Background Since 1990, many countries like United States, Japan and EU understand that intellectual properties create higher value added than tangible assets do so these countries respectively transformed their economic types to knowledge-based economy so as to boost economic growth and competitiveness. For example, Japan has legislated “Intellectual Property Basic Act” in 2002 and established “the Intellectual Property Strategy Headquarters” in 2003. United States legislated “Prioritizing Resources and Organization for Intellectual Property Act (PRO-IP Act)” in 2008. China also announced “National Intellectual Property Strategic Principles” in June, 2008. Following the above international tendency of protecting intellectual properties, Korea government has promoted intellectual property related policies and legislated related acts since 2000, such as “Technology Transfer Promotion Act” in 2000, policy of supporting patent disputes settlements and shortened the length of patent examination procedure in 2004. Besides, on June 27, 2006, the Presidential Advisory Council on Education, Science and Technology (PACEST) announced “Strategy for Intellectual Property System Constructing Plan.” However, these policies or acts mainly focus on the protection and application of patent rights, not relate to other kinds of intellectual property rights such as trademark right, copyright etc. Until 2008, in order to advance the ability of national competition, Lee Myung-bak government had established “Presidential Council on National Competitiveness (PCNC)”. For the vision of transforming to the intellectual property based economy, the PCNC held its 15th meeting on July 29, 2009. The meeting, held at the Blue House, was attended by the president, the Chairman, and members of the Council. One of the agenda of the meeting is strategies for an intellectual property (IP) powerhouse to realize a creative economy. Three goals of the strategies includes being IP Top 5 nations (U.S., Japan, EU, Korea and China), improving technology balance of payments deficits, and enhancing the scale of copyright industry. Next, this study will introduce details of Korea IP related strategies for our nation’s reference. Introduction Korea IP strategy consists of 3 aspects (creation and application, law and regulation, infrastructure) and 11 missions. And the contents of 11 missions cover the creation, protection and application of intellectual property rights (patent, copyright, trademark, plant variety etc), namely the whole life cycle of intellectual property rights. Through announcement of IP Strategies, Korea hopes to protect intellectual property rights from every aspect and makes IP as essential driving force for national economic growth. 1. Creation and Application Aspect First, although the quantity of intellectual property rights (IPRs) of Korea is rapidly increased in recent years, the quality of intellectual property rights is not increased equally. Also, most of researchers do not receive appropriate rewards from R&D institutions, and then it might reduce further innovation. As above reasons, Korea IP strategy indicated that the government will raise “invention capital” to exploit, buy researchers’ new ideas, and make those ideas get legal protection. That is, the government will set up non-practicing entities (NPEs) with private business. The NPEs would buy intellectual properties from R&D institutions or researchers, and then license to enterprises who have need. After licensing, NPEs will share royalty which obtained from enterprises (licensees) with researchers appropriately. Besides, in order to encourage university, public R&D institutions to set up “technology holdings”, Korea government had amended “Industry Education and Corporation of Industry, Academic and Research Promotion Act”. The amendments are loosening establishment conditions of technology holdings, such as minimum portion of investment in technology has been lowered from 50% to 30%, and broadening the scope of business of technology holdings. 2. Law and Regulation Aspect Secondly, in aspect of law and regulation, in addition to encouraging creation of good quality of IP, Korea considers that intellectual property rights are needed to be protected legally. Therefore, the IP strategy especially pointed out that Korea would follow the example of Japan to legislate their own “Intellectual Property Basic Act”. According to Korea “Intellectual Property Basic Act”, it should establish a “Presidential Council on Intellectual Property”. The main work of this Council is planning and promoting intellectual property related policies. There are 5 chapters and 41 articles in Korea “Intellectual Property Basic Act”. The Act like Korea IP strategy is divided into three parts, that is, “creation and application”, “protection” and “infrastructure”. In fact, the legislation of Korea “Intellectual Property Basic Act” embodies the policies of IP strategy. Further, according to Korea “Intellectual Property Basic Act”, “Presidential Council on Intellectual Property” is to integrate IP related affairs of the administrations into one action plan and promote it. Moreover, according to Korea “Intellectual Property Basic Act”, the government should make medium-term and long-term policies and basic plans for the promotion of intellectual properties every 5 years and adjusts policies and plans periodically as well. Through framing, enacting and adjusting policies and plans, Korea expects to create a well-living environment for the development of intellectual property. 3. Infrastructure Aspect Thirdly, even if good laws and regulations are already made and more government budget and human resource are invested, Korea is still deficient in well-prepared social infrastructure and leads to the situation that any promoting means of intellectual properties will be in vain. With regard to one of visions of Korea IP strategy,” being IP Top 5 power (U.S., Japan, EU, Korea and China)”, on the one hand, Korea domestic patent system should harmonize with international intellectual property regulations that includes loosening the conditions of application and renewal of patent and trademark. On the other hand, the procedure of patent application conforms to the international standard, that is, the written form of USA patent application becomes similar to the forms of world IP Top 3 power (U.S., Japan and EU) and member states of Paten Law Treaty (PLT). At the same time, Korea would join “Patent Prosecution Highway (PPH)” to enable Korea enterprises to acquire protection of patent rights around the world more rapidly. In addition, about the investigation of infringement of intellectual property rights, Korea IP strategy stated that it would strengthen control measures on nation border and broaden IP protection scope from only patent to trademark, copyright and geographical indications. Besides, Korea uses network technology to develop a 24-hour online monitoring system to track fakes and illegal copies. In addition to domestic IP protection, Korea enterprises may face IP infringement at overseas market, thus Korea government has provided supports for intellectual property rights disputes. For this sake, Korea choose overseas market such as Southeast Asia, China, and North America etc to establish “IP Desk” and “Copyright Center” for providing IP legal consultation, support of dispute-resolving expenses and information services for Korea enterprises. Korea IP strategy partially emphasizes on the copyright trading system As mentioned above, one of visions of Korea IP strategy is “enhancing the development of copyright industry”. It’s well-known that Korea culture industries like music, movie, TV, online game industries are vigorous in recent years. Those culture industries are closely connected to copyright, so development of copyright industry is set as priority policy of Korea. In order to enhance the development of Korea copyright industry, a well-trading environment or platform is necessary so as to make more copyrighted works to be exploited. Therefore, Korea Copyright Commission has developed “Integrated Copyright Number (ICN)” that is identification number for digital copyrighted work. Author or copyright owners register copyright related information on “Copyright Integrated Management System (CIMS)” which manages information of copyrighted works provided by the authors or copyright owners, and CIMS would give an ICN number for the copyrighted work, so that users could through the ICN get license easily on “Copyright License Management System (CLMS)” which makes transactions between licensors and licensees. By distributing ICN to copyrighted works, not only the licensee knows whom the copyright belongs to, but the CLMS would preserve license contracts to ensure legality of the licensee’s copyright. After copyright licensing, because of characteristic of digital and Internet, it makes illegal reproductions of copyrighted works easily and copyright owners are subject to significant damages. For this reason, Korea Ministry of Culture, Sports and Tourism (MCST) and Korea Intellectual property Office (KIPO) have respectively developed online intellectual property (copyright and trademark) monitoring system. The main purpose of these two systems is assisting copyright and trademark owners to protect their interests by collecting and analyzing infringement data, and then handing over these data to the judiciary. Conclusion Korea IP strategy has covered all types of intellectual properties clearly. The strategy does not emphasize only on patent, it also includes copyright, trademark etc. If Taiwan wants to transform the economic type to IP-based economy, like Korea, offering protection to other intellectual property rights should not be ignored, too. As Taiwan intends to promote cultural and creative industry and shows soft power of Taiwan around the world, the IP strategy of Taiwan should be planned more comprehensively in the future. In addition to protecting copyrights by laws and regulations, for cultural and creative industry, trading of copyrights is equally important. The remarkable part of Korea IP strategy is the construction of copyright online trading platform. Accordingly, Taiwan should establish our own copyright online trading platform combining copyright registration and source identification system, and seriously consider the feasibility of giving registered copyright legal effects. A well-trading platform integrating registration and source identification system might decrease risks during the process of licensing the copyright. At the same time, many infringements of copyrights are caused because of the nature of the modern network technology. In order to track illegal copies on the internet, Taiwan also should develop online monitoring system to help copyright owners to collect and preserve infringement evidences. In sum, a copyright trading system (including ICN and online intellectual property monitoring system) could reinforce soft power of Taiwan cultural and creative industry well.Mainland China changes domestic regulation for game consoles
