Consumer electronics giant Philips Electronics plans to cancel a technology transfer license with Taiwan's Ritek Ltd (
The commission ruling -- which also targeted Japan's Sony Corp and Taiyo Yuden Co -- said the three had violated Taiwan's fair trade law by acting jointly in CD-R patent licensing agreements and that such actions must end.
Philips, a Dutch company, licenses Ritek to produce recordable compact discs (CD-R) for use with personal computers and other electronic devices.
Although Ritek president Yeh Chwei-jing (
Taiwan's Fair Trade Commission fined Philips NT$8 million (US$235,000), ruling the company abused its dominant market position to prevent other firms from entering into technology licensing agreements with Taiwanese CD-R manufacturers.
The Commission also ruled that Philips is charging too high a fee for the technology transfer license, and that it collects fees as if it were the sole holder of CD-R patents. In fact, Sony and other companies also hold patents for CD-R technology.
"They want a royalty fee of ?6.5 per disc, but that's 20 to 30 percent of the selling price," said Echo Yu (喻家麟), spokesman for Ritek.
Company president Yeh explained that Taiwanese firms would like to see the licensing fee lowered to a level deemed fair by the entire industry.
"Competition in this industry is already so intense that we only take a 7 to 8 percent profit margin right now," said Yeh.
Further, Yeh said Taiwanese firms, like market leader Ritek and competitor CMC Magnetics (中環) currently account for 80 percent of worldwide CD-R production and sell product around the world. CMC and other Taiwanese firms also make compact disks with Philips' technology.
Yeh also said he hopes the decision does not impact his company's relationship with Philips, though that may be a foregone conclusion.
According to local media, Philips' decision to cancel the technology transfer license was in direct response to the fine imposed by the Fair Trade Commission.
For its part, Ritek plans to continue using Philips technology and the company hopes to conclude a new agreement with the Dutch company as soon as possible.
Ritek shares fell 5 percent to NT$70 yesterday on the Taiwan Stock Exchange, the fourth most actively traded shares on the market yesterday. Shares in CMC Magnetics also fell on news of the Philips technology license problems, shedding NT$2.1 to end at NT$35.1 on the day.
Philips is one of the world's biggest electronics companies and Europe's largest, with sales of 31.5 billion euros in 1999. It is a global leader in color television sets, lighting, electric shavers, color picture tubes for televisions and monitors, and one-chip TV products.
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