JUDGMENT OF 16. 3. 1978 — CASE 135/77 BOSCH v HAUPTZOLLAMT HILDESHEIM

In Case 135/77 REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht Hamburg for a preliminary ruling in the action pending before that court between:

THE COURT (First Chamber) composed of: G. Bosco, President of Chamber, A. M. Donner and A. O'Keeffe, Judges, Advocate General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the procedure and the observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows :

I — Facts and procedure

1. The parties in the main action disagree as to the interpretation of Artide 3 (1) (a) of Regulation (EEC) No 803/68 of the Council which provides that: By judgment given on 14 July 1977, [1977] ECR 1473, the Court of Justice (First Chamber), in answer to the request for a preliminary ruling referred to it by the Finanzgericht Hamburg, ruled that: Article 3 (1) (a) of Regulation No 803/68 of the Council is to be interpreted as meaning that the normal price of goods includes the value of a patent for a process where the protected process is inseparably embodied in and constitutes the only economically viable use of the goods.

‘1. When the goods to be valued

a) are manufactured in accordance with any patented invention or are goods to which any protected design has been applied; or

b) are imported under a trademark; or

c) are imported for sale, other disposal or use under a foreign trade-mark, the normal price shall be determined on the assumption that it includes the value of the right to use the patent, design or trademark in respect of the goods. This provision shall also apply in the case of copyright of any other intellectual or industrial property right’.

2. During the public hearing of the Finanzgericht which took place after the judgment of the Court of Justice was given it was declared that the patent for a process (Verfahrenspatent) which forms the basis of the dispute may be used not only in the goods which form the subject-matter of the dispute but also in other machines which may be manufactured without using the patent for a product (Sachpatent) whereby those goods were manufactured. The plaintiff in the main action maintained that the value of a patent for a process may not be included in the normal price where the patent for a process may also be used for machines of a type different from the imported machine. It considers that in such a case the patent for a process is not embodied in the machine. The defendant in the main action claimed that in that case the patent for a process is embodied in the goods. In its opinion, the decisive factor is only the embodiment of the patent for a process in the imported machine in question. The possibility of using the patent for a process for machines of a different type does not prevent its being accepted that the patent for a process is embodied in the imported machine. By order of 6 October 1977, the Finanzgericht stayed the proceedings and decided to refer to the Court of Justice under Article 177 of the EEC Treaty the following question: The order of the Finanzgericht was entered in the Court Register on 8 November 1977. Written observations were submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC by the plaintiff in the main action, represented by Mr Uhl, and by the Commission of the European Communities, represented by Manfred Beschel, member of the Legal Service of the Commission. The Court, after hearing the report of the Judge Rapporteur and the views of the Advocate General, decided to open the oral procedure without a preparatory inquiry. By order of 1 February 1977, the Court, in pursuance of Article 95 (1) of the Rules of Procedure, decided to refer the case to the First Chamber.

‘Are Article 3 (1) (a) of Regulation (EEC) No 803/68 of the Council and the judgment of the Court of Justice of the European Communities of 14 July 1977 in Case 1/77 to be interpreted as meaning that the value of a patent for a process is to be included in the normal price of goods only if the process can be put into effect only by the use of those goods, or is the value of the patent for a process also to be included in the normal price if, although the only economically viable use of those goods consists in the carrying out of the process, the process can also be used in connexion with other types of goods?’

II — Summary of the written observations submitted to the Court

The plaintiff in the main action observes that the Court of Justice had declared that for the purpose of the determination of the value for customs purposes it is in principle necessary to concentrate only on the intrinsic value of the article and to disregard the value of processes, which may be patented, in which it may be used (Paragraph 4 of the Decision of the Court in the abovementioned case).

It considers that it is possible to derogate from that principle only by way of exception, in particular where the protected process is completely embodied in the imported goods. In other words, the use of the process must on the one hand constitute the only economically viable use of the goods and on the other, the process must only be put into effect by the use of those goods. It agrees entirely with the definition of the concept of ‘embodiment’ given in Paragraph 3 of the Decision in the above-mentioned case.