In 2000, the General Office of the State Council of the People’s Republic of China issued “the Notice on Launching a Special Campaign against Illegal Electronic Game Rooms”(國務院辦公廳轉發文化部等部門關於開展電子遊戲經營場所專項治理意見的通知). From then on, Mainland China has strictly enforced prohibition on gaming consoles, however in December 21, 2013, “the State Council released the Comprehensive Plan for the China (Shanghai) Pilot Free Trade Zone, the State Council’s Decision to Temporarily Adjust Relevant Administrative Laws and State Council Regulated Special Administrative Measures for Approval or Access in the China (Shanghai) Pilot Free Trade Zone”(國務院關於在中國(上海)自由貿易試驗區內暫時調整有關行政法規和國務院文件規定的行政審批或者准入特別管理措施的決定). As a result of the thirteen year long prohibition on game consoles, the development of the game consoles market has been limited in Mainland China, while mobile phone and online games have dominated the video games market in the country. Mainland China’s lifting of the ban on game consoles will lead to a reshuffling of the gaming market, and is certainly worth a deeper look. This following article will review the evolution of the gaming regulatory policy in Mainland China over the recent years, and identifies the changes and problems that may arise during the deregulation process. The sale of game consoles has been prohibited in Mainland China since 2000 According to “The Notice on Launching a Special Campaign against Illegal Electronic Game Rooms” issued by General Office of the State Council in 2000, “companies and individuals were prohibited from the manufacture or sale of game consoles, as well as the production or sale of related accessories”. As a result, the mobile game consoles and the television game consoles both lost their legitimacy in the video game industry in Mainland China. The stated intent of the ban against video arcades was to protect the youth and ensure public order. And yet, in spite of potentially impacting youth in a similar manner, the online game sector has been listed as a key industry for development and has been strongly supported by the government. This has clearly contradicted the reason of banning the game consoles. Thus, the major console manufacturers, Sony, Microsoft, and Nintendo, have been trying in various ways to enter the Chinese market, and have called on the Mainland China government to open their domestic market for the sale of game consoles. Announcement of reopening the sale of game consoles in China (Shanghai) Free Trade Zone in 2013. After thirteen long years, the State Council issued the “the Comprehensive Plan for the China (Shanghai) Pilot Free Trade Zone”, permitting foreign enterprises to produce and sell game equipment in the Free Trade Zone. Five days later, Blockbuster that under Shanghai Media Group announced a cooperation with Microsoft in a joint venture company within the Free Trade Zone, claiming their main business as " design, development, production games, entertainment applications and derivative products; sales, licensing, marketing and production for third-party games and entertainment applications software; technical advice and services related to video games ". In December 21, 2013, “the State Council released the Comprehensive Plan for the China (Shanghai) Pilot Free Trade Zone, the State Council’s Decision to Temporarily Adjust Relevant Administrative Laws and State Council Regulated Special Administrative Measures for Approval or Access in the China (Shanghai) Pilot Free Trade Zone”, officially lifted the prohibition on game consoles in the Free Trade Zone, and also opened the gates to investors. Potential problems facing China’s game consoles market As the case study above describes, Microsoft chose to enter the Mainland China market through a joint venture, the main reason being that foreign investment in entities engaged in internet data operations is still prohibited in China (Shanghai) Free Trade Zone. Thus, Microsoft will need to rely heavily on Blockbuster for the data operation and set-top box business license, which was the main subject as the Internet service content provider. In addition, apart from the joint venture between Blockbuster and Microsoft, there are two other companies in the industry: Sony and Nintendo, which retain a large part of the game consoles market, but have not taken action at the moment. These two companies have a pivotal position in the game consoles industry, and therefore it is predicted they will likely follow the Blockbuster and Microsoft example to look for a license holder vendor as a way to enter the mainland China market. On the other hand, at the end of June 2014 the updated announcement regarding the China (Shanghai) Free Trade Zone “negative list”, still clearly stated that foreign enterprises in the Free Trade Zone are “prohibited from direct or indirect participation in online game operations and services”. Due to the trend among game consoles towards online connectivity, the classification of related games as online games, and prohibition of foreign enterprises from entering this space, domestic game developers have enjoyed a safe monopoly over the industry in Mainland China. But if the industry is not restricted under the scope of foreign operation of online games, and foreign enterprises may be allowed involvement in the management of their operations directly or indirectly, “fully localized” online game industry in Mainland China may be challenged in a noticeable way. In addition, although Mainland China has begun to loosen control over game consoles, the publication of electronic publications licensed by a foreign copyright owner (including online gaming works) will be determined under the General Administration of Press and Publication (新聞出版廣電總局). An enterprise who wishes to enter the Mainland China market has to create content which is able to pass a content review, at the same time maintaining the original integrity of the game. Moreover, consumers in Mainland China have long been accustomed to "cheap" or "free" Internet games, so are they going to change their behavior and be willing to pay for their games? These are big obstacles to be overcome by the industry.Discussion on the Formation of Taiwan’s Network of Intellectual Property Collaboration System in light of Japan’s Experience
Background Taiwan industries have been facing an increasing pressure from the competitive global market. To assist the Taiwan industries, the Government has approved the “National Intellectual Property Strategy Guideline” (the “Guideline”) on 17 October 2012. The Guideline stipulates six major strategies and twenty-seven relevant enforcement criteria in relation to intellectual property (“IP”). The six major strategies are as follows: (a) creation and utilization of high-value patents; (b) enforcing cultural integrity; (c) creation of high agricultural value; (d) support free flow of IP for academics; (e) support system of IP trade flows and protection; and (f) develop highly qualified personnel in IP. Under the “innovation of high-value patents” strategy, the relevant enforcement criterion, being “establishing academia-industry collaborative system for IP management”, is to support the Taiwan’s current and future technology development program on R&D planning, IP management and technology commercialization. In other words, this enforcement criterion can greatly improve the ambiguity and inadequacy of Taiwan’s research infrastructure which have caused inefficient research operation. Furthermore, this enforcement criterion can also improve network collaboration between organizations on IP management, allowing more efficient process for managing IP and thus achieving the purpose of “creation and utilization of high-value patent”. In light of the above, this article studies Japan’s practice on integrating the IP network resources and improving their IP management under the University Network IP Advisors Program (“IP Advisors Program”). University Network IP Advisors Framework Outline A. Policy background, goals and methodology National Center for Industrial Property Information and Training (“INPIT”) initiated the IP Advisors Program and commissioned Japan Institute for Promoting Invention and Innovation (“JIII”) to implement and carry out the new policy in year 2011. Prior to the implementation of the new policy by JIII, INPIT has assisted with establishing proper IP management systems for more than 60 Japanese universities by dispatching IP experts and advisors (“IP Advisors”) to each of the universities during 2002 to March 2011. After the implementation of the initial policy, review has suggested that by expanding the network collaboration, such as establishing intervarsity IP information sharing system within their university networks, the universities can fully aware of and identify technologies that were created by them