[A2k] EU threatens Taiwan on CL

[Sean Flynn]

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SNIP:  "the Commission concluded that provisions of Taiwan's Patent Act
dealing with compulsory licenses were inconsistent with Article 28 of
the WTO's Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPs) because it allows the granting of licenses where there is
no more than a refusal to deal on the part of the patent owner."



EUROPEAN UNION/TAIWAN

EU Threatens Action Against Taiwan

On Compulsory-Licensing Decisions



                  GENEVA -- The European Union has accused Taiwan of
violating World Trade Organization rules by maintaining legislation and
administrative decisions that allow Taiwanese authorities to unfairly
issue compulsory licenses in order to override patent rights.



                  In a statement issued January 30, the European
Commission warned it would initiate WTO dispute proceedings against
Taiwan within two months if Taiwan does not amend its Patent Law and
reverse earlier compulsory licensing decisions that allowed a Taiwanese
firm to override patent rights held by the Dutch electronics giant
Philips in order to produce recordable compact discs (CD-Rs).



                  While the compulsory licenses in question were
terminated with effect from June 1, 2007, the Commission said the
termination "was not retroactive, so the decisions still set a
precedent."



                  "The Commission views it as necessary to have the
Patent Law amended and the effects of the decision reversed," it added.



                  European Trade Commissioner Peter Mandelson said in
prepared remarks that while Brussels supports the use of compulsory
licensing in specific circumstances -- in particular, to facilitate
access to medicines -- "we cannot accept the abuse of this system" by
Taiwan. "I hope that the Taiwanese authorities will move quickly to
bring their law and practice into line with WTO rules," Mandelson added.
"I cannot rule out seeking WTO dispute settlement if they do not."



                  Taiwan pointed out that neither the EU nor any other
WTO member raised objections about the compulsory license provisions of
the Patent Law when Taiwan joined the WTO in 2002, and that compulsory
licenses are issued through a "careful, prudent review process".



                  The EU action followed a complaint filed in January
2007 by Philips, the inventor of some of the core technologies for CD-Rs
and holder of patents on those technologies. According to Philips, the
Taiwan Intellectual Property Office (TIPO) granted compulsory licenses
in July 2004 allowing Gigastorage Corp. to override five patent rights
by producing CD-Rs without securing a prior licensing agreement with
Philips.



                  Gigastorage filed its request for a compulsory license
after failing to reach an agreement with Philips on a voluntary license,
which Philips had already granted to a number of Taiwan's CD
manufacturers.



                  The company's request was made under Article 76 of
Taiwan's Patent Act, which provides for the granting of compulsory
licenses in certain specified circumstances. The TIPO decision was
appealed to Taiwan's Ministry of Economic Affairs in August 2004, with
the ministry rejecting the appeal on June 16, 2006.



                  Commission Report



                  Under the EU's Trade Barriers Regulation, the
Commission was obliged to issue a report (normally within five months)
on the Philips complaint as well as issue recommendation for action.



                  In its report, the Commission concluded that
provisions of Taiwan's Patent Act dealing with compulsory licenses were
inconsistent with Article 28 of the WTO's Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPs) because it allows the
granting of licenses where there is no more than a refusal to deal on
the part of the patent owner. Further, the Commission concluded that the
interpretations of various procedural requirements relating to the grant
of compulsory licenses in the decisions of the Taiwanese authorities
were inconsistent with Article 31 of the TRIPs Agreement.



                  The Commission also concluded that Taiwan had failed
to respect the obligation to ensure that the compulsory licenses were
not used to produce for export, and that in fact they had been
predominantly used for this purpose. Circumstantial evidence "appears to
suggest that there has been a willingness on the part of the authorities
of (Taiwan) to use the mechanism of compulsory licensing to force the
Complainant (Philips) to lower its royalty rates," the Commission said
in its report.



                  While the Commission added that it had no concrete
proof that this was the intent of the Taiwan authorities, "a number of
elements (e.g., the exceptionally long administrative procedures, the
fact that none of the other CD-R manufacturers opposed an advantage
granted to only one of them, rumors of comparable threats being made to
other companies) gives the Commission ground to believe that this may
have been the intention. If this is the case, this sets a terribly
dangerous precedent."



                  The Commission report noted that Taiwan's actions have
cost Philips tens of millions of euros, and that it was important not
only to amend Taiwan's Patent Law provisions relating to compulsory
licensing, but also to reverse the "unacceptable precedent" set by the
compulsory licensing decisions.



                  "It is only a direct reversal of the interpretation
contained in the TIPO decision, as confirmed on appeal, which can bring
about a satisfactory resolution of this issue," the Commission said. The
Commission report is available at
http://trade.ec.europa.eu/doclib/docs/2008/january/tradoc_137633.pdfEnd
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