CHAPTER VI EXPERIENCES OF COMPULSORY LICENSE IN TAIWAN
1. C ASES OF C OMPULSORY L ICENSE IN T AIWAN
In Taiwan, there are two compulsory licensing cases so far. In July, 2004, the Taiwan Intellectual Property Office issued compulsory license to Gigastore for 5 patents related to CD-R of Philips. And In November 2005, Taiwan granted a compulsory license for patents needed to manufacture and sell generic versions of Tamiflu.
1.1. Compulsory Licenses for Philips’ CD-R Patents
Koninklijke Philips Electronics N. V. (hereinafter Philips) owned the patents to the Orange Book recordable compact disc (CD-R) standard for about 20 years. In 1999, Philips entered into contracts of package licensing agreement with three companies, Gigastorage Corp. (Gigastorage), Princo Corp. and Linberg Enterprise Inc. The Royalties set in the agreement was either at 3% of the net selling price or ￥10 per disc, which ever was higher.
In fact, Philips has licensed the patents to Taiwanese companies since early 1990’s and Taiwanese manufacturers supplied approximately 80% of the world’s CD-R market by 2003. However, the wholesale price of CD-R had fallen to $0.50 in 2000, compared to $7 per disc in 1996. Thus, ￥10 came to represent approximately 30% of an off-the-shelf CD-R’s price, which was unproportionate to the original agreement. Consequently, all three licensees stopped paying royalties to Philips. Philip thus terminated the license to Gigastorage for its non-reporting and under-reporting sales and failure to pay
126
royalties. However, Gigastorage went on manufacturing CD-R with the patented standard. And both parties were unable to reach a new agreement regarding to a satisfying royalty.298
In July, 2002, the Intellectual Property Office of Taiwan (TIPO) issued compulsory licenses to the 5 patents related to CD-R possessed by Philips in response to Gigastorage’s application. The granting ground supporting the TIPO’s decision was that Gigastorage had made several attempts to negotiate with Philips but in vain. According to the earlier finds of The Taiwan Fair Trade Commission (FTC), Philips had abused its patent right by requiring unfairly high royalty. Pursuant to Article 76 (1) of Taiwan’s Patent Act, which allows the granting of compulsory license when a patent owner has failed to offer a voluntary license on “reasonable commercial terms and conditions”299, TIPO granted compulsory licenses to the 5 patents at issue.300
On appeal, the Committee of Appeal of the Ministry of Economic Affairs (MOEA) affirmed TIPO’s decision. As a result, Philips continued to seek redress and file a complaint against Taiwan for granting compulsory licenses to CD-R invoking Article 28 and 31 of the TRIPS Agreement. The EC circulated the case to Trade Barrier Regulation Investigation Report to Member State and made public on 30 January 2008. In the report, it concluded that Article 76 of the Taiwanese Patent Act and the compulsory licenses to
298 See Report to the Trade Barriers Regulation Committee, Examination Procedure Concerning an Obstacle to Trade, within the Meaning of Council Regulation (EC) No 3286/94, Consisting of Measures Adopted by the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu Affecting Patent Protection in Respect of Recordable Compact Discs (Jan. 30, 2008) , available at http://trade.ec.europa.eu/doclib/docs/2008/january/ tradoc_137633.pdf [hereinafter the EC TBR Report]. For an Executive Summary, see http://trade.ec.europa.eu/doclib/docs/2008/january/
tradoc_137632.pdf
299 The provision specifying “patent owner’s failure to offer a voluntary license on reasonable terms and conditions constitutes ground of compulsory license ”has been eliminated in the new draft of Taiwan’s Patent Act since the authorities concerned had faced with pressure from the European Commission after the issuance of compulsory licenses to Philips.
300 Supra note 298
127
Philips were in violation with the TRIPS Agreement. Furthermore, the EC pressured Taiwan to amend the Patent Act and invalidate the grant of compulsory licenses within 2 months. If the concrete steps were not taken, it would file a WTO complaint against Taiwan. Afterwards, the Taipei High Administrative Court revoked the controversial decision on 13 March, 2008.TIPO did not appeal.301
1.2. Compulsory License for Tamiflu
On 25 November, 2005, the Department of Health (DOH) in Taiwan announced that the Taiwanese government would issue compulsory license on Roche’s patented drugs of “Tamiflu” for local production, which was regarded as the most promising treatment for avian influenza. According to TIPO’s Director of International Affairs, stockpile of Tamiflu was only enough to treat 1% of the population, well below the WHO recommended stockpile of 10% of the population. When the negotiations with Roche were still ongoing, a decision to grant a compulsory license was granted to DOH by TIPO. TIPO issued a conditional license for the generic version of Tamiflu valid until December 2007 or until a licensing agreement is concluded between Taiwan and Roche. TIPO’s announcement stated that the locally produced versions would be solely for domestic use and would be used only in the event that supplies of Roche-produced Tamiflu were exhausted.302
During the negotiations between Taiwan’s DOH and Swiss drug-manufacturer Roche over supply of avian influenza treatment Tamiflu, Roche’s spokesman claimed that Roche would be able to provide Taiwan with
301 Id.
302 ICTSD, Taiwan Issues Compulsory License for Tamiflu, at http://ictsd.org/i/ip/39838/
128
the necessary supply, and promised to offer Taiwan with 2.3 million doses (10% of the population in Taiwan) by June 2006. However, Taiwan health officials were concerned about the timely supply of Tamiflu. According to the DOH Bureau of Pharmaceutical Affairs Director General’ announcement, the most dangerous period for avain influenza infections was likely to be between January and March of 2006. Therefore, considering the global demand for Tamiflu, it was doubted that Roche would be able to meet its commitment to supply Taiwan necessary amount of stockpile.303
As a result, TIPO invoked Article 31 of the TRIPS Agreement and limited the locally produced generic versions of Tamiflu to domestic use under the control of DHO, justifying its issuance of compulsory license for Tamiflu.304