Dutch see Orange Book differently; Philips prevails again

The relationship between IP and competition law is one of the hottest topics in IP law. It now seems that two respected European courts have come to different conclusions on the applicability of the "competition law defence" (although in the result, the decisions do not differ).

CD technology was developed many years ago jointly by Philips and Sony. The technical parameters were laid out in several different documents with various colours on the cover, including for CD-Rs in the so-called Orange Book. If you want to produce CD-Rs that are interoperable and saleable, you need to use the technology specified in the standard, and a license from Philips.

The German company SK Kassetten GmbH & Co. KG did not have a license (and never asked for one) and was sued by Philips. It argued that the patents were not infringed and if they were, it was entitled to a compulsory licence since Philips’ behaviour amounted to an abuse of its dominant position (in the CD-R market) in the sense of art. 82 of the European Treaty. In a decision of 6 May 2009 (the "Orange Book Standard" decision), the German Federal Court (BGH) held the patents infringed and accepted that there was a potential "competition law defence". It rejected an argument that the provisions of the Agreement on Trade Related Aspects of Intellectual Property (TRIPS) on compulsory licences prohibited the raising of the defence. However, to avail itself of a compulsory license, the defendant had to act like a "true licensee", namely by

• determining the reasonable licence fee objectively (ie, presumably based on common practice in the relevant industry or market intelligence);


• regularly rendering accounts; and


• paying, or at least depositing, (eg, into an escrow account) hypothetical licence fees.

Practitioners were quick to note that these requirements put the defendant in an almost impossible situation - to be sure that he could benefit from the license, he had to pay a royalty that was possibly too high, but once he paid, he would not get it back. Google BGH and Orange Boook Standard for some views.

The EPLAW blog just broke the news that the District Court The Hague decided on 17 March 2010 that SK Kassetten could not rely on the compulsory license by competition law defence (the court calls this the "FRAND-verweer"). If this IPKat understands correctly - and that is a big if, because his command of Dutch is extremely limited - the Hague Court argues that SK Kassetten never asked for a license, and this bars it from relying on the "FRAND-defence". SK Kassetten should have asked Philips for a license, and if Philips had refused, sued based on competition law. It could not just infringe and then, when it lost the argument on non-infringement, try to rely on the compulsory license defence. The Hague Court notes that it disagrees with the criteria laid down by the BGH for a compusory license based on competition law (see p. 16 of the decision). The Hague Court doesn't fail to note that even if the BGH criteria were applicable, SK Kassetten could not prevail, because it never paid Philips anything (and neither deposited any money into an escrow, presumably).

If readers with better command of Dutch have more insight, please post them in the comments, and if you have an English translation of the Dutch decision, please let the IPKat now.