Content

WP recommended by the Legal 500

Six of Winkler Partners’ practice areas have been recommended by The Legal 500 as part of their research into legal service providers in the Asia Pacific region for 2018. For the first time, our employment practice was ranked in the first tier with Partner Christine Chen also listed as a Leading Individual. The Legal 500 notes that we helped clients navigate recent changes to the Labor Standards Act and that employment disputes are a particular strength.

Our insurance practice, led by partner Chen Hui-ling was ranked in the top tier for the sixth consecutive year, and was noted for our strength in D&O insurance. The Legal 500 says that Hui-ling “has extensive insurance litigation and arbitral expertise”. Michael Fahey is also mentioned for his support of cross-border matters.

In intellectual property, practice head partner Peter Dernbach was listed as a Leading Individual. The Legal 500 mentions that we have “notable expertise acting for international brands in enforcement and prosecution matters” and singles out our work on behalf of the Scotch Whisky Association. Partners Gary Kuo and Christine Chen are recommended for IP litigation.

The Legal 500 notes that our TMT practice has a niche in over-the-top (OTT) content and Internet of Things, citing our work with several multinational clients in connection with their services in Taiwan.

Finally our dispute resolution and corporate/M&A work were also recommended. The Legal 500 notes that we represent international clients across an array of commercial litigation matters, including the enforcement of foreign judgments and that our corporate practice, led by Gregory Buxton, “has extensive experience handling trans-Pacific and cross-Strait, inbound and outbound transactions”.

The Legal 500 has been ranking law firms worldwide for over 25 years, with a special attention to practice area teams who are providing the most cutting edge and innovative advice to corporate counsel. You can read the latest Legal 500 Asia Pacific rankings here.

2018 Summer internship

Winkler Partners is looking for a law student intern for summer 2018. 1Ls and 2Ls are all welcome.

The basic qualifications include good analytic, research, and writing skills. The successful candidate will probably be a native speaker of English or someone primarily educated in English who is currently a law student.

The successful candidate will also likely be able to speak Mandarin and must be able to read traditional Chinese with reasonable proficiency. We will consider candidates who speak other Chinese languages such as Cantonese if the candidate can read traditional Chinese.

Duties would include writing updates on legal topics and light case work for 30-40 hours per week. The internship is (very) modestly paid but the successful candidate will need to cover at least travel costs to Taipei.

We regret that Taiwan’s laws currently preclude us from obtaining work authorization for candidates with Chinese citizenship (including Hong Kong and Macau) unless the candidate is a dual national. Offers to successful candidates will be conditioned on our ability to receive work authorization.

Please send a resume, a brief writing sample, and a cover letter explaining your interest in an internship in Taiwan to personnel@winklerpartners.com by 1 February 2018.

A look at proposals for B Corporation legislation in Taiwan

In recent years, a growing number of entrepreneurs around the world started to fervently promote the notion that contrary to traditional practice, enterprises should not only look after the interests of their shareholders, but also, those of their stakeholders. As a response to this movement, many jurisdictions began enacting legislation that provides for a new type of legal entity specially tailored to the purposes and characteristics that these entrepreneurs were seeking. Examples of these are the Community Interest Company legislation in the United Kingdom; the Benefit Corporation legislation enacted in 33 states (and the District of Columbia) in the United States; and the Societá Benefit legislation in Italy. The enterprises created under these three examples of legislation are allowed to have a dual purpose: (1) maximize shareholders’ interests and (ii) take on one or more social interests to benefit the enterprises’ stakeholders.

The discussions regarding the creation of a similar type of legislation in Taiwan started to gain momentum since the announcement of proposed amendments to Taiwan’s Company Act (the “Act”). The Ministry of Economic Affairs (the “MOEA”) was tasked with preparing the first draft amendments. In February 2016, the MOEA organized the Act’s Amendment Committee (the “Committee”), with the aim of gathering voices from different interest groups, including the private sector and academia.

During the committee’s discussions, the inclusion of a chapter providing for “benefit corporations” was raised and supported by a number of committee members. The hope was to allow recognition and codification of benefit corporations under the Act in an attempt to promote socially responsible enterprises in Taiwan. In this way, enterprises set up under the legislation would be able to include the term “Benefit Corporation” in their names and hence, serve as a positive identifier to clients, investors and the public at large.

As such, the Committee’s proposed amendments to the Act (the “Committee Draft”) included a “benefit corporation” entity type and further provided that:

  • benefit corporations had to expressly include as their purpose a “general social interest” and then state the specific social interest the company would serve (e.g. provision of goods or services to individuals and/or communities in need; environmental protection; improve the overall health of people);
  • in making decisions and managing benefit corporations, the responsible persons (directors, officers, managers) besides the interests of the shareholders, may also take into account the interests of the company’s employees, clients and community; the environment at large; long-term sustainable development of the company;
  • benefit corporations may also designate a “benefit” director or manager to design and put into practice a corporate governance structure unique to a benefit corporation; and
  • the boards of benefit corporations must also prepare and disclose a report where it assesses the impact of its social interest activities on its stakeholders (with regards to how the report should be prepared and disclosed, the Committee left it to the MOEA to discuss and determine).

It is important to note that pursuant to the Committee Draft, the social interest purpose of a benefit corporation is the “pursuit” of said social interest; hence, the responsible person of a benefit corporation is not legally liable to any individual or organization who is the beneficiary of the social interest activities conducted by the benefit corporation. Further, the Committee Draft did not provide for any special tax considerations applicable to benefit corporations.

Despite the expression of support from a number of members of the committee, the draft amendment to the Act published by the MOEA (the “MOEA Draft”) in April this year did not include a chapter to allow for the formation of benefit corporation entities. The MOEA Draft only went as far as expanding the general scope of a company’s purpose from merely profit-making to serving the public’s interest. Although the MOEA Draft did not include a specific benefit corporation chapter, supporters are still optimistic and hopeful that some progress on this issue will be made. The next step is for the MOEA Draft to be reviewed, revised and approved by the Executive Yuan followed by debate and further revisions at the Legislative Yuan. Therefore, supporters believe there is still an opportunity for a benefit corporation chapter to be included in the Act at either the Executive Yuan or Legislative Yuan stages. As of November 2017, the MOEA Draft is still under review at the Executive Yuan.

Assessing design infringement under the revised Directions for Determining Patent Infringement

In February 2016, the Taiwan Intellectual Property Office (TIPO) issued the revised “Directions for Determining Patent Infringement” (“Directions”), which include substantive changes regarding how Taiwan courts assess infringement of design patents. Prior to revision, the Directions employed a two-step test to determine design patent infringement: 1) the “ordinary observer test;” and 2) the “point of novelty test”. Under that approach, even in cases where a patented and an accused design were nearly identical in appearance, the courts typically found no infringement if the accused product failed the “point of novelty” test. Under the revised Directions, the “point of novelty test” is removed, leaving an “ordinary observer test” and a new auxiliary “three-way comparison test”.

Application of the modified test

Vehicle designs constitute 10% of all design patent applications in Taiwan. Not surprisingly, the courts have taken up a number of infringement cases in recent years involving vehicle designs. Looking at how the IP Court compares the patented design with the allegedly infringing product in these cases can cast some light on the changing way in which design patent infringement is determined in Taiwan.

