EU may go to WTO over Gigastorage's compulsory license

The EU said yesterday it could take a dispute with Taiwan over the manufacture of recordable compact discs to the WTO.

The 27-nation EU said Taiwan acted illegally by issuing licenses allowing a local producer to make the discs, for which the patent is owned by Royal Philips Electronics NV.

A European Commission report concluded that patent laws in Taiwan "are inconsistent with WTO rules on intellectual property" and gave it two months to reverse the compulsory license decisions.

EU Trade Commissioner Peter Mandelson said that Taiwan had abused the system of compulsory licensing.

When a government issues a compulsory license, a company can make a product without negotiating with the patent owner for permission to use their technology -- but under WTO rules, these cannot be exported.

Philips filed a complaint with EU trade regulators last year claiming Taiwanese authorities allowed local producers to make recordable compact discs (CD-Rs) for export that Philips said were covered by its exclusive patents.

Taiwan makes 80 percent of CD-Rs sold throughout the world and Philips had granted licenses to eight companies in Taiwan to make the discs.

However, Gigastorage Corp (國碩科技), which failed to get a license, applied to the authorities for a compulsory license, which was granted.

The license was terminated last June, but the EU said the cancelation was not made retroactive, "so the decisions still set a precedent."