and are beneficial to the industrial sector. In addition, expanding the network collaboration can also help the universities to quickly develop mechanisms that will enable them properly protect and utilize their acquired IP rights. Accordingly, after 2011, the initial policy has expanded its scope and became the current IP Advisors Program. Japan is expected to improve its nation’s ability to innovate and create new technologies. To attain this goal, Japan has identified that the basis for industry-academia-government R&D consortiums is through obtaining information on universities’ and other academic organizations’ research technologies and IP so that Japan can appropriately place these universities in the appropriate wide-area network. This will allow the universities within the wide-area network to establish IP management policy to properly protect and utilize their IP rights. The current IP Advisors Program is conducted through application from the universities in established wide-area network to JIII. Upon review of the application, JIII will then dispatch the IP Advisor to the applicant university of that wide-area network. IP Advisors not only can provide solutions to general IP related problems, they can also provide professional advice and service on how to establish and operate IP management system for all the universities within the wide-area network. B. IP advisors’ role In principle, IP Advisors are stationed to the Administrative School or Major Supporting School within the wide-area network. IP Advisors can be dispatched to other member schools (“Member Schools”) or provide telephone inquiry service by answering IP related questions. In other words, IP Advisors are not stationed in any Member Schools to manage their IP management affairs, rather, IP Advisors advise or instruct the IP managers of the Member Schools on how to establish and utilize IP management system based on the Member School’s infrastructure. The contents of IP Advisors roles listed are as follows: (a) Assist with activities within the wide-area network. 1. assist with establishing information sharing system between universities within the wide-area network; 2. assist with solving region-based or technology-based IP problems; 3. provide inquiry service for planning activities within wide-area network; and 4. provide inquiry service on other wide-area networks activities planning. (b) Provide services for Member Schools (Type 1) with undeveloped IP management system. 1. investigate or analyze the available IP management system in the Member Schools; 2. assist with drafting a plan to establish IP management system (through an assisting role) and provide instructions or advices accordingly; 3. direct personnel training (i.e. provide education on invention evaluation, assessment on applying for patent and contracts); 4. advocate different regimes of IP; and 5. collect relevant information on new developing technologies. (c) Provide services for Member Schools (Type 1) with developed IP management system 1. investigate or analyze the available IP management system in the Member Schools; 2. provide advices or instructions on the application of IP management department; 3. provide advices or instructions for solving IP management problems; 4. direct personnel training (i.e. provide education on invention evaluation, assessment on applying for patent and contracts); 5. advocate different regimes of IP; and 6. gather relevant information on new developing technologies. (d) Provide services for Member Schools (Type 2) 1.Share and exchange information through network conference. C. Recruitment process and criteria JIII adopts an open recruitment process without a set number of allocated IP Advisor positions. Working location is based in Member Schools of wide-area network in Japan. In principle, IP Advisors are stationed in Administrative Schools or Major Supporting Schools within the wide-area network and can only provide telephone inquiry service or temporary assignment for assistance to the Member Schools (Type 1). However, it is noted that IP Advisors do not belong to any specific university within the wide-area network, they are employed by JIII under an exclusive contract. Based on 2013 example, IP Advisors’ employment contract started from 1 April 2013 and expires on 31 March 2014. IP Advisors’ salary and travelling expenses are paid by JIII. However, expenses for Members School (Type 1) establishing a working environment and any other disbursements should be paid by the Member School (Type 1). Furthermore, under the implementation of the current policy with respect to IP Advisors who are unable to comply with the new criteria, previous contract is considered as a non-periodical contract for the IP Advisors to continue to station in the university. However, if IP Advisor is stationed in a specific university, it must be limited to a maximum of 3 years. Due to the IP Advisors’ work, they must comply with the privacy law and keep any obtained information confidential. D. IP advisors’ qualification 1. Require a high level of professional knowledge on IP management system IP Advisor candidates must have relevant experience working in the industry with IP management system department, operation planning department, R&D department (collectively refer as “IP Management Related Departments”). 2. Have relevant experience in directing trainings in IP Management Related Departments IP Advisor candidates must have the ability to train personnel in IP Management. 3. Can provide IP strategies based on the demands. IP Advisor candidates must have the ability to plan and utilize IP strategies to achieve optimal outcomes in R&D base on the circumstances and needs of different universities. 4. Have referral from the supervisors. IP Advisor candidates who are currently employed must be able to obtain a referral from their current positions’ supervisor, IP manager or personnel from higher up. IP Advisor candidates who are current unemployed must be able to obtain a referral from their previous employment. E. IP advisors’ selection process Based on JIII’s “University Network IP Advisors Adopted Standards” (“Adopted Standards”), IP Advisors are selected first through written application followed by interview. After a comprehensive assessment, all qualified candidates will be compared based on their compatibility of the essential criteria and other non-essential criteria, and finally selecting the most suitable candidate for the wide-area network. F. Application criteria for IP advisors services 1.Common requirements for Member Schools of wide-area network (a) must be an university or educational organization pursuant to the School Education Act (No. 26 of 1947) and must be able to conduct research and have set number of entry students and graduates per year;and (b) university must have developed IP related technology or design. 2. Criteria for wide-area network (a) Must have minimum of 3 and maximum of 8 Member Schools (Type 1) and 10 or less Member Schools (Type 2) combined, and have Member School (Type 1) entering wide-area network; (b) Must clearly state the nature of network as region-based or technology-based; (c) With Administrative School as base, the network must have collaborative system to plan network events; (d) Administrative School must be able to propose and carry out network events which can benefit Member Schools (Type 1) and the society through annual business plan. (e) Must be capable to provide indirect assistance to IP Advisors who are limited by time and region such that there is a proper environment to conduct wide-area network events. 3. Entry requirement for Member Schools (Type 1) (a) Must include in the university’s policy that they will become a Member School (Type 1) in the network and provide assistance to IP Advisors accordingly; (b) IP management and IP utilization system must be clearly implemented; (c) must clearly state the scope of responsibility in relation to the collaboration with the Administration School; (d) Propose and carry out an annual business plan which can improve IP management and utilization system to a certain level on their own; and (e) Has the facility to allow IP Advisors to provide assistance and service. 4. Entry requirement for Member Schools (Type 2) (a) Must include in the university’s policy that they will become a Member School (Type 2); (b) Same as paragraph F(3)(b) in this article; and (c) Same as paragraph F(3)(c) in this article. G. Current status quo The original aim was to establish the initial IP Advisors Program to assist with university’s IP management system by dispatching IP Advisors to 60 and more universities from 2002 to March 2011. The current wide-area university network IP Advisors Program started on April 2011. Since then, JIII has dispatched IP Advisors to 8 wide-area networks. In addition, IP Advisors have also been dispatched to wide-area network with art and design colleges/universities. During year 2011, IP Advisors has achieved and completed several IP management policies as follows: 7 IP policies, 3 academia-industry collaboration policies, 2 conflicting interest policies and 2 collaborative research policies etc. Recommendation This article is based on a legal perspective view point, taking Japan’s IP Advisors Program as a reference to provide the following recommendations on the topic of network for academia-industry collaboration in Taiwan. A. Separate levels of collaboration base on needs Using Japan’s policy as an example, universities within the wide-area network require different content of services tailored to each university individually, and the universities can be categorized into two types of member schools based to the content of services. Accordingly, it is recommended that the Government should consider a similar approach to the Japan’s policy when establishing IP management alliance and forming network of IP management system. For instance, design different levels of content