It suggests that the answer to the question referred by the Finanzgericht should be as follows:

‘Article 3 (1) (a) of Reguladon No 803/68 of the Council must be interpreted as meaning that the normal price of goods includes the value of a patent for a process where the protected process is inseparably embodied therein. Such is the case where the use of the process constitutes the only economically viable use of the goods and where the process may be put into effect only by the use of those goods’.

The Commission considers that the two guiding principles upon which the short statements contained in the operative part of the judgment are based are revealed in the grounds of the judgment of 14 July 1977. On the one hand, the Court, going beyond the wording of the provision contained in Article 3 (1) (a), also includes within the scope of that provision the possibility of taking into account the value of patents for processes relating to the use of goods (Paragraph 5 or the Decision). At the same time, the Court of Justice emphasizes that patents for processes may not be included in the value for customs purposes of goods except in certain special and well-defined cases (Paragraph 4 of the Decision).

The condition upon which the existence of a special case depends is the embodiment of the patented process in the goods themselves. To be able to speak of such embodiment, two conditions must be fulfilled according to the case-law of the Court of Justice :

1) the use of the process must constitute the only appropriate use of the goods and

2) the process may only be put into effect by the use of those goods.

In the Commission's opinion, the Court repeats these two characteristics in the operative part of the judgment by requiring not only that the use of the process must constitute the only economically viable use of the goods, but also that the patent for the process must be inseparably embodied therein. Therefore, the Commission considers, contrary to the view which the Finanzgericht Hamburg seems to take, that there is no discrepancy between the contents of the grounds of the judgment and the contents of the operative part of the judgment.

The Commission suggests that the question referred to the Court of Justice or a preliminary ruling by the Finanzgericht Hamburg should be answered as follows:

‘Article 3 (1) (a) of Regulation No 803/68 of the Council is to be interpreted as meaning that the value of a patent for a process concerning the use of imported goods must not be included in the value for customs purposes of those goods where the patented process may also be used with other types of goods.’

III — Oral procedure

The Commission of the European Communities, represented by Manfred Beschel, member of the Legal Service of the Commission, presented oral argument at the hearing on 9 March 1978.

The Advocate General delivered his opinion at the same hearing.

Decision

1. By order of 6 October 1977, which reached the Court on 8 November 1977, the Finanzgericht Hamburg referred to the Court of Justice under Article 177 of the EEC Treaty a question on the interpretation of Regulation No 803/68 of the Council of 27 June 1968 on the valuation of goods for customs purposes (Official Journal, English Special Edition 1968 (I), p. 170), in particular Article 3 thereof, and of the judgment given by the Court of Justice on 14 July 1977 in Case 1/77 ([1977]) ECR 1473).

2. The question asks whether the value of a patent for a process is to be included in the normal price of goods only if the process can only be put into effen by the use of those goods or whether the value of the patent for the process must also be included in the normal price if, although the only economically viable use of those goods consists in the carrying out of the process, the process can also be used in connexion with other types of goods.

3. The decision in the above-mentioned judgment already provides that:

‘By only mentioning patented inventions in accordance with which goods are manufactured, Article 3 seems to exclude patented inventions which relate to the process of use of the article. However, this distinction loses its meaning in cases in which the manufactured article and the process of use thereof are so closely linked that the manufactured article and the process of use are embodied in one and the same article. In fan the result of an interpretation of Article 3 in accordance with the objectives of the basic provision laid down by Article 1 of the regulation is that a patented process, the carrying out of which constitutes the only profitable use of the goods and which is only put into effect by the use of those goods, is regarded as embodied in the imported goods’.

4. The operative part of that judgment must therefore be understood in the light of that paragraph of the decision. It is therefore appropriate to state to that effect the reply to be given.

Costs

5. The costs incurred by the Commission of the European Communities, which submitted observations to the Court, are not recoverable. Since the proceedings are, so far as the parties to the main action are concerned, a step in the action pending before the Finanzgericht Hamburg, the decision on costs is a matter for that court.

On those grounds, THE COURT (First Chamber) in answer to the question referred to it by the Finanzgericht Hamburg by order of 6 October 1977 hereby rules: