1. SEPs and Antitrust Enforcement in Taiwan: The Challenges and Unresolved Issues
Recent Jurisprudence Related to SEPs in International Jurisdictions Ya-Lun Yen/Assistant Professor National Cheng Kung University, Taiwan 2017/11/10

2. Outline IP licensing and antitrust law in Taiwan.
The cases concerning Philips’ patent licensing.
TFTC’s latest decision on Qualcomm’s patent licensing.
The challenges and unresolved issues.
Conclusion. 2

3. IP Licensing and Antitrust Law in Taiwan
Article 45 of Taiwan Fair Trade Act (“TFTA”)
“No provision of this Act shall apply to any proper conduct in connection with the exercise of rights pursuant to the provisions of the Copyright Act, Trademark Act, Patent Act or other Intellectual property laws.”
How to interpret and define a “proper conduct” in connect with the exercise of intellectual property rights? 3

4. IP Licensing and Antitrust Law in Taiwan
Taiwan Fair Trade Commission(“TFTC”) Disposal Directions (Guidelines) on Technology Licensing Arrangements
Technology Licensing Arrangement referred to in the Guideline means any arrangement that involves the licensing of patents, know-how, or combination of the two.
Fundamental Principle：In its review of technology licensing arrangement cases, TFTC does not presume that a licensor, as a result of owning a patent or know-how, has market power within a relevant market. 4

5. IP Licensing and Antitrust Law in Taiwan
TFTC Disposal Directions (Guidelines) on Technology Licensing Arrangements
Steps for Review and Analysis
Whether the licensing arrangement, under Article 45 of TFTA, is a proper conduct in connection with the exercise of patent rights
Does such arrangement overstep the scope of proper exercise of of patent rights
Does such arrangement contravene the related legislative purpose of protecting invention and innovation? 5

6. IP Licensing and Antitrust Law in Taiwan
TFTC Disposal Directions (Guidelines) on Technology Licensing Arrangements
Steps for Review and Analysis
Possible or actual restraint of competition created by such arrangement in the relevant goods markets, technology markets, and innovation markets.
The reasonableness of the provisions of such arrangement.
The other factors considered by TFTC, such as the market power of the licensor with regard to the licensed technology. 6

7. IP Licensing and Antitrust Law in Taiwan
Articles of TFTA mostly resorted by TFTC as to Patent Licensing
Article 9 of TFTA
Monopolistic enterprises shall not engage in any one of the following conducts:
directly or indirectly prevent any other enterprises from competing by unfair means;
improperly set, maintain or change the price for goods or the remuneration for services;
make a trading counterpart give preferential treatment without justification; or
other abusive conducts by its market power. 7

8. IP Licensing and Antitrust Law in Taiwan
Articles of TFTA mostly resorted by TFTC as to Patent Licensing
Article 20 of TFTA
No enterprise shall engage in any of the following acts that is likely to restrain competition:
2.treating another enterprise discriminatively without justification;
5. imposing improper restrictions on its trading counterparts' business activity as part of the requirements for trade engagement. 8

9. IP Licensing and Antitrust Law in Taiwan
Articles of TFTA mostly resorted by TFTC as to Patent Licensing
Article 25 of TFTA
In addition to what is provided for in this Act, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to affect trading order. 9

10. The Cases concerning Philips’ CD-R Patent Licensing
CD-R Patent Licensing Arrangements in Taiwan by Philips, Sony, and Taiyo Yuden
Philips, Sony, and Taiyo Yuden are the holders of SEPs of de facto industry specification related to CD-R products, without FRAND commitment.
TFTC has made five decisions since The latest decision was made in
The continuing fight between Philips and TFTC has lasted for more than 16 years.
In TFTC’s second decision, TFTC recognized that the patent tying agreement and package license should be reviewed under the rule of reason. 10

11. The Cases concerning Philips’ CD-R Patent Licensing
CD-R Patent Licensing Arrangements in Taiwan by Philips, Sony, and Taiyo Yuden
The main issues in the administrative litigations:
Were the Orange book patents owned by Philips, Sony, and Taiyo Yuden complementary rather than competitive?
Did Philips, Sony, and Taiyo Yuden jointly have the dominant position in CD-R patent technology market by their joint patent licensing practices, and then improperly maintain the royalties? 11

