JUDGMENT OF 14. 7. 1977 - CASE 1/77 BOSCH v HAUPTZOLLAMT HILDESHEIM

In Case 1/77 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: A. M. Donner, President, J. Mertens de Wilmars and G. Bosco, Judges, Advocate-General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

I — Facts and procedure

II — Summary of the written observations submitted to the Court

As to (1)

As to (2)

As to (3)

As to (4)

As to (5)

As to (6)

III — Oral procedure

Decision

Costs

I —. Facts and procedure

(a). advice concerning the introduction of the COS process and also the construction of the batteries manufactured under the COS process,

(b). discussions of problems during visits by experts from Globe and the plaintiff in the main action to Globe's works and to Hildesheim,

(c). the handing over or the dispensing of prescriptions for the flux, the temperature of the lead baths and the composition of the lead alloys, which are used when the COS process is operated.

(a). that the goods are delivered to the buyer at the place of introduction into the customs territory of the Community;

(b). that the seller bears all costs, charges and expenses incidental to the sale and to the delivery of the goods at the place of introduction, which are hence included in the normal price;

(c). that the buyer bears any duties or taxes applicable in the customs territory of the Community, which are hence not included in the normal price.

(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 trade-mark; or

(c). are imported for sale, other disposal or use under a foreign trade-mark,

II —. Summary of the written observations submitted to the Court

1. The imported patented machine is made in such a way that a person who uses it in accordance with the instructions automatically carries out the patented process. There is technically no possibility of carrying out the patented process in any way other than by using the patented machine.

2. As under (1) above; the patented process may however also be carried out in another way, for example by hand or by using other machines.

3. As under (1) or (2) above; however only part of the patented process may be carried out by the machine and the other part must be carried out by hand or by using other machines.

4. the patented machine is made in such a way that the patented process may only be carried out with the aid of that machine if the special features of the patented process are known and applied.

5. As under (2) to (4) above; the machine may however also be used for purposes which have no connexion with the patented process.

6. As under (1) to (5) above; the machine is however not (or is no longer) patented.

1. Under Article 3 (1) (a) of Regulation No 803/68 the value of the right to use the patent must be included in the value of the goods for customs purposes when the goods are manufactured in accordance with any patented invention. This is the case where the goods as such are the object of a patent called a product patent so that, whatever method is used, this product may only be manufactured by the patentee. Goods are also manufactured in accordance with any patented invention when they are the direct result of a patented process. In this respect it is possible to state that Article 3 (1) (a) also concerns patents for processes. However this provision indicates clearly that it only applies to patented processes used for the manufacture of the imported goods. On the other hand, it does not authorize the inclusion in the value for customs purposes of patents for processes which are used after the importation within the context of the user of the goods. This restriction of the field of application which already follows from the clear wording of Article 3 (1) (a) seems appropriate. In fact, for the purposes of determining the value of the goods for customs purposes it is important to calculate the economic value of the imported goods, that is, the value of the foods in the state in which they have been imported.

2. Regulation No 803/68 is based on the principle of customs duties on goods: the duty to obtain the customs clearance relates to the goods, that is, to tangible objects, but not to intangible industrial property. The normal price on which the value for customs purposes is based varies according to the economically relevant and measurable characteristics of the goods. If goods are acquired at the normal price, it is necessary to accept that their purchaser has in addition acquired at the same time the right to use them freely in a certain way. If, in addition to the purchase price properly so-called of goods, a royalty is paid for the use of these goods for their purpose that royalty forms part of the normal price.

III —. Oral procedure

1. By order of 5 November 1976, which was received at the Court Registry on 3 January 1977, the Finanzgericht Hamburg referred to the Court of Justice under Article 177 of the EEC Treaty a preliminary question on the interpretation of Regulation No 803/68 of the Council of 27 June 1968 on the valuation of goods for customs purposes (OJ English Special Edition 1968 (I), p. 170) and in particular Article 3 thereof. The question has arisen in the context of a dispute concerning the valuation for customs purposes of a COS (cast-on strap) machine protected by an invention patent called a product patent (Sachpatent) while, on the other hand, the process enabling the machine to be used for the manufacture of terminal bridges for lead-acid batteries is also protected by another invention patent called a process patent (Verfahrenspatent). The question concerns whether, in the determination of the normal price, that is, of the value for customs purposes of the machine, it is necessary to take into account the patent for the process relating to its use, or more particularly: Is Article 3 (1) of Regulation (EEC) No 803/68 of the Council (a regulation on valuation for customs purposes) to be interpreted as meaning that the normal price also includes the value of a patented process embodied in an appliance within the meaning of the judgment of 7 August 1962 of the Bundesfinanzhof (Federal Finance Court), File No VII 89/60 U, Bundessteuerblatt (Federal Tax Journal) III 1962, p. 549 ?

2. The abovementioned judgment of the Bundesfinanzhof was given in application of national rules and case-law relevant at that time which have meanwhile been replaced by Community rules and it is therefore necessary to examine the problem solely in the light of the rules of Community law which are applicable.

3. Article 1 of Regulation 803/68 provides that: For the purpose of applying the Common Customs Tariff, the value for customs purposes of the goods imported shall be taken to be the normal price, that is to say, the price which they would fetch … on a sale in the open market between a buyer and a seller independent of each other. The following articles lay down how that basic provision is to be applied in detail so as to take into account various factors which are capable of influencing the price of the goods. Article 3 (1) (a) provides that: When the goods to be valued are manufactured in accordance with any patented invention or are goods to which any protected design has been applied … the normal price shall be determined on the assumption that it includes the value of the right to use the patent … [or] design … in respect of the goods. This provision shall also apply in the case of copyright or any other intellectual or industrial property right.

4. The Common Customs Tariff by its nature concerns only the importation of goods, that is, tangible property, and does not apply to the importation of incorporeal property such as processes, services or know-how, which are, owing to their nature, already difficult for the customs mechanisms to cover. Therefore, 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. If this were not so there would be a risk of extending the application of the Common Customs Tariff, by too wide an interpretation of the concepts of value and price, to the introduction into the Community of ideas underlying inventions as such, which are not embodied in tangible property. Such application would necessarily be arbitrary because it would not be capable of covering the more or less uncertain connexion between the idea underlying the invention and the articles concerned.

5. 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 fact 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 economically viable 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.

6. It is therefore necessary to reply 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 patented process where the protected process is inseparably embodied in and constitutes the only economically viable use of the goods.

7. 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 5 November 1976 hereby rules.