EU to Take Taiwan to WTO over Compulsory Licensing Provision

If the EU does file a complaint at the WTO against Taiwan’s CL provision, we are likely to gain more insight into the contours of the compulsory licensing provisions and the various flexibilities inherent in it. Of course, recordable storage media is very different from drugs and we’re likely to see less politicization of the dispute here. Also, EU’s main problem seems to be the alleged sales of CD’s outside Taiwan–which, if true, is clearly prohibited under WTO rules. Interestingly, Philips is locked in a patent dispute in India with Moser Baer over some of its optical media patents (that are part of a patent pool).

Michael Macmanus of DigiTimes reports:

“A European Commission report published on January 30 has criticized Taiwan’s compulsory licensing practices for recordable compact discs (CD-R), and the report recommends that the Commission should start World Trade Organization (WTO) proceedings if Taiwan does not take concrete steps to amend its patent law and reverse the compulsory license decisions against Philips within two months.

The report is a result of complaint filed last year by Royal Philips Electronics with the EU against the Taiwan government, which it claims was in violation of the WTO TRIPS (Trade Related Intellectual Property Rights) agreement.

Philips was appealing a July 2004 ruling by the Taiwan Intellectual Property Office (TIPO) that called for the compulsory licensing of five Philip’s CD-R disc patents to Gigastorage, a second-tier optical disc maker in Taiwan. TIPO based its decision on the fact that Philips had refused to renegotiate the CD-R fixed royalty charge rate of US$0.035 per disc, despite the fact that OEM prices had fallen from US$5 in 1997 to US$0.19 in the first half of 2003.

At the time of the ruling against Philips, TIPO stated that under Taiwan patent law, it had to balance the considerations of intellectual property rights with the promotion of domestic Taiwan industrial development, with the perceived unreasonable royalties charges tipping the case in favor of Gigastorage.

According to comments made by EU Commissioner Peter Mandelson, the EU supports the use of compulsory licensing in specific circumstances, in particular to facilitate access to medicines, but Mandelson implied that Taiwan had abused the system in this case.

The EU report also stated that although the TRIPs agreement requires that compulsory licenses only be issued for goods intended chiefly for the domestic market, the Taiwan government ignored that provision.

However, Taiwan’s MOEA stated in 2006 that the TIPO ruling on compulsory licensing was specific to Gigastorage only and restricted to the licensee’s production of discs for sale in Taiwan.

In April of last year, Gigastorage applied with the TIPO to terminate the compulsory license, stating that since it had decided to shift its production of CD-R discs to Thailand, the TIPO-granted compulsory license was to become meaningless. Although the Commission report noted that the compulsory licenses were terminated last June, the EU still views it as necessary to have the patent law amended, as the termination was not retroactive.

In September, Gigastorage also announced that it had reached a preliminary settlement with Philips regarding the infringement of the CD-R patents.”

Shamnad Basheer

Shamnad Basheer

Prof. (Dr.) Shamnad Basheer founded SpicyIP in 2005. He's also the Founder of IDIA, a project to train underprivileged students for admissions to the leading law schools. He served for two years as an expert on the IP global advisory council (GAC) of the World Economic Forum (WEF). In 2015, he received the Infosys Prize in Humanities in 2015 for his work on legal education and on democratising the discourse around intellectual property law and policy. The jury was headed by Nobel laureate, Prof. Amartya Sen. Professional History: After graduating from the NLS, Bangalore Prof. Basheer joined Anand and Anand, one of India’s leading IP firms. He went on to head their telecommunication and technology practice and was rated by the IFLR as a leading technology lawyer. He left for the University of Oxford to pursue post-graduate studies, completing the BCL, MPhil and DPhil as a Wellcome Trust scholar. His first academic appointment was at the George Washington University Law School, where he served as the Frank H Marks Visiting Associate Professor of IP Law. He then relocated to India in 2008 to take up the MHRD Chaired Professorship in IP Law at WB NUJS, a leading Indian law school. Later, he was the Honorary Research Chair of IP Law at Nirma University and also a visiting professor of law at the National Law School (NLS), Bangalore. Prof. Basheer has published widely and his articles have won awards, including those instituted by ATRIP, the Stanford Technology Law Review and CREATe. He was consulted widely by the government, industry, international organisations and civil society on a variety of IP issues. He also served on several government committees.

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