and collaboration, and thus expand collaboration targets to gradually include major legal research institute, technology transfer centre for universities, and IP services in northern, center and southern area of Taiwan. This will allow collaboration of these organizations to coordinate IP programs such as IP northern, application and utilization with ease. B. Emphasis on the idea of establishing and maintaining IP basic facilities Based on Japan’s past experience, it is recommended that before expanding IP Advisors related policy to solve regional IP problems, universities must first be assisted to improve their own IP management system, which has taken Japan almost 10 years to improve their universities’ IP management system. From the current IP management system policy, it can be observed that the establishment of IP management system has a certain relevant importance. Furthermore, there is an emphasis on IP Advisors’ experience in training IP managers. Accordingly, it is recommended that the Government in future planning of network IP collaborate system should set short term and long term goal flexibly, such that the basic IP facilities within the members of the network can develop continuously. For example, short term goal for a legal research institute can be growing to a certain size for it to adjust or implement IP related policies. As for longer term goal, it can be a requirement to set up a unit or department to operate and manage IP. C. Expanding the definition of ‘Networks” Taiwan and Japan are high populated country on an island with limited land. Thus, if Taiwan and Japan insist on maintaining the geographic position for networking concept and adopting such concept on the regional economics for cluster effects, then it is difficult for Taiwan and Japan to compete with American Silicon Valley or other overseas universities. In light of the above, on establishing network of IP collaborative system, the Government should take reference from Japan’s practice in 2012 and combine same industry such as medicine industry or art industry in the definition of network. This will accelerate the integration of IP experience, information, and operation management capability within the network of same industry. Conclusion In conclusion, in order to establish academia-industry IP collaboration system and efficiently improve Taiwan’s IP management system in research organizations, first must focus on various policies tailored for different levels of collaboration so that it can be integrated and expand the integration of IP resources such that there is a good foundation to develop IP basic facilities. Following the establishment of good IP foundation, it can then be further develop to more complex IP programs such as IP landscape, planning and strategizing etc.Antitrust Issue of Reasonable Royalty and Prohibition of Excessive Pricing in Taiwan
Antitrust Issue of Reasonable Royalty and Prohibition of Excessive Pricing in Taiwan A proposed antitrust framework to determine a reasonable royalty I. INTRODUCTION “Can, and should antitrust laws and authorities step in market prices?” - It has long been a controversial antitrust issue, especially when an antitrust case is involved with allegedly unlawful monopolization (or called abuse of monopoly in some countries), Intellectual Property (IP) rights (IPRs), reasonable royalties, and the complex and fast-changing technologies behind. It thus constitutes the tricky and challenging antitrust issue of reasonable royalty - “if a monopolistic firm is charging reasonable royalties or abusing its monopoly power?” Since the goals and regimes of antitrust are very different between Asia, the United States (the U.S.), and Europe, there are consequently various ways to deal with such issue. A. China and its Per-Se Violation of Excessive Pricing Several countries in East Asia aim to protect fair competition and social public interests via antitrust laws, including some other non-competition-based goals. China, Japan, Korea and Taiwan’s goals of antitrust all include protection of fair competition. China also articulates its goals to maintain public interests and promote socialist market economy. Japan also aims to promote the employment rate and the level of national income which are not competition-based goals. Furthermore, South Korea expresses its antitrust goal to achieve balanced economic development which is somehow tricky to judge. As a result of the concepts of fairness and non-competition interests, the antitrust issue of reasonable royalty can possibly lead to the determination of unfairly high prices and thus constitutes an unlawful per se violation of excessive pricing in East Asia. Take China as an example, China explicitly articulates the prohibition of charging unfairly high prices as a firm in dominant position. Moreover, China has further stepped in determining “appropriate royalties” supposedly charged by licensors and has demanded foreign firms in China to charge lower royalty rates. In Huawei v. InterDigital Technology Corporation (IDC), the court ruled that IDC charged Chinese firms unfairly high royalties and further held that the royalty rates of the Standard Essential Patents (SEPs) charged by IDC shall not exceed 0.019%. In the Qualcomm case in China, National Development and Reform Commission of China ruled that Qualcomm was charging unfairly high prices and demanded it to lower its royalty base. Additionally, China’s Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights published by the Ministry of Commerce of the People's Republic of China (MOFCOM) in March of 2017 were passed in the end of 2018. While already waiting to be formally executed, these Guidelines had received comments regarding reasonable royalties – especially the antitrust violation of licensing IPRs at unfairly high prices with 5 listed factors to consider whether there is abuse of dominant position. By pointing out the dangers of regulating price following with potential harms to competition, one of the comments encourages the Guidelines to have the relevant factors in terms of determining unfairly high prices, such as the prices of comparable licenses instead of any other irrelevant indicators. B. European Commission (EC) and its Per-Se Violation of Excessive Pricing While embracing free market economy and achieving social and political goals at the same time, EC prohibits unfairly high prices as unlawful per se by articulating “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions” as abuse of market dominance. The test to it started from the case United Brands (1978) which stipulates the difference between cost and price. As the time came to the late 2000s, EC once said that “it takes no position on what a reasonable royalty is” in 2013 but later stated its option to act directly against excessive prices in 2016. In 2017, the Copyright and Communication Consulting Agency/Latvian Authors Association (the AKKA/LAA case) was brought to the court for charging excessive fees for its exclusive right to license. According to Article 267(a) of the Treaty on the Functioning of the European Union, the Court of Justice of the European Union (CJEU) shall have jurisdiction to give preliminary rulings concerning the interpretation of the Treaties. Given the questions referred to the CJEU in the AKKA/LAA case, the concept of excessive pricing therefore had the chance to be clarified further.  Three important principles established in this case are: (1) comparing the price at issue between the prices charged by other appropriate and sufficient comparators; (2) there is no threshold of what a royalty rate must be regarded as appreciably high, but a difference between rates must be both significant and persistent to be appreciable; (3) an analysis of fairness justification provided by the alleged dominant firm must be conducted. The AKKA/LAA case reestablished and reaffirmed EC’s resolve to enforce prohibition of excessive pricing. As for the recent times, the Danish Competition Council found that the Swedish pharmaceutical distributor - CD Pharma had abused its dominant position by charging excessive prices for Syntocinon, ruling the price increase of 2000% unjustified. The appeal against this decision is now pending. Many more excessive pricing cases are still ongoing within EU jurisdictions. C. The U.S. and its Hands-Off Approach towards Pricing U.S., on the other hand, never did and does not prohibit monopoly or excessive pricing, and has been warning the great dangers and potential harms to competition resulting from regulating price. The long-established principle of not regulating price, however, was shaken by U.S. Federal Trade Commission (FTC)’s complaint against Qualcomm for conducting unfair methods of competition in 2017. U.S. FTC filed a complaint against Qualcomm in 2017, alleging Qualcomm violating the Federal Trade Commission Act.According to the complaint, customers accepted elevated royalties that a court would not determine fair and reasonable due to Qualcomm’s unlawful maintenance of monopoly. However, the complaint fails to explain what a reasonable royalty is and why Qualcomm charges more than it is supposed to be charging. Furthermore, the dissenting statement of this case states that the theory adopted by FTC required proof of Qualcomm charging unfairly high royalties where there was failure of proving reasonable royalty baseline in the case. In January of 2019, this case finally kicked off in a California courtroom and the outcome of it will definitely have tremendous impacts on every stakeholder. Later in May 2019, the United States District Court for the Northern District of California found that Qualcomm violated the FTC Act. The case is still ongoing. D. Taiwan and its Unclear Attitude towards the Antitrust Issue of Reasonable Royalty So, where does Taiwan stand between prohibition of excessive pricing and the hands-off approach in the U.S.? In Taiwan, improperly setting, maintaining, or changing