Under the two-step test of the earlier Directions:

In Honda Motor Co., Ltd. v Kwang Yang Motor Co., Ltd. (2009), the IP Court took the view that, given the crowded scooter market, the scope of protection of Honda’s patented design should be limited. On the “point of novelty” test, the court concluded that the accused product did not include any of the novel features of the patented design in major positions (handlebars, handlebar stem, seat, tank hole cover on the rear shell) and, therefore, the accused product was deemed not to infringe the patented design. Images of the patented design on the left, and accused product on the right:



Under the revised Directions:

Under the revised Directions, the perspective of “ordinary observer” is the primary mechanism employed in determining whether an accused product infringes a patented design. Additionally, where the “ordinary observer test” is inconclusive, there is an auxiliary “three-way comparison test” to assess similarity based on visual analysis of the prior art, the patented design and the accused product.

In Giant Electric Vehicle (Kun Shan) Co., Ltd. v Tei Sheng Development Co., Ltd. and Wei Sheng Marketing Enterprise Limited (2016), the IP Court concluded that with regard to electric bicycles, the front and side portions are the most visible in normal use. Moreover, the identical features in both the patented design and the accused product are in those portions, which comprise a very large visual area of the entire bicycle. Ordinary purchasers viewing the electric bicycles at issue would mistakenly deem that the accused product is the same type of electric bicycle as the patented product. Therefore, the accused product fell into the scope of the patented design’s claims and was deemed infringing.

In February 2017, the IP Court of Appeals affirmed the above decision. It found that although the accused product contained several features that differ from those of the patented design, the court concluded that these differences are minor, do not affect the overall visual impression, and are simply modifications of prior art. As the identical features in the patented design and the accused product exist in the front and side portions of the vehicles, they were therefore infringing. Images of the patented design on the left, and accused product on the right:


Conclusion

The IP Court applied the standard under the new Directions, in which the determination on infringement is the result of the ordinary observer test using overall observation and comprehensive comparison. The identical features and different features in both the patented design and accused product should all be considered in comprehensive comparison. However, an overall observation gives greater weight to those features that are most visible in normal use and those identical features that more readily affect the overall visual impression.

The reduction of the two-step test to a single “ordinary observer test” to determine infringement under the new Directions and the IP Court’s application of the same is encouraging in that design patent owners can expect more reasonable and predictable decisions regarding design patent infringement going forward.

For more information on patent matters, please contact Peter Dernbach at pdernbach@winklerpartners.com or Betty Chen at betty@winklerpartners.com.

Our summer intern, Andy Yang, also worked on this article.

WP represents a third of the world’s biggest brands for the second consecutive year

Interbrand has released its 100 Best Global Brands list for 2017. Winkler Partners represents a third of the brands that made the list for this year, and half of the top ten.

Brands such as Facebook (8th), whose value increased 48% year on year, and Amazon (5th), whose rose 29%, show that increasingly, the brands with the most value are associated with technology and the Internet. The most valuable brand in the world for the 5th consecutive year is Apple, which saw a 3% rise in its brand value over 2016, while Netflix (78th), an entertainment and on-demand media provider, made it into the list for the first time. Two other brands that made their inaugural entry in the list are luxury car manufacturer Ferrari (88th) and software solutions provider Salesforce (84th). Social media, ecommerce, software and IT solution providers as well as familiar hardware manufacturers feature heavily in the list, as do consumer goods and several luxury fashion brands including Louis Vuitton (19th), Hermès (32nd) and Gucci (51st).

Winkler Partners currently represents 32 of these top global brands of 2017, a slight decrease from 35 in 2016, and an increase from 25 in 2015, and just 18 in 2010. Brands that we have worked with are active in many fields, including fashion, software, hardware, consumer goods, ecommerce, beverages and media.

The full list of Best Global Brands 2017 can be found here.

Restrictions on unregistered foreign companies in Taiwan

We are often asked whether a foreign business with no registered presence in Taiwan can conduct marketing or other activities. The answer depends very much on the specific facts of the proposed activity, but in general unregistered foreign companies must not “transact business or perform legal acts in the course of business.” Taiwan Company Act §§19,371, and 386.

A person who transacts business or performs legal acts in the course of business in the name of an unregistered foreign business is subject to criminal liability including a fine of up to NT$150,000 and up to one year imprisonment.

