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Court Revives Patent Claim Against Philips

(CN) - The Federal Circuit partially reversed a judgment for Philips, allowing Princo to assert claims that the electronics maker improperly expanded the scope of its patents on recordable and rewritable CD technology through price-fixing, price discrimination and mandatory package licensing.

Philips and three other companies - Sony, Taiyo Yuden and Ricoh - formed a patent pool to cover technology for making recordable CDs (CD-Rs) and rewritable CDs (CD-RWs). Some of the patents cover technology needed to comply with Orange Book, the technical industry standard for CD-Rs and CD-RWs. Compact discs need to comply with Orange Book standards to be compatible with most CD players and CD-ROM drives.

In the early 1990s, the companies agreed to license their pooled patents to Philips in exchange for royalties.

But when Princo stopped paying royalties, Philips filed a patent infringement complaint with the International Trade Commission.

Princo asserted patent misuse as a defense.

The commission agreed that Philips had misused its patents by tying the package licenses to nonessential patents. The Federal Circuit reversed and remanded, saying some of those patents were, in fact, essential.

Princo then narrowed the focus to a particular patent, Sony's Lagadec patent. The plaintiff claimed that the Lagadec patent was not essential to the production of Orange Book-compliant CDs.

The commission rejected its misuse claims on remand, and the federal appeals court in Washington, D.C., partially agreed.

A three-judge panel upheld the commission's rejection of the illegal tying claim, but revived the claim that Philips and Sony allegedly agreed not to license the Lagadec patent as competing technology to Orange Book.

The court remanded for reconsideration of the alleged collusion between Sony and Philips.

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