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."