12. The Cases concerning Philips’ CD-R Patent Licensing
CD-R Patent Licensing Arrangements in Taiwan by Philips, Sony, and Taiyo Yuden
The main issues in patent infringement litigations:
Shall the terms and provisions of the patent license agreement be void and invalid for their violation of prohibitions against a monopolistic enterprise’s abusing its market power in TFTA?
Did the SEP licensees be entitled to refuse to pay the royalties under the patent license agreement with justified patent misuse defenses?
How to determine the amount of the damages, reasonable royalties, or unjust enrichment acquired by the licensees in SEP infringement lawsuits ? 12

13. The Cases concerning Philips’ CD-R Patent Licensing
Philips’ unfair conduct of requiring the licensees to provide sales report and other information
TFTC determined that Philips engaged in unfair conduct and violated Article 24 (now 25)of TFTA.
Philips was considered not having monopolistic position in the technology market for producing CD-R discs.
Does Philips “individually” have the relatively dominant position, compared to the licensees, in CD-R technology market? 13

14. The Cases concerning Philips’ CD-R Patent Licensing
Philips’ unfair conduct of requiring the licensees to provide sales report and other information
Grant back provisions shall be reviewed under the rule of reason.
Did Taiwan Intellectual Property Court recognize the essential facility doctrine and consider that this doctrine shall be applied to intellectual property rights? 14

15. TFTC’s Decision on Qualcomm’s Patent Licensing
TFTC News Release on Oct. 11, 2017(Official decision has not been published)
Qualcomm violated subparagraph 1 of Article of TFTA for abusing its monopolistic status in the market of baseband chips that comply with CDMA, WCDMA and LTE mobile communications standards by:
refusing to license its standard-essential patents to other chipmakers and further requesting to enter into an agreement with unfair provisions,
adopting a “no licence, no chip” policy, and
entering into the provisions with offering rebates for exclusive dealing with specific enterprises. 15

16. TFTC’s Decision on Qualcomm’s Patent Licensing
TFTC News Release on Oct. 11, 2017(Official decision has not been published)
Qualcomm was in possession of a considerable number of standard essential patents on CDMA, WCDMA and LTE mobile communications standards. Qualcomm was also a monopolistic business in the CDMA, WCDMA and LTE mobile communications standard baseband chip market.
With above-mentioned overall business practices, Qualcomm achieved the purpose of pushing up the prices of baseband chips supplied by its competitors and reducing the interest of trading counterparts in purchasing from such competitors. 16

17. TFTC’s Decision on Qualcomm’s Patent Licensing
TFTC News Release on Oct. 11, 2017(Official decision has not been published)
TFTC demanded that Qualcomm cease applying terms and provisions in the contracts which had been entered into to
require competitors to provide sensitive information with regard to chip prices, customers, sales volumes, and product model numbers,
stop supplying chips to cell phone makers obtaining chips from suppliers without authorization to use Qualcomm’s patents, and
offer discounts to businesses accepting exclusive dealing terms. 17

18. TFTC’s Decision on Qualcomm’s Patent Licensing
TFTC News Release on Oct. 11, 2017(Official decision has not been published)
The FTC also demanded that
Qualcomm notify rival chipmakers and cell phone manufacturers in writing within 30 days after receiving this decision to renegotiate an amended version of the patent-licensing contract or a new contract;
Qualcomm negotiate in accordance with the principles of good faith and reciprocity; and
the negotiation shall include but not limit to the provisions which the other parties to the negotiation deem unfair based upon the decision. 18

19. TFTC’s Decision on Qualcomm’s Patent Licensing
TFTC News Release on Oct. 11, 2017(Official decision has not been published)
In addition, Qualcomm shall not restrict the other parties from resorting to any litigation or arbitration by an independent third party to solve disputes.
Qualcomm shall report to TFTC the results of negotiations every six months after receiving the decision as well as present the amended patent-licensing contracts or new contracts within 30 days after such completion. 19

20. TFTC’s Decision on Qualcomm’s Patent Licensing
TFTC News Release on Oct. 11, 2017(Official decision has not been published)
TFTC imposed a fine of NTD$23.4 billion (USD million) on Qualcomm, the largest amount since TFTC’s establishment, according to the “Regulations for Calculation of Administrative Fines for Serious Violations of Articles 9 and 15 of the Fair Trade Act”.
The violation lasted at least seven years.
The royalties that Qualcomm collected from businesses in Taiwan totaled around NT$400 billion and the baseband chips that Taiwanese enterprises purchased from Qualcomm amounted to US$30 billion. 20

