Royal Dutch Philips Electronics Ltd. and Sony Corporation of Japan with Taiyo Yuden Co., Ltd.

Case:

Key Words:

CD-R, orange book, license agreement

Reference:

Fair Trade Commission Decision of October 28, 2009 (the 938th Commissioners' Meeting), Disposition Kung Ch’u Tzu No. 098156

Industry:

Data Storage Media Units Manufacturing (2740)

Relevant Laws:

Article 10 of the Fair Trade Law

Summary:

1. This case originated from the complaint filed in 1999 against Royal Dutch Philips Electronics Ltd. (hereinafter referred to as Philips) and Sony Corporation of Japan (hereinafter referred to as Sony) with Taiyo Yuden Co., Ltd. (hereinafter called Taiyo Yuden) regarding the violation of the Fair Trade Law arising from their licensing of the CD-R manufacturing technology. The FTC, in its 480th Commissioners’ Meeting on January 11, 2001, imposed administrative fines of eight million, four million, and two million New Taiwan Dollars respectively on Philips, Sony, and Taiyo Yuden. These three companies were dissatisfied with the disposition and respectively filed for an administrative appeal. The Committee of Administrative Appeals of the Executive Yuan vacated and remanded the FTC’s rulings and required the FTC reissue a proper ruling in accordance with the appeal decision in 2001. The FTC further conducted new investigation, research, and analysis and remained its decision of disposition in its 544th Commissioners’ Meeting on April 11, 2002. Said companies again did not accept the disposition and filed for a second administrative appeal which was dismissed by the Committee of Administrative Appeals. They later filed administrative litigation with the Taipei High Administrative Court which, in its decision, vacated both the “decision of the administrative appeal and original disposition,” and ordered the FTC to make a proper disposition upon further investigation. (2003 Decisions Su-Tzu No. 00908, 01132, and 01214) The FTC was dissatisfied with this decision and filed an appeal to the Supreme Administrative Court which dismissed the appeal. The FTC again filed a second appeal which was also dismissed by the Supreme Administrative Court. The case was then submitted to the Commissioners’ Meeting for a new disposition in accordance with the law and pursuant to the final decision of the Taipei High Administrative Court.

2. Findings of FTC after investigation: These two parties were requested in writing to make statements and provide information at the FTC. The FTC also dispatched personnel to visit and investigate the domestic CD-R manufacturers and their affiliates, such as Asia-Pacific Technology & Intellectual Property Service Inc. Additionally, the FTC asked the Electronics & Optoelectronics Research Laboratories of the Industrial Technology Research Institute to provide professional opinions. All facts investigated can be traced in the records. The FTC also referred to the opinions and decisions of the Taipei High Administrative Court and Taipei Supreme Administrative Court for its decision of disposition.

3. Grounds for disposition:
   (1)Philips, Sony, and Taiyo Yuden stipulated the orange book standards and monopolized the CD-R technology market via their conduct of concerted licensing. With the conspicuously changed circumstances where the market scale of CD-R having large growth exceeding the original expectations, these three companies still would not allow any room for the licensees to negotiate and continued to maintain the original calculation of licensing royalties. The undue fixing of licensing royalties violated Article 10(ii) of the Fair Trade Law governing the prohibitions of monopolistic enterprises.
   (2)Philips, Sony, and Taiyo Yuden failed to inform the licensees of relevant important trade information, such as patent contents, scope, and validity duration. They also used the urgent need of the domestic companies to obtain the license and requested these domestic companies to withdraw the exposure of invalid patents prior to the signing of the license agreement as the prerequisite of the agreement. These three companies indeed exploited their advantageous market position and violated Article 10(iv) of the Fair Trade Law. As a result, administrative fines of 3.5 million, 1 million, and half million New Taiwan Dollars were imposed respectively on Philips, Sony, and Taiyo Yuden.

Summarized by Chen, Shu-Hua; supervised by Wu, Lieh-Ling