In a 23 January decision, the Taiwan Fair Trade Commission (TFTC) approved the DVD patent pool formed by LG Electronics, Pioneer, Philips and Sony - the so-called One-Red - on condition that it complies with several requirements ordered by the TFTC.

Established last year, One-Red offers patent licensing essential for the manufacture of DVD products. For patent pools and other types of merger, the Fair Competition Law requires the parties to the merger to file for approval in advance if:

- the merger will result in a market share of one-third or more.
- one of the parties has a market share of one-quarter or more.
- the annual revenue of one party exceeds NT$10 billion (approximately US$33.85 million) and of the others exceeds NT$1 billion (approximately US$3.385 million).

The main reason the TFTC approved the One-Red DVD patent pool is because it takes the view that a single window for patent licensing is beneficial to DVD manufacturers in Taiwan in view of the transaction costs and royalty rates available.

The TFTC also believes that the One-Red DVD patent pool would increase competition in downstream market and would not be harmful to vertical competition. The TFTC concluded that the contribution of the One-Red DVD patent pool would be greater than its possible unfair competition effects.

The TFTC approved the application of the merger, conditioned on five requirements:

- LG, Pioneer, Philips and Sony shall not enter into agreements or exchange information regarding pricing or quantity of DVD products.
- LG, Pioneer, Philips, Sony and One-Red shall not limit licensees? use of technologies, business deals or product pricing.
- LG, Pioneer, Philips, Sony and One-Red shall not prohibit licensees from challenging the essence or validity of the patents.
- LG, Pioneer, Philips, Sony and One-Red shall not prohibit licensees from researching, developing, manufacturing, using or selling competing products or adopting competing technologies during the licensing period or after the licence has expired.
- LG, Pioneer, Philips, Sony and One-Red shall not refuse to provide information on the patents, the scope of the patents or the expiry date of the patents.

The TFTC's recent decision is almost identical to its 30 March 2011 decision on the One-Blue Blu-ray patent pool, where Hitachi, Panasonic, Philips, Sony, Samsung and Taiwanese company Cyberlink each sought to acquire one-sixth of the shares of One-Blue to form a patent pool of Blu-ray technologies.

Story filed 18.02.13