European Commission investigation into Taiwan’s CDR compulsory licences

The European Commission has launched an in-depth investigation into the WTO consistency of the granting of compulsory licenses by Taiwan for recordable compact discs (CDRs) under the Trade Barriers Regulation. This follows a complaint lodged by Philips, the electronics manufacturer which holds patents in the technology for CDRs. A compulsory license is a permission granted by a government which permits a domestic producer to use a patent without having to negotiate a licensing agreement for the use of the patent with the patent owner. The conditions for the grant and use of compulsory licenses are regulated in the WTO TRIPs (Trade Related Aspects of Intellectual Property Rights) Agreement.

EU Commissioner for Trade, Peter Mandelson said: "The proper enforcement of intellectual property rights one of the central planks of the EU's Global Europe Strategy. The allegations made in respect of the grant of these compulsory licences give ground for substantial concerns and the Commission will thoroughly investigate them. I am hopeful that we can find a means to resolve any WTO violations identified in the investigation".

The Commission is acting on the basis of a complaint lodged by Philips, the Dutch electronics manufacturer pursuant to the Trade Barriers Regulation. Philips is the inventor of some of the core technologies for CDRs and holds patents in those technologies. The complaint alleges that Taiwan granted compulsory licences inconsistently with the WTO TRIPs Agreement. In particular, it is alleged that Taiwan granted these licences where Philips had made reasonable efforts to provide its licenses on a voluntary basis by offering terms acceptable to seven of the eight main producers in Taiwan. It is also alleged that Taiwan granted the licence in full knowledge of the fact that the CDRs produced would be for export ( Taiwan produces 80% of the world's CDRs) despite the express prohibition on the use of such licences for export production in the TRIPs Agreement. The Commission is satisfied that there is sufficient prima facie evidence of a violation of the TRIPs Agreement and of adverse effects on the Community to merit an investigation.

The Trade Barriers Regulation provides EU companies and industry associations with a right to file a complaint with the Commission when they face trade barriers in third countries. Following Philips's complaint, the Commission has decided to initiate an investigation procedure. When this happens, the Commission normally has five months to decide on whether to proceed with a commercial policy measure. The investigation process involves gathering information in Taiwan, in cooperation with the Taiwanese government. Member States can assist in the fact-finding process, for instance through their local delegations. EU and Taiwanese companies will also be asked to participate in the investigation by way of questionnaires and meetings. Parties interested in participating in the investigation should consult the Notice of Initiation in the Official Journal of the European Union.

Several outcomes are possible. The Commission may find the claims unfounded and decide to terminate the procedure. The Commission may also decide that satisfactory steps are being taken by Taiwan to eliminate the barrier to trade, and may monitor developments. The Commission may seek a solution with Taiwan. The Commission may also decide to initiate international dispute settlement proceedings in the WTO against Taiwan.