Taiwan seeks to end CD dispute

Taiwan has told Philips that a local company will stop using its compact disc technology under a controversial compulsory licence, in an apparent bid to stop the European Union from taking it to the World Trade Organisation over the matter.

The European Commission last month started investigating Taiwan’s decision to award local manufacturer Gigastorage a compulsory licence to make recordable CDs using the Dutch electronics group’s technology, which Philips believes violates global trade rules.

The compulsory licence came after years of patent disputes between the two companies. Any move by the WTO to target Taiwan for violating rules on intellectual property rights protection would deal a severe blow to its status as a global technology industry hub.

John Eastwood, co-chair of the Intellectual Property Rights Committee at the European Chamber of Commerce in Taipei, said the move appeared to be an attempt to get out of the dispute gracefully. “Otherwise no one will invest in IT in Taiwan anymore,” he said.

Wang Mei-hua, deputy director-general of the Taiwan Intellectual Property Office (Tipo), told the FT that Gigastorage had applied to have the compulsory li­cence ended, since it planned to shift manufacturing of its CDs overseas as of May 31. “We received a letter on Monday afternoon and informed Philips of this,” she said. Ms Wang did not say whether her office was preparing to revoke the compulsory licence. But she admitted that the government had come under pressure to limit the damage from the dispute to Taiwan’s image as a location for the technology industry.

EU officials are due to visit Taipei next month as part of their probe. The Commission is due to decide in July whether to seek a WTO ruling against Taiwan for allegedly violating global trade rules in the case.

Under WTO rules, member governments are allowed to hand out compulsory li­cences in a state of emergency. But Taiwan’s patent law also allows the government to award such licences in the case the patent owner and the potential licensee fail to reach an agreement with­in a reasonable timeframe. Philips has argued that Gigastorage’s licence only legalised the use of patents the company was al­ready infringing, and that Gigastorage is exporting most of the CDs, contrary to the requirement that production under compulsory licence should be for domestic use only.

European diplomats said the Commission could decide against taking the case to the WTO if Taiwan convinced it that its future attitude on compulsory licensing was more in line with global trade rules.

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