Commission closes investigation into patent pools and standardisation agreements

13 April 2006

Louise Banér

March 2006

The Commission has closed two investigations relating to technology pools and standardisation agreements following amendments of the relevant provisions by the parties to facilitate access to the technology. The investigations concerned Philips CD-Recordable Disc Licensing system and the European Telecoms Standardisation Institute’s (ETSI) standard-setting rules.

Philips CD-R Disc Licensing System

The inquiry was launched in 2003, following a complaint by FIPCOM, an association of European manufacturers of CD-Recordable discs. The complaint alleged that the terms and conditions of licensing of the CD-R technology violated the EU competition rules on restrictive business practices and abuse of a dominant position. Philips revised the programmes to ensure that all the necessary information concerning the licensed technology is made available and that the programmes are managed in a fair and non-discriminatory way.

Since 1996 Philips Electronics had offered European manufacturers a joint patent licence which included its own CD-R disc patents as well as those of Sony and Taiyo Yuden, a Japanese technology company. Philips committed to discontinue the joint licence programme in Europe with effect from 15 December 2005. In addition, Philips had, since 2001, offered an individual licence limited to its own CD-R patents. The most important changes in the new licensing agreement are:

  • making available on its website summary reports of independent experts regarding those Philips patents that are essential to produce CD-R discs;

  • adding the explicit obligation for Philips to address technical problems associated with the management of the CD-R standard;

  • updating the CD-R standard to clarify that discs that do not use Philips’ Multi Speed proprietary technology but rather alternative high speed recording technologies still qualify as CD-R discs.

Philips also reduced the level of royalty from 4.5 US cents to 2.5 US cents per disc.

The Commission also took the opportunity to announce its intention to “continue to closely monitor existing or new technology pools, in particular those that support or establish a de facto or a de jure industry standard in order to ensure that they comply with Community competition rules”.

ETSI standard setting rules

The Commission investigated ETSI’s standard setting rules as a result of concerns that these rules did not sufficiently protect against the risk of ‘patent ambush’ during ETSI standard-setting procedures. A patent ambush occurs where, during the development of a standard, a company intentionally conceals the fact that it has essential intellectual property rights (IPR) for that standard, and then declares and identifies these IPR only after the standard has been agreed. In this way, the company can gain control over the standard and often charges unreasonably high license fees. Even if the essential IPR claim is in itself valid, the company’s actions mean that the possibility of considering alternative technologies has been artificially removed, and that the competitive process has been distorted.

ETSI has now strengthened the requirement for early disclosure of those IPR which are essential for the implementation of a standard, minimising the risk that parties deliberately set up a patent ambush. In addition, ETSI has announced that it may adopt an ex ante licensing policy (i.e. where royalties are set or discussed before a standard is agreed). The Commission’s Guidelines on technology transfer agreements indicate that this type of licensing can be pro-competitive subject to certain safeguards.

Source: European Commission press releases of 9th February 2006 found at:

and 12th December 2005 found at: