The RCA Thomson Licensing Corporation was complained for its violation of the Fair Trade Law by improperly collecting royalties
Chinese Taipei
Case:
The RCA Thomson Licensing Corporation was complained for its violation of the Fair Trade Law by improperly collecting royalties
Key words:
royalty, discriminatory treatment, retroactive royalty collection(U.S.); Customs Law Article 337
Reference:
Fair Trade Commission Decision of 7 January 1998 (the 323rd Commission Meeting); Letter (87) Kung Erh Tzu No. 8302352-002
Industry:
Other Computer Equipment Manufacture Industry (3149)
Relevant Laws:
Summary:
The complainant filed information with the Fair Trade Commission that the respondent was collecting patent royalties from local monitor producers that were higher than the royalties it collected in other regions (e.g. the PRC, Korea). To avoid local producers facing unfair treatment in competition when exporting their products to the international market, which would affect domestic industries, the complainant requested the Fair Trade Commission to investigate. The unfair competition means employed by the respondent included giving discriminatory treatment in collecting royalties, improperly collecting royalties, collecting retroactive royalties, and threatening by referring to U.S. Customs Law Article 337 (measures used to block imports from customs declaration).
An intellectual property rights [IPR] holder may make arrangements for the use of its right, which is an exclusive and monopoly right and position under the law. As a technology holder, it may also license its IPR to another person to utilize and collect royalties from that person. This is the best way for an IPR holder to commercially exploit its IPR when it cannot utilize the right on its own. In international IPR licensing activities, an IPR holder normally has a comparatively advantageous position in the agreement, and the licensing involves different regulatory requirements of the parties' economies. The licensor [i.e. the IPR holder] would usually ask the licensee to accept certain restrictions in its business activities or other disadvantageous terms as part of the agreement, so as to obtain more benefits and promote its own competitiveness and position. On the other hand, the licensee in a less favorable position, who a party seeking to utilize the technology, is either in dire need of the special knowledge and know-how or lacks basic knowledge about and/or substantial content of the terms specified in the licensing agreement, is often unable to contest disputable terms prior to signing the contract. The laissez-faire principle of free contracting therefore often fails to facilitate the self-regulation function of the market.
Besides conferring various IPRs to protect the interests of the right holders, every economy also imposes certain limitations on the content of IPR licensing agreements, which it deems appropriate under competition law in order to protect its domestic public interest. The following lists the terms that are often considered by many economies to be subject to competition law: forbidding challenges of validity of IPRs, making the term of the contract survive the term of effective patent license, imposing restrictions on free competition, demanding remuneration for unprotected products, imposing limits on maximum quantity, imposing price restrictions, imposing restrictions on trading counterparts, imposing obligation of feedback, tying, forbidding cross-area trading, imposing sale restrictions, cross-licensing and joint licensing, and compulsory package licensing.
Licensing of technology is very significant to domestic industries, particularly when this economy is a party importing technology as oppose to industrialized economy exporting technology. By entering into licensing agreements, domestic industries may be able to acquire advanced technology, and thus licensing has become an important way for domestic industries to advance their technology level. Since the parties involved are often placed in unequal positions when establishing licensing relationships, the party in the comparatively advantageous position sometimes takes advantage and makes requests in its own favor that will be incorporated into the agreement and bind the other party. On the contrary, because the other party is in a position of comparative disadvantage where it needs its counterpart's consent, and tries to prevent infringing upon its counterpart's patent right, or to avoid being sued, the other party often has less bargain power. Sometimes due to the lack of sufficient legal knowledge, the other party may be even incapable to negotiate. Technology licensing thus contracted will often have elements of unfairness.
The instant case involves disputable issues that are essentially important to this country in terms of its position as the party seeking to import technology. The case regarding INTEL and this case both present issues that have continued to bother both parties of licensing agreements. Speaking from a long-term point of view, the FTC should undertake as one of its focused tasks to observe different economies' increasing emphasis on the issue and prescribe appropriate guidelines in conformity with the provisions of TRIPS. However, with regard to the instant case, certain points of the dispute still need further discussion and evidence. Certain portions of the complaint cannot be sustained due to the lack of sufficient grounds to deem a violation. Based on the consideration of public interest, it is suggested that the disputes in this matter be resolved out by administrative settlement.
Summarized by Lin, Ch'ing-t'ang
Supervised by Yu, Su-su