the price for goods or the remuneration for services as a monopolistic enterprise has long been unlawful per se since Taiwan’s Fair Trade Act (FTA) was enacted in 1991. This unlawful per se violation is in fact Taiwan’s prohibition of excessive pricing. However, the attitudes of Taiwan Fair Trade Commission (TFTC) and the courts in Taiwan towards the antitrust issue of reasonable royalty can be switching. They have avoided the issue, left the issue for private contracting, resorted to Patent Act, and determined royalties for the involving parties. Antitrust cases involving the issue of reasonable royalty can be a matter of billion-dollar fines, tremendous costs of litigation, negative impacts on innovation and competition, and harms to consumers. Such important issue can no longer be neglected by Taiwan anymore. By focusing on the antitrust issue of reasonable royalty in Taiwan, this paper will begin with the past attitude and the current antitrust framework of reasonable royalty in Taiwan. Further, because Taiwan has been looking up to the U.S. and its patent law in terms of calculating reasonable royalty in patent infringement cases; this paper will then turn to the reasonable royalty approach in Taiwan and the U.S. respectively. Even though this paper does not support prohibition of excessive pricing, we hope the antitrust issue of reasonable royalty in any excessive pricing case in Taiwan will be properly and carefully dealt with. Therefore, based on the proposed methodologies in a 2016 paper, the core of this paper will be proposing a framework for Taiwan in order to give clearer directions on how to face the antitrust issue of reasonable royalty along with the potential violation of Article 9 of FTA. II. THE PAST ATTITUDE AND THE CURRENT ANTITRUST FRAMEWORK OF REASONABLE ROYALTY IN TAIWAN A. The RCA, Catrick, and Microsoft case - 1995 ~ 2003 TFTC’s attitude towards the antitrust issue of reasonable royalty had long been unclear. In TFTC v. Radio of Corporation of America (RCA)(1995), RCA settled with TFTC for the accusation of charging improper royalties.In TFTC v. Microsoft (2002-2003), Microsoft settled with TFTC after 10 months being accused of conducting excessive pricing.  However, the details of both settlements were never published. In the Catrick case (1998), a U.S. firm named Catrick was accused of improperly charging royalties. TFTC attempted to resort to Patent Act but Patent Act at that time was silent on calculation of royalties. To play safe, TFTC did not interpret FTA or determine a reasonable royalty. Instead, TFTC left the issue to be solved under the principle of freedom of contract and closed the investigation. B. The CD-R Patent Pool Case – 2001~2015 1. Summary of the case Even being given 15 years of time, the antitrust issue of reasonable royalty still remained unsolved in the CD-R Patent Pool case (2001-2015). Upon the investigation from 1999, TFTC found that Philips Electronics NV (Philips) and other two companies had violated Article 10 of FTA with their unlawful concerted action and abuse of dominance in 2001. Here is the background: The CD-R manufactures in Taiwan accounted for 80% of the global CD-R manufacturing output when the time the CD-R technologies were a worldwide industrial revolution. The price of CD-R was originally at around $60 per piece in 1990. It later went down to $0.20 per piece in 2000. However, the three enterprises in the case kept refusing to change the formula for calculating the license fee. Thus, the pricing issue here was that if the three monopolistic enterprises improperly maintained the formula for calculating the CD-R license fee by joint licensing and refusing to change the license fee even though the market conditions had changed drastically at that time. After a series of appeals and retrials, TFTC again ruled that Philips violated Section 2 of Article 10 of FTA by abusing its dominant position and improperly maintaining the price for its jointly licensed technologies in 2015. To everyone’s disappointment, TFTC again left the determination of reasonable royalty unsolved. 2. Fights over reasonable royalty between courts and TFTC The tricky thing is, administrative courts, TFTC, Intellectual Property Court of Taiwan (IP Court of Taiwan) held totally different positions in the CD-R case in terms of the antitrust pricing issue: a. Taipei High Administrative Court (2003)  The court reasoned that the license fees should be determined by competition and cost structure on principle. As a result, the determinants to reasonable royalties would be supply and demand in the market. b. TFTC Decision No.095045 (2006)  TFTC did not hold that the defendants’ pricing practice in violation of FTA. However, it stated its position in stepping in royalties - “Business value of patents varies due to maturity of technologies and market development. Therefore, patent holders should consider prices of final products, value of patents, and contributions made by licensees while determining reasonable royalties… It is inappropriate for the antitrust authority in Taiwan to step in royalties unless there is indication of illegal monopolization or cartel. “ c. Intellectual Property Court Appeal Case No.14 (2008)  IP Court of Taiwan incorporated the concept of fairness in its decision by saying – “courts could only adjust the royalty rates in consideration of fairness towards both parties and other relevant factors in the contract.” Further, the court also said that it was not within TFTC’s jurisdiction to determine the reasonableness of the license fee charged by Philips. d. TFTC Decision No. 098156 (2009) By revealing the prices of CD-R output, shipment of CD-R, change of market conditions within 10 years, and the 60 times higher royalty revenues earned by Philips, Sony and Taiyo Yuden, TFTC found that the profits earned by the three defendants were beyond expectation and estimation. In conclusion, TFTC again held in its 2009 decision that the three defendants violated FTA by not giving opportunities to negotiate over the CD-R license fee upon the easily perceived market changes. e. Supreme Court of Taiwan, Case No.883 (2012)  After the long fights between courts and TFTC for 10 years, Sony and Taiyo Yuden had stopped fighting and their cases were affirmed in 2011. As for Philips, they enjoyed a huge turning point in 2012 because the Supreme Court of Taiwan abolished IP Court of Taiwan’s 2008 verdict and ruled that the governing laws of the contracts between the involving parties were Dutch laws. f. TFTC Decision No. 104027 (2015) TFTC did not get defeated and reached another decision against Philips in 2015. In the reasoning, TFTC first clarified that market prices should be determined by competition and cost structure. Then it claimed to still have the role to rule that Philips had been improperly maintaining the license fee of CD-R through abuse of dominance, refusals to renegotiate and earning excessive profits. To everyone’s disappointment, TFTC still left the determination of reasonable royalty unsolved. C. TFTC v. Qualcomm Incorporated (Qualcomm) (2015 - 2018) In 2017, TFTC ruled that Qualcomm violated Article 9(1) of FTA by refusing to license, imposing no license no chips policy, and conducting exclusive dealing. As for the pricing issue in this case, it was argued if the license fees charged by Qualcomm were unreasonably high and if the fees should be based on value of patents instead of net prices of manufactured phones. TFTC did point out the pricing issue in its reasoning but did not say much further. Instead, TFTC commented in the decision that Qualcomm had been enjoying excessive profits and stated that license fee was a matter of freedom of contract and negotiation. After a series of fights between TFTC and Qualcomm, both parties agreed to settle in August 2018. The Administrative Decision No. 106094 issued by TFTC was vacated with the replacement of the settlement which Qualcomm agreed to invest hundreds of millions in Taiwan and on other matters. D. The Current Antitrust Framework of Reasonable Royalty in Taiwan The current antitrust framework of reasonable royalty in Taiwan in this paper is based on the latest version of Fair Trade Act of Taiwan which was amended in 2017 and the latest version of IP Guidelines of Taiwan which was amended in 2016. There are three main steps in the current antitrust framework to deal with the reasonable royalty issue that suspiciously violates FTA in Taiwan. 1. Proper conducts pursuant to Intellectual Property Laws in Taiwan First, and most importantly, Article 45 of FTA excludes the application of FTA to all “proper conducts” pursuant to all IP Laws in Taiwan where TFTC does not give quite clear explanation of. The reason behind such exclusion stated in the legislative rationale of Article 45 of FTA is problematic - “Copyrights, Trademarks, and Patents are monopoly rights endowed by IP laws. Therefore, FTA shall not apply to them by nature.”  2. Guidelines on Technology Licensing Arrangements (IP Guidelines of Taiwan) Secondly, TFTC shall turn to review if IP Guidelines of Taiwan apply to any licensing practice in the case when it sees Article 45 of FTA not applicable. IP Guidelines of Taiwan articulates a correct and fundamental principle while reviewing a technology licensing agreement – “TFTC does not presume market power resulted from owning a patent or know-how.” Further, IP Guidelines of Taiwan do not articulate reasonable royalty or excessive pricing. Instead, the Guidelines make clear of the allowed and prohibited calculation methods for royalties. By recognizing the ease of calculation as efficiency, IP Guidelines of Taiwan basically allows the end product approach and the net sales approach to be applied in a technology licensing agreement as long as the licensed technology was indeed used by the licensee. Notwithstanding, TFTC still has the power to find an antitrust violation upon finding of improper matters even if a licensor complies with Section C of Article 5 of IP Guidelines of Taiwan.  