Commission Closes Probe Into Philips CD-R Patent

The European Commission has dropped its anti-trust investigation into Philips' proprietary software for CD-Recordable discs.

The Commission -- the European Union's executive authority -- said today (Feb. 9) it had closed the case after the Dutch electronics giant pledged to change its licensing program for the technology to make CD-Rs.

"The new licensing conditions offered by Philips are likely to bring about lower prices and more transparency for millions of consumers of recordable CDs," the Commission said in a statement.

The initial inquiry, launched in 2003, was prompted by a complaint from FIPCOM, which gathered a group of European CD-R manufacturers.

In 1996, Philips offered European manufacturers a joint portfolio license that included its own CD and DVD patents as well as those of Sony and Japan's Taiyo Yuden. In addition, in 2001, Philips offered an individual license, the Philips Only License Agreement, which was limited to its own CD-R patents.

In the face of complaints about unfair licensing terms, Philips agreed to scrap the joint patent portfolio license program in Europe. Now Philips will publish a list from independent experts identifying essential patents.

Philips has also agreed to address technical problems associated with the management of the CD-R standard. And the company will clarify that discs that use alternatives to the proprietary Philips technology still qualify as CD-Rs.

Philips has also slashed the level of royalty from U.S. 4.5 cents to U.S. 2.5 cents per disc, and undertook to apply this new rate retroactively from October 1, 2005 to licensees.

This is not the first time Philips' CD technology has been probed by the Commission. In 2003, the executive examines Philips and Sony's worldwide program for licensing CD technology, although it eventually concluded that the system did not infringe competition rules.