of case with which these proceedings are
excluded      from    Article    3    (1).   The   concerned       differs    from    that     only
Commission       submitted   that, in    such a    inasmuch as, the patent being one for a
case, the value of the right to use the            process, it is necessary to enquire to what
patent in respect of the machine must be           extent, if any, the invention that it
segregated from the value of the right             protects is really that of the machine.
                                                                                               1491
 ---pagebreak---                                 OPINION OF MR WARNER —CASE      1/77
 To seek to solve that problem by                 on their user. Since we are avowedly in
  reference to Article 1 (1) of the               the realm of implication it is, perhaps,
  Regulation is open to two major                 neither here nor there to point out that
  objections.                                     no such principle is expressed in Article
                                                   1 (1). It is however, I think, even on that
 The first is that it ignores the structure of    footing, a valid criticism that the
 Articles 1 to 8 of the Regulation. Article       principle so propounded is inconsistent
  1 (1), as I have pointed out, only gives a      with the Commission's own conclusions,
 general definition of the concept of the         for the Commission accepts that there
 'normal price'. Articles 1 (2) and 2 to 8        are circumstances in which the existence
 refine on that definition, working out the       of a patent for a process will restrict the
 details of its application in relation to        freedom of a purchaser of a machine to
 specific matters. The matter of industrial       use it, without the value of the right to
 property rights, and in particular of            use that patent forming part of the
 patents, is dealt with by Article 3. That       'normal price' of the machine. The truth
 being so there is no room for implying           is that there is nothing in the concept of
 anything further about patents in Article        the 'open market', and it is on that, I
  1 (1) itself. Of course each of the             think,     that the Commission mainly
 provisions of the Regulation must be             relied, that connotes that a purchaser of
 interpreted in the light of the others, but     goods in that market will acquire them
 that is not to say that any of them can be      free from restrictions on their user. For
 interpreted as implicitly dealing with a        instance the rule of English law is that a
 matter which is the express province of         sale of a patented article by the patentee,
 another.                                        in any market, is presumed to carry with
                                                 it the right for the purchaser to use the
The second and graver objection is that          article in any way he chooses, but that
 Regulation No 803/68 is fiscal legis­           that presumption is rebutted if at the
 lation. Its purpose and its effect are to       time of the sale the purchaser has notice
define     fiscal liabilities. It  would    be   of restrictions on its use imposed by the
contrary to all principle to hold that such      patentee,       whether    by   contract   or
liabilities could be imposed or increased        otherwise (see National Phonograph Co.
by implication.                                   of Australia, Ltd. v Menck [1911] A.C.
                                                 336, Goodyear Tyre and Rubber Co.
The very argument of the Commission              (G. B.) Ltd. v Lancashire Batteries Ltd.
evinces a difficulty inherent in its             [1958] 1 W.L.R. at p. 861 and Dunlop
approach. The Commission naturally               Rubber Co. Ltd. v Longlife Battery
realized that it was not enough to say           Depot, ibid., at p. 1037). Of course, where
that this case was implicitly covered by         and in so far as Article 3 (1) applies, it
Article 1 (1). It must propound a                requires such restrictions to be ignored
principle from which that could be               in computing the 'normal price' of the
deduced. The principle it propounded             article. But nothing to the same effect
was that the acquisition of goods at their       can legitimately be read into Article 1 (1)
'normal price' implied that the purchaser        taken by itself or, for that matter, into
would acquire them free from restrictions       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