3. Prohibited monopolistic conducts When neither Article 45 of FTA nor IP Guidelines of Taiwan applies to the case, the last step TFTC shall take towards reasonable royalty issue is to review if Section 2 of Article 9 of FTA applies - ” Monopolistic enterprises shall not engage in improperly setting, maintaining or changing the price for goods or the remuneration for services.”  Basically, it is the prohibition of excessive pricing in Taiwan. To be noticed, Article 9 of FTA can only be applied when there is one or more monopolistic enterprises involved. 4. Some issues under the current antitrust framework of reasonable royalty in Taiwan a. Proper conducts pursuant to all IP laws in Taiwan. Article 45 of FTA excludes the application of FTA to what so called “proper IP conducts.” Such exclusion is based on the idea that IPRs are monopoly rights – which is problematic. The fact is - IPRs are exclusive rights instead of monopoly rights. IPRs do not necessarily confer monopoly power or induce more anticompetitive behaviors than other types of property. Moreover, exercising an IPR can be engaging in improper market conducts that lessens competition. In other words, what should be kept in mind is that a proper IP conduct may still possibly constitute an antitrust violation. b. The maybe-violation in IP Guidelines of Taiwan. IP Guidelines of Taiwan are basically friendly towards the end product and the net sales approaches for calculating royalties. However, Article 5 of the Guidelines still gives TFTC the power to find a “maybe” antitrust violation upon any improper matters. Such maybe violation makes the protection under IP Guidelines shaky and even not that useful. c. No such thing as excessive profit. One of the legislative reasons behind the prohibition of excessive pricing in Taiwan is that - “when a firm does not price its products based on reflection of the costs but intends to gain exorbitant profits, such improper pricing conduct would be the most effective way to exclude competition.”  Firstly, there is no such thing as an excessive or exorbitant profit in a free market economy when a price is determined by supply and demand which results in profits you earn accordingly. Secondly, instead of the profits, it should be the price or the pricing practice to be evaluated due to the purpose of excessive pricing violation. d. Missing harms to competition. Most important of all in any excessive pricing case – where are the harms to competition? It should be clear that unjustified profits are not what antitrust laws aim to punish but the anticompetitive market conducts that harm competition. Which is to say – if a monopolistic enterprise has been charging excessive prices through abuse of monopoly that generates harms to competition? With the ultimate goal of protecting the overall competition and consumers, there must be potential or actual harms to competition proven in any excessive pricing case. Such as higher prices, lower outputs, exclusion of competition, entry barriers, negative impact on innovation, or so. E. The Reasonable Royalty Approach under the Patent Act in Taiwan 1. Damages as reasonable royalty Article 97(1) of Patent Act of Taiwan lists three approaches for calculating damages in any event of patent infringement. One of the approaches is the reasonable royalty approach. The so-called reasonable royalty is the royalty the licensee would have paid if there had been a negotiation instead of an infringement. In practical, any profit earned by the licensee from the infringement is excluded from the damages while adopting such approach. Since the infringing licensee saved the costs of negotiation and the licensor spent extra costs on patent infringement litigation, it is also recognized that damages calculated by adopting the reasonable royalty approach can be more than the royalty the licensee would have paid. 2. Determinants and principles in a hypothetical negotiation over royalty After all, the reasonable royalty approach assumes a hypothetical negotiation over royalty between the licensee and licensor. There are still controversies over the determinants and principles to be applied while adopting such approach. Various considerations would possibly lead to drastically different reasonable royalties just like the NT$10 million and NT$1 billion damages in the Philips v. Gigastorage case.  Koninklijke Philips NV (Philips) brought a patent infringement lawsuit against Gigastorage Corporation (Gigastorage, a Taiwan-based manufacturer) at the IP Court of Taiwan in 2014, alleging that Gigastorage had been infringing their Taiwanese patent from 2000 through 2015 by manufacturing and selling DVD related products. The pricing issue here is how to calculate the damages and compensation of unauthorized utilization of the patent involved where the calculation methods and considerations would make big differences. IP Court of Taiwan awarded NT$10.5 million as damages based on reasonable royalty approach in the first trial. However, the same court of different judges later ruled that the damages should be over NT$1 billion according to unjust enrichment. The case was brought to the Supreme Court of Taiwan in 2017. In September 2018, the NT$1 billion judgement was remanded and now the IP Court of Taiwan is thus responsible for a retrial. Nevertheless, the two most common determinants to a reasonable royalty under this approach are – licensing history and comparable patents. Interestingly and importantly, these two determinants are also taken into consideration by several antitrust jurisdictions in the world while dealing with the issue of reasonable royalty. III. WHETHER TO REGULATE EXCESSIVE PRICING AND THE MONDERN REASONABLE ROYALTY APPROACH IN THE U.S. A. Whether to regulate excessive pricing? Supply and demand are two key factors that determine a price in a free market. Profits are usually what encourage innovation and attract firms doing businesses in the first place. There is no doubt that a firm sets a price it believes to maximize its profits – which is profit maximization rule in economics. When a monopoly tries to manipulate or disturb the market by setting a lower or higher price that does not go along with profit maximization rule, here are some possible consequences: (1) new entries in the market trying to share the profits; (2) consumers might switch to substitutes of the product in order to pay less; (3) monopoly might lose profits that it would earn otherwise. Simply saying, a free market usually responds to market changes quite well and can function accordingly without too much disruption. Regardless of the free market mechanism, there are still many voices discouraging the prohibition of excessive pricing due to the inherent dangers of regulating prices – such as discouraging investment in research and development activities, impairing innovation, and ultimately harming consumers. Along with the antitrust jurisdictions that prohibit excessive pricing by law, there are studies showing that prohibition of excessive pricing may benefit the market or – the consumers. A 2015 research finds that: “when economies of scale and entry barriers imply a great likelihood of dominant firms not subjecting to regulation but capable of charging supra-competitive prices, excessive pricing regulation is then important for smaller markets.” A study in 2017 further examines the competitive effects of the prohibition of excessive pricing by applying two competitive benchmarks – retrospective benchmark and contemporaneous benchmark to assess the price charged by a dominant firm excessive or not. The study finds that the two benchmarks restrain the dominant firm’s behavior but soften the firm’s behavior when its competing with a rival. By setting certain factors homogeneous, a retrospective benchmark for excessive pricing benefits consumers. While under different circumstances, consumers are worse off and inefficient entries are created. Overall, the study indicates that the competitive effects of prohibition of excessive pricing vary as we consider various factors – such as the nature of competition, the expected fines, incentive to invest in research and development (R&D), cost of litigation and more.  As a whole, there are still a great number of concerns about potential dangers of regulating price. However, whether to regulate excessive pricing or not, the fundamental question to ask is still – “how to determine a reasonable price to assess if the price at issue is excessive?” B. The Modern Reasonable Royalty Approach in the U.S. U.S. antitrust agencies do not prohibit excessive pricing. An IPR holder is free to charge a monopoly price just as a monopoly is free to earn its monopoly profits as long as the monopoly price and profits are not resulted from anticompetitive conducts that violate antitrust laws in the U.S. While saying that, U.S. still has a reasonable royalty approach developed under its patent law which is the law Taiwan has copied a lot from.  There are different methodologies for the reasonable royalty approach in the U.S., the most common one would be the hypothetical negotiation which was matured from Georgia-Pacific Corp. v. United States Plywood Corpin 1971 (Georgia-Pacific case), ruling that the proper damages in a patent infringement case as – “the amount that a licensor and the infringer would have agreed upon.” By adopting this hypothetical negotiation framework, the case eventually developed a list of 15 determinants as to a reasonable royalty:  (1) The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty. (2) The rates paid by the licensee for the use of other patents comparable to the patent in suit. (3) The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold. (4) The licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly. (5) The commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promotor. (6) The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales. (7) The duration of the patent and the term of the license. (8) The established profitability of the product made under the patent; its commercial success; and its current popularity. (9) The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results. (10) The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention. (11) The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use. (12) The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions. (13) The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer. (14) The opinion testimony of qualified experts. (15) The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license. The U.S. reasonable royalty approach and the calculation of reasonable royalty have been evolving since then. The Federal Circuit in a 2011 case held that the long-used and criticized 25 percent rule of thumb is fundamentally flawed for determining a baseline royalty rate in a hypothetical negotiation. The rule suggests that 25% of the expected profits for the product that incorporates the IP at issue as a baseline royalty rate. Practically, the profits earned by the licensee and the revenues of the product are still often taken into consideration nowadays while applying the U.S. reasonable royalty approach. Further, the Ninth Circuit modified some factors in Microsoft Corp. v. Motorola Inc. (2012) which was a case involved with reasonable and non-discriminatory (RAND) commitment, standard essential patents (SEPs), and patent pool.  This case raised some important factors to determine a RAND royalty, such as RAND commitment and its purposes, SEPs’ contribution and importance, alternatives of SEPs to the adopted standard, and so on. Comparable patents play a very critical factor in this case in terms of calculating a RAND royalty. Also, it is important to notice that the function of a RAND commitment limits a SEP licensor to royalties that reflect their ex ante values instead of the incremental monopoly power provided by the standard. In Ericsson, Inc. v. D-Link Systems, Inc. (2014), a modified version of the 15 factors was adopted after the Federal Circuit held that – not every factor from the 15 factors in Georgia-Pacific will apply to every case, and courts must instruct the jury on factors that are relevant in the case. Also, the burden of proof is on the implementer (or, the antitrust authority in an excessive pricing case) to establish a baseline royalty with evidence. That royalty then must be assessed to determine if it is excessive. By adopting incremental value approach and incorporating apportionment, the Federal Court here provides a more complete guidance on how to calculate royalties for patents on RAND terms: (1) Importance of RAND commitment; (2) Apportionment of patented features: the royalty for the patented technology must be apportioned from the value of the standard as a whole; (3) Incremental value approach: the royalty must be based on the incremental value of the invention, instead of any value added by the standardization of the invention or the standard itself. Lastly, two factors that were not often discussed while determining a reasonable royalty were applied inPrism Technologies LLC v. Sprint Spectrum L.P. (2017) - previous settlement agreements and cost savings though infringement. In conclusion, the modern reasonable royalty approach under U.S. patent law was evolved from the adopted 15 factors in Georgia Pacific case. The approach then has been developing along with changes of law, development of technology, adoption of SEPs, RAND and FRAND commitments, and more other relevant factors. IV. A PROPOSED ANTITRUST FRAMEWORLK OF REASONABLE ROYALTY FOR TAIWAN Having articulated the past attitude and the current antitrust framework of reasonable royalty in Taiwan, we have pointed out some misunderstandings in the current framework. Having addressed the reasonable royalty approaches under the patent laws in Taiwan and the U.S., we also have found similarities in between – the hypothetical negotiation framework and relevant determinants. Even though there are concerns against prohibition of excessive pricing due to potential dangers of regulating price and supports towards ultimate protection of free competition, TFTC and the courts in Taiwan are still required by law to apply the prohibition of excessive pricing against IPRs for the current time being. Therefore, the most important section and the core of this paper now has come forward – which is a proposed antitrust framework composed of possible methodologies and clearer guidance for Taiwan to deal with the antitrust issue of reasonable royalty in an excessive pricing case. The proposed framework is based on the proposed methodologies in a 2016 paper - which is to apply the hypothetical negotiation framework under U.S. patent law to determine a reasonable royalty or a competitive benchmark in an excessive pricing case. By applying the most relevant factors and adhering to important and correct principles in the case, a reasonable royalty as a baseline is thus determined to evaluate if the price at issue is excessive. Before articulating the proposed framework in a more detailed way, it is important to notice some basic differences between reasonable royalty in a patent infringement case and an excessive pricing case: Table 1 Reasonable Royalty in between a Patent infringement Case and an Excessive Pricing Case Reasonable Royalty in an Excessive Pricing Case Reasonable Royalty in a Patent Infringement Case Base Country Countries that prohibit excessive pricing. U.S. Case Type Antitrust case Patent infringement case Governing Law Antitrust (competition) law Patent law Prohibited Action A prohibited act of charging unfairly high price through abuse of monopoly. A prohibited act of unauthorized making, using, offering, or selling any patented invention. The Reasonable Royalty Issue Through determining a reasonable royalty to evaluate if a firm is charging excessive royalty through abuse of monopoly. Through determining a reasonable royalty to establish damages/compensation for the act of patent infringement. Proof of Harm Having found excessive pricing, competitive harms should be proved to establish an excessive pricing violation. Harm is proved after determining the reasonable royalty. Having proven the act of patent infringement, damages will then be determined based on reasonable royalty. Harm is proved to exist before calculating the damages. Negotiation There was negotiation over royalty before the lawsuit starts. There sometimes had no negotiation over royalty. Reasonable Royalty Approach Apply relevant factors to determine a reasonable royalty, then compare it with the price at issue to decide if the firm is charging excessive price through abuse of monopoly. Apply hypothetical negotiation framework to determine the royalty the licensor and the infringer would have agreed upon if there had been a negotiation instead of an infringement. Relevant Factors There are multiple and various factors applied in different countries, often not systematic or relevant. The 15 factors evolved from Georgia-Pacific, and some modified and new factors developed later on. A. Step 1 – Important Principles to Keep in Mind Regarding the Antitrust Issue of Reasonable Royalty. 1. No presumption of monopoly power: Ownership of IPRs does not necessarily confer monopoly power. 2. IP conducts may possibly constitute antitrust violations: Enforcing IPRs or any seemingly proper IP conduct may still possibly constitute an antitrust violation, so that they shall not be excluded from the application of FTA. 3. No such thing as excessive profit in free market economy: It is the pricing practice conducted by a monopolistic enterprise that should be evaluated in an excessive pricing case, instead of the profits the enterprise earns. 4. Harm to competition is and should be the key to establish an antitrust violation under Article 9 of FTA: Simply charging a perceived excessive price or earning some unjustified profits does not automatically constitute an antitrust violation. It is the competition and consumers that we should protect in terms of any excessive pricing case. Thus, harms to competition and consumers should be proved – such as lower outputs, entry barriers, and negative impacts on innovation or R&D activities. B. Step 2 – Compliance with Article 45 of FTA & IP Guidelines of Taiwan. 1. Firstly, all proper conducts pursuant to all IP laws in Taiwan are excluded to the application of FTA even though there is no clear explanation of what would be proper IP conducts. 2. If Article 45 of FTA does not apply in the case, we should turn to IP Guidelines of Taiwan to see if the involved market conducts or pricing practices would violate the Guidelines. If the Guidelines do not apply here, then we shall turn to Step 3 of the proposed framework. C. Step 3 – If it is a Potential Excessive Pricing Case? Section 2 of Article 9 of FTA articulates - “Monopolistic enterprises shall not engage in improperly setting, maintaining or changing the price for goods or the remuneration for services.” 1. There must be a monopolistic enterprise. 2. The prices of goods or services or the pricing practices involved are reasonably challenged by the implementers or TFTC.  