C-1/77

Donner Mertens de Wilmars Bosco

Delivered in open court in Luxembourg on 14 July 1977.

A. Van Houtte A. M. Donner

Registrar President of the First Chamber

OPINION OF MR ADVOCATE-GENERAL WARNER

DELIVERED ON 22 JUNE 1977

GmbH, which I shall call 'Bosch'. The furnish to Bosch certain technical and defendant is the Hauptzollamt of other information to enable Bosch to Hildesheim. manufacture batteries using the COS process and machine. It continued: The facts are these. 'G-U O will furthermore procure that An American company, Globe-Union Globe will furnish to Bosch, upon its Inc., of Milwaukee, which I shall call request, one or two COS Equipment with 'Globe', is the patentee of a process for such features and at a price and on the manufacture of electric storage conditions to be agreed upon between G-U O, Globe and Bosch in advance'.

follows. The process is called the 'COS process', the letters 'COS' standing for 'cast-on strap'. Globe is also the manufacturer and Under paragraph 2.2 Bosch was to be the patentee of a machine which is provided by G-U O and Globe with described (in paragraph 1.1.(b) of that engineering and consultancy services, Agreement) as having been 'designed for including in particular visits by Globe the express purpose of the practice of the experts to the Bosch works 'with respect COS Process'. In the Federal Republic of to any detailed engineering for the first Germany, there are two patents for the COS Equipment and the installation machine and one for the process.

'G-U O'. The Agreement recited, among patented or unpatented, as would be of other things, that G-U O was for the assistance to Bosch's operations under purposes of the Agreement sufficiently the Agreement; and under paragraph 2.4 entitled to the technical information and Bosch was given the right to inspect, at patent rights of Globe with respect to the any time during the two years following COS process and machine, and that the date of the Agreement, Globe's 'COS Bosch desired to acquire the machine Equipment' at any 'suitable' Globe plant. and the right commercially to practise By paragraph 4.1 G-UO granted to the COS process, and to use therefor Bosch a non-transferable, non-exclusive Globe's technical information and patent licence, expressed to be 'under Globe's rights. (The machine was referred to in and G-U O s Technical Information and the Agreement as 'COS Equipment'). Patent Rights', (i) to manufacture, use and sell in all countries of Continental

information made available to Bosch on such goods under the CCT was under the Agreement or any feature or 7-5 %. The defendant provisionally features covered by the patent rights in valued the machine at DM 271 107-25 respect of the COS process or machine and, on that basis, assessed the customs and (ii) to use and sell batteries so duty at DM 20 333, which sum Bosch manufactured in Great Britain and paid. The defendant also assessed Bosch Ireland, and in all countries of Africa and to German 'import turnover tax' Asia, with certain exceptions. By various (Einfuhrumsatzsteuer) of DM 32 058-40, provisions of the Agreement (in but with that this Court is not concerned. particular paragraphs 2.5, 3.2 and 4.3) The valuation of DM 271 107-25 was, as I Bosch undertook countervailing obliga­ understand it, made up of a sum of DM tions as to secrecy and as to the 228 476-25 representing the price paid by disclosure to G-U O of improvements, Bosch for the machine (US $84 254-95) whether patented or not, found by Bosch and a sum of DM 42 631 described as a concerning the use of the COS machine supplement in respect of royalties or process. By clause 5.1 Bosch was to payable by Bosch under the Agreement pay to G-U O an initial sum of of 20 May 1965 (as amended). US $ 10 000 within one month of the date of the Agreement. By clause 5.2, as The valuation was challenged by Bosch. I amended by a supplemental Agreement need not take up Your Lordships time made on 12 December 1968, Bosch was, with a detailed account of the for the first five years of the life of the administrative processes that followed. Agreement, to pay to G-U O a royalty for Suffice it to say that they culminated in a each battery sold under the licence, the decision (Einspruchentscheidung) of the rates being US $1-15 for each 6-volt defendant dated 4 March 1975, under battery and US $2-30 for each 12-volt which the supplement of DM 42 631 was battery, with a minimum annual royalty reduced to DM 27 099-43 and Bosch of US $ 7 000. Under paragraph 5-3, was thereby rendered entitled to a Bosch was, from the beginning of the reimbursement of DM 1123-40. sixth year, to pay royalties at half those rates and then only for batteries in the Against that decision Bosch now appeals manufacture of which any of the licensed to the Finanzgericht, claiming that there patent rights had been used. should be no supplement at all and, in the alternative, that, if there should be The Finanzgericht has found as a fact one, the defendant's computation of it is that the technical information to be still excessive.