21. The Challenges and Unresolved Issues
TFTC
Interpretation and Application of Article 45 of TFTA
Monopolistic Enterprises and Dominant Position
Does each SEP constitute one relevant market ? Is each holder of any SEP a monopolistic enterprise under Article 9 of TFTA? Shall other competitive standards be considered in defining the market?
The confusing “relatively dominant position” concept in Philips cases and its potential effect on Qualcomm case.
whether the SEP holder may be entitled to the injunctive relief against the implementer of the technical standard the SEPs are embedded on, after the patent pledge on the FRAND licensing was made. And if the answer is affirmative, under the consideration of the risk of hold-up and royalty-stacking, what situation where the injunctive relief was made is equitably justified under patent law? When the risk of reverse hold-upis recognized, how could the court decide if the injunctive relief is equitably justified?
Taiwan Supreme Court even evaded the critical issue about if the court should intervene or amend royalty rate by the opinion that this issue shall be governed by Dutch law under the patent license agreement in dispute. 21

22. The Challenges and Unresolved Issues
TFTC
Improper or Excessive Royalties?
In TFTC’s decision on Qualcomm patent licensing, TFTC did not invoke subparagraph 2 of Article of TFTA to determine if Qualcomm improperly set the royalty rate.
The debates about TFTC’s enforcement policy and how to determine royalties at issue are improper or excessive.
The lesson from Philips cases.
Could the implicit concerns about royalties in TFTC’s decision on Qualcomm‘s patent licensing be justified by TFTC in the courts?
whether the SEP holder may be entitled to the injunctive relief against the implementer of the technical standard the SEPs are embedded on, after the patent pledge on the FRAND licensing was made. And if the answer is affirmative, under the consideration of the risk of hold-up and royalty-stacking, what situation where the injunctive relief was made is equitably justified under patent law? When the risk of reverse hold-upis recognized, how could the court decide if the injunctive relief is equitably justified?
Taiwan Supreme Court even evaded the critical issue about if the court should intervene or amend royalty rate by the opinion that this issue shall be governed by Dutch law under the patent license agreement in dispute. 22

23. The Challenges and Unresolved Issues
TFTC
How could TFTC decide, in view of FRAND commitment, whether the holder of SEPs violates Article 9, 20, or 25 of TFTA upon exercise of SEPs through litigations or injunctions, or refusal of licensing SEPs?
Could TFTC order the holder of SEPs to compulsorily license SEPs under TFTC’s authority to demand for rectification of the conduct violating TFTA under Article 34 of TFTA?
Is it appropriate to apply Essential Facility Doctrine? 23

24. The Challenges and Unresolved Issues
The Courts
Judicial review for TFTC’s decisions on SEPs.
In the lawsuits between the holders of SEPs and implementers
FRAND Commitment
Could any contract, contract for third party beneficiary, or a preliminary contract be constituted by a FRAND commitment under Taiwan Civil Code? 24

25. The Challenges and Unresolved Issues
The Courts
In the lawsuits between the holders of SEPs and implementers
FRAND Commitment
What is the obligation of the holder of SEPs under FRAND commitment?
The obligation to negotiate under good faith?
The obligation to grant a non-exclusive license? 25

26. The Challenges and Unresolved Issues
The Courts
In the lawsuits between the holders of SEPs and implementers
FRAND Commitment
Could an implementer initiate an action to require the the holder of SEPs to enter into a patent license agreement under FRAND commitment, or claim the damages arising from violation of FRAND commitment? 26

27. The Challenges and Unresolved Issues
The Courts
In the lawsuits between the holders of SEPs and implementers
Could the implementer defend against the claims of the holder of SEPs making FRAND commitment in accordance with abuse of right and good faith principles in Article 148 of Taiwan Civil Code, or TFTA?
The interests gained by the holder of SEPs and society.
The losses suffered by implementers and society.
The influence of relevant TFTC’s decisions 27

28. The Challenges and Unresolved Issues
The Courts
In the lawsuits between the holders of SEPs and implementers
Calculation of damages under Article 97 of Taiwan Patent Act vs. Determination of reasonable royalties in view of FRAND commitment and antitrust law.
The application of unjust enrichment in Article 179 of Taiwan Civil Code?

29. Conclusion
TFTC is trying a new approach to find an appropriate framework for SEP issues, which may be challenging.
In Taiwan there are various unclarified issues concerning exercise of SEPs to be resolved by the courts and the courts need to take crucial responsibility of balancing antitrust law, intellectual property, and contract law.

30. Thank You For Your Attention