D. Step 4 – When would a hypothetical negotiation have taken place? When it is a potential excessive pricing case under Section 2 of Article 9 of FTA, it is time to apply the hypothetical negotiation framework under patent law to determine a reasonable royalty within antitrust framework. While the first thought we come up with is usually “how much the parties would have agreed upon,” what we often ignore is that – “when would a hypothetical negotiation have happened? “The timeframe of the hypothetical negotiation is in fact highly related to what relevant factors we should consider in terms of determining a reasonable royalty. Such timeframe issue thus could cause huge impacts on the amount of damages in a patent infringement case and affect the competitive benchmark in an excessive pricing case. More clarifications are as follows: 1. In a patent infringement case: a. Pure ex ante approach: By assuming the parties would have negotiated over the royalty before the infringement began, such approach reflects an ex ante negotiation in the absence of infringement based on the information available before the infringement. Two supporting reasons are: (1) preservation of incentives; (2) avoidance or lowering the cost of patent holdup. b. Pure ex post approach: This approach sets the negotiation reached on some later date, such as the date of judgement or any time after the infringement. Such approach could possibly provide more available and provable information to determining a royalty but could also give the patentee more bargaining power when the patentee is holding an injunction against the infringer. Figure 1 Timeframes of the Hypothetical Negotiation Applying Pure Ex Ante Approach and Pure Ex Post Approach c. Contingent Ex Ante Approach: Pros and concerns when applying pure ex ante and pure ex post approaches are out there to be noted. While a proposed approach claims to address the issues of patent holdup and bargaining power at the same time – which is called contingent ex ante approach. This approach sets the negotiation prior infringement reached contingent on the ex post information, arguing that ex post information provides a better measure for the true value of the patented technology. Further, it is said to be able to take new and changed circumstances into account in every individual infringement case. Here is a simple example presented in the paper: (1) A $500,000 royalty might be agreed upon based on the parties’ expectation that the infringer would earn $1 million above what it would earn if it used the next-best available non-infringing patent. (2) At the date of judgement, the infringer is proven to earn $1.5 million instead of $1 million. This $1.5 million earning would be the ex post information applied in an ex ante negotiation. On the other hand, if the proven earning is only $500,000, then the royalty the parties might have agreed upon would be lower. (3) By applying contingent ex ante approach, it is argued that the patent hold-up would be avoided and the bargaining power between the parties would be balanced. Figure 2 Timeframes of the Hypothetical Negotiation Applying Contingent Ex Ante Approach 2. In an excessive pricing case: Applying the hypothetical negotiation framework under patent law in an excessive pricing case is much more difficult on one matter – the timeframe discussed above. Some important reasons are as follow: (1) Excessive pricing cases involve comparing a competitive benchmark with the price at issue, yet the prices in a case could be changing over time. (2) There were already negotiations over royalty before an excessive pricing lawsuit starts. (3) Involvement of FRAND and SEPs only make it more complicated to determine a reasonable royalty while facing the timeframe issue. E.g. the timing of a patent’s incorporation into a standard is critical and affects the value of the invention. Figure 3 Excessive Pricing Case and the Timeframe Issue E. Step 5 – If there are FRAND or RAND terms? Royalties negotiated on FRAND or RAND terms (FRAND royalties) can be and are usually different from those without. FRAND royalties may involve the following factors which often consequently affect royalties in real world: 1. FRAND obligations and terms: such as fairness, royalty free, grant back provision, exclusivity and other reciprocal terms. 2. Timing of the establishment of a standard: A patent may exist before the establishment of an industrial standard. As this patent is considered essential to a standard and also is included in such standard, the value of such patent – SEP usually goes up. 3. Cooperation between SEP holders: the number of SEP holders and the number of SEPs included in a standard can be influential. 4. Other factors: standard setting organizations’ policies, threat of injunction, patent hold-up and hold-out, royalty stacking, other available and comparable technologies, and relationship between licensors and licensees. F. Step 6 – Consider the Most Relevant Factors. No matter what approach or timeframe of hypothetical negotiation gets adopted in an excessive pricing case, the most relevant factors to consider in determining a reasonable royalty are as follow: 1. Comparable patents The best potential non-infringing alternatives should be the top determinant. What we usually consider as alternatives here are the existing patents in the marketplace since it would be impractical to include expired or invalid patents as comparable patents. But if we take the issue of the timeframe of a hypothetical negotiation into consideration, the status of the patents could be different – which means the hypothetical negotiation could have happened when there were more or less comparable patents. Undoubtedly, comparability is hard to judge. Loads of factors have been taken into account – technical and economic standpoints, the underlying technology, timing of the licensing, previous settlements or litigations, and other more. As noted here, comparable patents are provided as evidence to determining a reasonable royalty – not to its admissibility. Further, here are more difficulties while looking for comparable patents: a. Lots of technology-related royalties nowadays are negotiated on a patent portfolio basis using the end-user device as the royalty base. Both end-user based and portfolio based calculations make it harder to extract the value of an individual patent. b. Cross-licensing or business relationships are sometimes built in exchange of patent licensing. It means that there sometimes has no cash payment involved to know the values of patents. c. Should the allegedly comparable patents cover foreign patents? 2. FRAND royalties: a. FRAND or RAND commitment and its importance. b. Number of SEPs and number of SEP holders in a standard setting. c. Proper apportionment: By the reason that not all patents are created equal or of the same value, the value of an individual patent’s contribution to the standard and the end product is a critical factor when determining a FRAND royalty. As noted here for clarification, even though the Federal Circuit in the famous Ericsson v. D-Link case stated that a FRAND royalty should not include the value that a technology gains from simply being included in a standard, it should not be interpreted as a complete exclusion of any of a standard’s value. When a patented technology in fact creates values for a standard due to its inclusion, these values should definitely be considered as contribution and an important factor. G. Step 7 – Consider Other Factors 1. Other factors may possibly be considered a. The terms and scope of the licensing agreement, as exclusive, non-exclusive, restrictive, or non-restrictive. b. The nature and benefits of the technology or invention. c. Licensor’s monopoly power, and its policies or programs to maintain or preserve such power. d. Licensing history between the parties, and between the licensor and other firms. e. Investments made to implement the technology or the standard. f. Barriers to entry, it could be legal barriers, exclusive agreements, economies of scale, or network effect. As for antitrust of excessive pricing in Taiwan, a paper suggests that entry barriers should be one of the keys to determine if TFTC should step in. That is to say - when there are entry barriers delaying or barring new entries in a market, TFTC should possibly have jurisdiction and a case according to the types of the barriers. g. Royalty stacking and patent hold-up and hold-out. h. Smallest saleable component rule: Institute of Electrical and Electronics Engineers (IEEE) amended its patent policy in 2015 and included the smallest saleable Compliant Implementationas an important consideration in terms of determining a reasonable royalty. 2. Factors not recommended to be considered. a. Profits earned from charging the allegedly excessive royalty. b. The profitability, commercial success, popularity, advantages, utilities, and the sales of the patented products. c. The value of the pure adoption of the standard. d. Commercial and business relationships involved. e. Other non-competition, non-patent-related, or pure business factors. H. Step 8– Compare the Reasonable Royalty to the Alleged Excessive Price 1. The determined reasonable royalty is a baseline or what we call a competitive benchmark. It should not be a minimal royalty a patent owner can charge. 2. As for practicality, it is allowed to be more than just reasonable royalty to be compensated to the patent owner in a patent infringement case. Just like a firm can charge a price more than the cost of its product. Therefore, the price at issue should not be necessarily excessive when the determined reasonable royalty is greater than the alleged excessive price. V. CONCLUSION Excessive pricing cases involving the antitrust issue of reasonable royalty can be a matter of tremendous cost of litigation, fines of billion dollars, and unimaginable potential harms to competition. The great dangers involved through regulating price can lead to negative impacts on innovation, industries, and consumers - consequently to the ultimate failure of protection of competition. Putting aside the doubts about the prohibition of excessive pricing, I respectfully propose an antitrust framework of reasonable royalty in this paper with a sincere goal to help Taiwan with the issue of reasonable royalty in any excessive pricing case in the future. Lastly, I sincerely address the most essential and ultimate principle of antitrust here, again - it is and should always be the competition that antitrust laws and agencies aim to protect, not competitors, prices or only the consumers.  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