construction and to the mode of its As Your Lordships know, the Brussels operation, embodied the patented Conventions bind all the Member States process so that a person entitled to use of the Community, and a large number the machine could, by operating it, also of other States besides. The Convention operate the patented process without on the Valuation of Goods contains in taking any further step in order to do so. Annex I the 'Definition of Value' which, by Article II of the Convention, each That decision of the Bundesfinanzhof Contracting Party undertook to introduce was however given in interpretation of into its domestic law and, in Annex II, the German Zolltarifgesetz of 16 August the 'Interpretative Notes' which, by 1951, a statute which antedated not only Article HI, each Contracting Party Regulation No 803/68 but even the entry undertook to introduce into its domestic into force of the Brussels Convention on law and, in Annex II, the 'Interpretative the Valuation of Goods for Customs Notes' which, by Article HI, each Purposes. It is a common feature Contracting Party undertook to conform of the Zolltarifgesetz, of the Brussels to in applying the Definition of Value.

far as material: The normal price shall of the Interpretative Notes in Annex II, include the right to use the patent . . . in namely Note 5. This is as follows: respect of the goods if the imported goods are the object of any such right'. The object of the Definition of Value is ('Im Normalpreis ist einbegriffen das to make it possible in all cases to Recht zur Benutzung des Patents . . . an calculate the duties payable on the basis den Waren, wenn die eingeführten of the price at which imported goods are Waren Gegenstand eines solchen freely available to any buyer on a sale in Rechtes sind). It is also to be observed the open market at the port or place that the reasoning of the of introduction into the country of Bundesfinanzhof was in large part importation. It is a concept for general founded on earlier authorities relating to use and is applicable whether or not the German customs legislation and to the goods are in fact imported under a German law of patents. contract of sale, and whatever the terms of that contract. So far as German law is concerned the Zolltarifgesetz appears to have been But the application of the Definition overridden by a Statute of 17 December implies an enquiry into current prices at 1951 providing for three Brussels the time of valuation. In practice, when Conventions on customs matters, imported goods are the subject of a bona including that on the Valuation of fide sale, the price paid or payable on Goods, to become applicable in that sale can generally be considered as a Germany: the 'Gesetz über internationale valid indication of the normal price Vereinbarungen auf dem Gebiete des mentioned in the Definition.

BOSCH v HAUPTZOLLAMT HILDESHEIM

Article 1 (1) provides: Article 2 (2), which was one of the provisions in point in the recent case 'For the purposes of applying the before this Court of Firma Farbwerke Common Customs Tariff, the value for Hoechst AG v Hauptzollamt Frankfurt customs purposes of the goods imported am Main/West (Case 82/76, not yet shall be taken to be the normal price, reported), defines the circumstances in that is to say, the price which they would which two persons are to be deemed to fetch, at the time referred to in Article 5 be associated in business with one [that is, in general, at the time of another.

importation], on a sale in the open market between a buyer and a seller Article 3, Your Lordships also remember independent of each other.' from that case, deals with industrial

OPINION OF MR WARNER —CASE 1/77

(1). It reads so far as material: subject of a bona fide sale, the price paid or payable on that sale can generally, 'When the goods to be valued . . . are subject to proper safeguards and manufactured in accordance with any adjustments, be taken as a valid patented invention . . . the normal price indication of the 'normal price'. shall be determined on the assumption that it includes the value of the right to use the patent . . . in respect of the Article 9 provides: goods.' 1. The price paid or payable may be accepted as the value for customs The French text, which is reflected in the purposes if: French and Italian texts of Article 3 (1), (a) the contract of sale is executed reads:

. .' (c) that price is adjusted, if necessary, to take account of circumstances Thus, in the English and German texts of the sale which differ from the goods are referred to as having been those on which the normal price manufactured in accordance with the is based. invention, the mention of the patent 2. Adjustments under paragraph 1 (c) being adjectival, whereas in the French may in particular be required with and Italian texts they are referred to as reference to: having been manufactured in accordance (a) the costs, charges and expenses with the patent, the mention of the mentioned in Article 1 (2), invention being there adjectival. The (b) reductions in price granted in Danish and Dutch texts of Article 3 (1) favour of sole agents or sole go even further in this direction: they concessionaires or any other refer only to the patent. As Your person operating in comparable Lordships will see, in the context of the circumstances, present case, the English and German (c) abnormal rebates and any other texts make rather better sense than the reduction from the ordinary others. competitive price.'

89/60 U, Bundessteuerblatt III 1962, so applied uniformly, would be rendering the task of those Courts and Tribunals p. 549'. more difficult than it need be if it were to formulate a ruling by reference to a The Finanzgericht explains in its Order for Reference that, if, as it is inclined to Judgment of a Court, however eminent, of one of the Member States. The think, that question is to be answered in substantial difficulty is that the the negative, it will accept Bosch's Bundesfinanzhof's Judgment of 7 August contention that no supplement is to be 1962 was given in interpretation, not of added to the price of the machine in Regulation No 803/68, but of an earlier, respect of the royalties payable by Bosch and differently worded, national statute, under the 1965 Agreement. This is and in the context of its own national because, in the view of the Finanzgericht, system of customs legislation and patent no part of those royalties was attributable law. It would be surprising to find that a to the use by Bosch of the patents for the rule thus established could be transposed, machine. In the light of the parties' without any modification, into Com­ submissions, the Finanzgericht has come munity law, but equally surprising to find to the conclusion that those royalties that nothing akin to it existed in were wholly attributable to other rights Community law. acquired by Bosch under the 1965 Agreement, so that the price it paid for the machine must be taken to have So I think that this Court must approach included the consideration for the use of the interpretation of Regulation No the patents for the machine. This Court 803/68, so far as regards the problem is not of course concerned with the posed by the present case, with a proper question whether the Finanzgericht is respect for the thinking of the

Bundesfinanzhof, but with an awareness that the Finanzgericht takes the same too that the problem is not quite the view. same as that with which the Bundesfinanzhof was confronted. In It was conceded in argument on behalf particular this Court cannot overlook that of Bosch that there was one case where a the interpretation that it places on patent for a process could, for the Regulation No 803/68 must be capable purposes of Article 3 (1) of Regulation of practical application in all the No 803/68, be assimilated to a patent for Member States, despite any divergences a machine.

B.SA. Tools Ltd. (1930) 48 R.P_C_ at the process. The present case, said Bosch, p. 58, Terrell on the Law of Patents (12th was of the last kind, since the machine Ed.) § 360 and Blanco White on Patents here in question could not effectively be for Inventions (4th Ed.) § 3 -210). used for the process without knowledge Moreover, it may be that Regulation No of the data as to the preparation of the 803/68 in so far as it reproduces the flux, the composition of the lead alloys Definition of Value in the Brussels and the temperature tolerances within Convention (and, as I have indicated, the which the work must be performed. relevant words of Articles 3 (1) are intended to do so) should be interpreted In my opinion that concession was also in the light of the laws of those rightly made.

