[A2k] IP-Watch: EU Threatens Taiwan With WTO Case Over Law On Compulsory Licences

[Thiru Balasubramaniam]

http://ip-watch.org/weblog/wp-trackback.php?p=3D907


31 January 2008
EU Threatens Taiwan With WTO Case Over Law On Compulsory Licences

Posted by William New @ 7:57 pm
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By David Cronin for Intellectual Property Watch
BRUSSELS - The European Union has demanded that Taiwan change its
intellectual property law within two months following a probe into how
the East Asian island overruled patents on recordable CDs (CD-Rs).

Philips, the Dutch electronics giant which holds patents for the core
technologies used in CD-Rs, filed a complaint with the EU in early
2007 over the activities of a Taiwan-based company Gigastorage.

Since the 1990s, Philips had given licences to use technology for
which it held patent rights to several companies in Taiwan. These
firms went on to supply about 80 percent of the global market in CD-Rs
by the early part of this decade.

While Gigastorage was one of the firms with which Philips had a
licence agreement, this accord was scrapped in 2001. Gigastorage
subsequently asked the Taiwanese national authorities to enable it
continue making the discs by issuing a compulsory licence. Its request
was granted in 2004.

After investigating Philips=92 complaint, the EU=92s executive, the
European Commission, warned on 30 January that it could start dispute
proceedings against Taiwan in the World Trade Organization unless its
patent law is swiftly amended.

The Commission has objected to a provision in the Taiwanese law
allowing national authorities to grant a compulsory licence if a
rights-holder has refused a voluntary one. EU officials believe this
clause is not compatible with the WTO Agreement on Trade-Related
Intellectual Property Rights (TRIPS), as it permits patent-holders to
withhold licences in most situations. It also suggested compulsory
licences should be limited to products intended primarily for the
domestic market, and that it was not the case.

=93The EU fully supports the use of compulsory licensing in specific
circumstances, in particular to facilitate access to medicines,=94 said
Peter Mandelson, the European commissioner for trade. =93However, we
cannot accept the abuse of this system. I hope that the Taiwanese
authorities will move quickly to bring their law and practice into
line with WTO rules. I cannot rule out seeking WTO dispute settlement
if they do not.=94

The Commission said that it is challenging Taiwan=92s patent law as part
of its overall efforts to remove barriers to trade encountered by
European firms doing business abroad. In a 2006 strategy paper titled
Global Europe, the Commission argued that the protection of European
patent rights outside the EU=92s borders is essential to guarantee the
competitiveness of European industry.

A report prepared by EU officials who examined the Philips=92 complaint
concludes that =93circumstantial evidence=94 has been found to suggest the
Taiwanese authorities are willing to use compulsory licensing as an
industrial policy instrument, rather than as a limited exception to
patent rights.

It suggests that a compulsory licence was issued in this case to
pressurise Philips into lowering the royalty rates it charged to all
CD-R manufacturers in Taiwan. None of the other CD-R manufacturers in
Taiwan opposed the advantages given to Gigastorage, it noted.

According to the Commission, the case sets a =93terribly dangerous
precedent of an industrial policy built on violation of the TRIPS
agreement.=94

A Taiwanese diplomat familiar with the case said that producers on the
island had encountered a =93dramatic change=94 because the international
price of CD-Rs has fallen considerably in recent years. Although the
Taiwanese authorities had asked Philips to reassess the royalty rates
it was charging to reflect this situation, the Dutch firm declined to
do so, the diplomat said.

=93It might seem odd that the Commission wants us to change the law
within two months,=94 the diplomat continued. =93Maybe it just wants to
send out a signal not just to Taiwan but to others that it will
vigorously safeguard Europe=92s intellectual property concerns.=94

Despite the Commission=92s warning, a preliminary settlement was reached
between Philips and Gigastorage in October 2007. The settlement
followed a ruling in Philips=92 favour, delivered by the US
International Trade Commission earlier in the year. The Commission
said its aim is a change to Taiwanese law.

The amount of compensation being paid as a result of the settlement
has not been disclosed.

David Cronin may be reached at info@ip-watch.ch.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997