Gigastorage Wins Ruling on U.S. Imports

The U.S. International Trade Commission (ITC) has made an initial ruling not to ban the sale of optical discs from Taiwan's Gigastorage Corp. in the American market, a ruling that has major implications for the island's optical-disc industry, say industry sources.

As a result, Taiwan manufacturers are expected to ask for lower licensing fees on CD-R (compact disc-recordable) products, and to gain more maneuvering room for bargaining with owners of related patents.

In the middle of last year the US Philips Corp., a subsidiary of Royal Philips Electronics of the Netherlands, filed a complaint with the ITC against 19 makers of optical discs, including Taiwan's Gigastorage and Princo Corp., as well as U.S.-based trading companies, for alleged infringement of Philips patents covering CD-R and CD-RW (compact disc-rewritable) technologies.

In its complaint, Philips asked the ITC to issue an order banning the import of all unlicensed discs into the U.S. so that the more than 70 manufacturers currently licensed by Philips would not be put at a competitive disadvantage.

Philips has stated that the recent ITC ruling was only an initial one, and that it will consider making an appeal.

When Gigastorage received word of the infringement complaint last year, it tried to reach a reconciliation with Philips but then decided to take legal steps when Philips insisted on banning the U.S. sale of the Taiwanese firm's discs.

Gigastorage has reported that it has not yet received the documents concerning the ITC ruling, but is sure that it won the case in part because it was heard in the fair, free, and open American market. The company feels, however, that it likely could not win a similar case in Europe.

The company has commented that local optical-disc makers will wait for a final ruling before renegotiating CD-R authorization fees with Philips. The expected lower fees will greatly add to the profitability of local manufacturers. Gigastorage says that it will be able to cut down on the fees, which today cost it about NT$200 million (US$5.88 million at NT$34:US$1) per year.

Some local disc makers are not happy with the ruling, which, they lament, will enable Gigastorage to ship its CD-R discs to the U.S. market without paying authorization fees. This, they moan, will be highly unfair to manufacturers who have paid the fees. They plan to ask Philips to reduce the fees they currently pay, or to eliminate them entirely.