In such a case, the Brussels Convention, but also of invention of the machine and the Regulation No 803/68, came to the same invention of the process are one and the conclusion and that that is why they same invention. A patent for that sought to frame the provisions both of invention cannot be excluded from the

The Commission told us, in its written to use the patent in other respects. I Observations, that, under the German agree. law of patents, it is not possible to take out a patent for a process having the Where I disagree with the Commission same content as a patent for a machine. is in the reasoning according to which it In a helpful paper that it submitted after reaches that conclusion. The Com the hearing at the request of the Court, mission's view is on the one hand that the Commission examined the position Article 3 (1) is to be given a narrow as to that under the legal systems of the interpretation, excluding all patents for other Member States. The conclusion to processes, unless they be processes by be drawn from that examination was that which the imported goods themselves the rule was substantially the same in all have been manufactured, but, on the the Member States, so that, in theory at other hand, that it is implicit in Article 1 least, cases of such double-patenting (1) of the Regulation that where a should be rare. There are however patented process covers the use of a variations in the detailed application of particular machine the value of the right the rule as between the Member States, so to use the machine forms part of its and one knows, of course, that, 'normal price'. particularly in this field, what happens in practice does not always coincide with In approaching the interpretation of what the law envisages. Indeed, were it Article 3 (1) the Commission focusses its otherwise, there would never be litigation attention on the reference to the goods in which the validity of a patent was having been 'manufactured in accordance challenged on the ground of 'prior with' a patented invention. From this the claim'; or, at all events, such a challenge Commission deduces that Article 3 (1) is would never succeed. In truth, the not concerned with any use of the goods application of the rules against after their manufacture and importation. double-patenting gives rise to such But this approach seems to me, with all complexities that it would be unrealistic respect to the Commission, to confuse to suppose that there can never be the use of a patent in respect of goods overlap between a patent for a machine (which is what Article 3 (1) refers to) and and a patent for a process. (As to that I the use of the goods themselves.

. . in machine and something else. In such a respect of the goods' must be intended to case, it seems to me, in so far as the cover all these. The situation in the type invention is of the machine, it is not of case with which these proceedings are excluded from Article 3 (1). The concerned differs from that only Commission submitted that, in such a inasmuch as, the patent being one for a case, the value of the right to use the process, it is necessary to enquire to what patent in respect of the machine must be extent, if any, the invention that it segregated from the value of the right protects is really that of the machine.

refine on that definition, working out the of a patent for a process will restrict the details of its application in relation to freedom of a purchaser of a machine to specific matters. The matter of industrial use it, without the value of the right to property rights, and in particular of use that patent forming part of the patents, is dealt with by Article 3. That 'normal price' of the machine. The truth being so there is no room for implying is that there is nothing in the concept of anything further about patents in Article the 'open market', and it is on that, I 1 (1) itself. Of course each of the think, that the Commission mainly provisions of the Regulation must be relied, that connotes that a purchaser of interpreted in the light of the others, but goods in that market will acquire them that is not to say that any of them can be free from restrictions on their user. For interpreted as implicitly dealing with a instance the rule of English law is that a matter which is the express province of sale of a patented article by the patentee, another. in any market, is presumed to carry with it the right for the purchaser to use the The second and graver objection is that article in any way he chooses, but that Regulation No 803/68 is fiscal legis­ that presumption is rebutted if at the lation. Its purpose and its effect are to time of the sale the purchaser has notice define fiscal liabilities. It would be of restrictions on its use imposed by the contrary to all principle to hold that such patentee, whether by contract or liabilities could be imposed or increased otherwise (see National Phonograph Co. by implication. of Australia, Ltd. v Menck [1911] A.C. 336, Goodyear Tyre and Rubber Co. The very argument of the Commission (G. B.) Ltd. v Lancashire Batteries Ltd. evinces a difficulty inherent in its [1958] 1 W.L.R. at p. 861 and Dunlop approach. The Commission naturally Rubber Co. Ltd. v Longlife Battery realized that it was not enough to say Depot, ibid., at p. 1037). Of course, where that this case was implicitly covered by and in so far as Article 3 (1) applies, it Article 1 (1). It must propound a requires such restrictions to be ignored principle from which that could be in computing the 'normal price' of the deduced. The principle it propounded article. But nothing to the same effect was that the acquisition of goods at their can legitimately be read into Article 1 (1) 'normal price' implied that the purchaser taken by itself or, for that matter, into would acquire them free from restrictions any other provision of the Regulation.