Koninklijke Philips Electronics, N.V.

Case:

Key Words:

DVD-R, DVD+R, patent license

Reference:

Fair Trade Commission Decision of January 4, 2007 (the 791st Commissioners' Meeting); Letter (96) Kung Er Tzu No. 0960000150 issued on January 5, 2007

Industry:

Data Storage Media Units Manufacturing (2740)

Relevant Laws:

Article 10,19(ii), and 19(vi) of the Fair Trade Law

Summary:

1. Koninklijke Philips Electronics, N.V. (hereinafter called “Philips”) was complained for violating Articles 10, 19(ii) and 19(vi) of the Fair Trade Law by conducting illegal patent licensing acts when selling recordable DVD (including DVD-R and DVD+R) to domestic companies.
2. After this case was investigated and submitted to the Commissioners’ Meeting for resolution, no violation of the Fair Trade Law was found upon current evidence. Grounds for this Decision:
1. The technologies required to produce the DVD-R/+R could be classified into two major systems: DVD-R and DVD+R. This distinction is based on the different development of each standard. It is important to note that, other than the patented technologies of Philips, the DVD-R and DVD+R standards are also provided by Sony, Hewlett Packard, Pioneer, Yamaha, Ricoh, Mitsubishi Chemistry, AOL, Hitachi, IBM, Mitsubishi, Panasonic, Toshiba, and JVC. Said companies all have relevant patents of DVD-R/+R and are engaged in relevant patent license. Philips is merely one of the patent licensers. Also, the patented technologies of the other licensers are also critical to the production of DVD-R/+R. Therefore, licensees would still have to obtain license from not only Philips but also all other licensers to manufacture the said products.? As a result, Philips would still have to compete with other enterprises and have no power to eliminate competition.?? Since Philips is not a monopoly, Article 10 of the Fair Trade Law shall not apply.
2. The complainant complained about the way that Philips set price for the royalty being based on ?considerations unrelated to trade, such as “whether it is easy to negotiate (degree of obedience)” or “whether the rights to object or complain are waived.”? However, the FTC requested the complainant to provide specific evidence to prove the aforesaid circumstances but had never received any response from the complainant. Therefore, the FTC could not confirm the aforesaid complaints. In addition, the FTC asked domestic manufacturers of the products in question for opinions. None of the businesses confirmed the aforesaid complaints about Phillips.? As a result, the FTC was not able to confirm the accused violation of Article 19(ii) of the Fair Trade Law.
3. It was found that Philips had retained an independent and external expert to evaluate whether the patent in question was a necessary patent to fabricate the products in question. In the event that said expert should find any patent inconsistent with the “necessary patent” set forth in the contract, Philips shall delete such patent from the patent list (and the relevant patents obtained by other countries) pursuant to the contract in question.? Since Philips had provided relevant mechanism to ensure that the patent list in question encompassed every necessary patent, the action it took shall be deemed appropriate.? Furthermore, a patentee’s act of package licensing regarding all necessary patents for one product could surely bring positive economic benefits such as decreasing trading and negotiation costs and avoiding litigation.? Such an act has also been practiced in the market of patent license.? Therefore, Philips’ act of package licensing shall be appropriate and not a violation of Article 19(vi) of the Fair Trade Law.

Appendix:
Koninklijke Philips Electronics, N.V.’s Uniform Invoice Number: none

Summarized by Chen, Shu-Hua; Supervised by Liou, Chi-Jung