Transacting Business

A review of the cases on transacting business shows that the Taiwanese courts use a totality of the circumstances test. Factors that have been considered include:

  1. Relationship of business transacted in Taiwan to the foreign company’s line(s) of business,
  2. Continuity and repetition of commercial activities,
  3. Fixed business premises,
  4. Hiring of employees, and
  5. Business contacts, price negotiations, and payments.

Most of the cases particularly emphasize factors 2, 3 and 4.

For example, the responsible person of a Hong Kong company that ran a legitimate but unregistered cartoon licensing business was convicted of unlawfully transacting business in Taiwan. The Taiwan business had office space and a number of employees. It also collected substantial royalties and provided post-sales services.[1]

A very typical case involved an unregistered foreign futures trading business that also had premises and employees. The business also took orders for margin currency trading. The responsible person was also convicted for unlawfully transacting business. Cases such as this one involving unregistered financial services business (often boiler room operations) are the most common type of case that results in prosecution and conviction.[2]

In contrast, the responsible person of a Hong Kong company that privately sought investors in Taiwan was found not guilty of transacting business in Taiwan despite the fact that investors invested in his company.[3] The court reasoned that this type of fundraising was unrelated to the Hong Kong company’s primary business and did not constitute transacting business even though the company was not registered in Taiwan.

A foreign company may transact business in Taiwan by establishing a branch or subsidiary in Taiwan.

Legal Acts in the Course of Business

A legal act in the course of business is “act that objectively suffices to create a predetermined legal relationship.”[4] For example, using the name of a dissolved company to entering into contracts to sell a vehicle and distribute auto parts are examples of legal acts in the course of business. Another example is the endorsement of a promissory note on behalf of the same defunct company. [5]

The Ministry of Economic Affairs has provided further guidance in a letter of interpretation that lists the following as legal acts in the course of business: “signing contracts, price quotations, price negotiations, bids, and procurement.”[6]

The takeaway from this somewhat abstract discussion is that the unregistered representative of a foreign company should not come to Taiwan and engage in legal acts such as signing contracts, engaging in price negotiations, or submitting bids on government contracts. If the representative wishes to engage in these activities in Taiwan, she and foreign company should register a representative office in Taiwan. Needless to say, she is perfectly free to engage in these activities with Taiwanese business people outside of Taiwan.

An interesting case involving legal acts in the course of business suggests that at least in some cases, marketing activities by an unregistered company may be fine. The defendant was a Taiwanese national who was in process of setting up a finance company.[7] Before the company was registered, he printed up marketing materials for the company’s post formation activities using the unregistered company’s name. The court held that the distribution of marketing materials was an act that did not suffice to create a legal relationship. Hence the Court concluded that no legal acts in the course of business had been performed and found the defendant not guilty.

Policy Considerations

Policy considerations behind the prohibition on unregistered foreign companies transacting business in Taiwan or performing legal acts in the course of business include:

[These rules] are intended to prevent foreign corporations from competing unfairly in Taiwan by doing business and earning profits on the one hand while evading Taiwanese regulation on the other. If foreign companies are not regulated in this manner, they might use their vast monetary resources and advanced technology to earn huge profits in Taiwan without being subject to Taiwan’s various restrictions on legal persons such as the benefits and protections available under the [Taiwan] Labor Standards Act, the various types of insurance available under the [Taiwan] National Insurance Act, and the various tax obligations under Taiwanese tax law. This would be unfair to Taiwanese companies and detrimental to their competitiveness. Most leading jurisdictions have similar rules.[8]

Conclusions

The restrictions on transacting business and performing legal acts in the course of business preclude an unregistered foreign company from engaging in extensive business operations in Taiwan and at least theoretically from coming to Taiwan to negotiate or sign contracts with Taiwanese parties in the course of ordinary activities. Nonetheless, there is some room for unregistered foreign companies to engage in limited marketed activities or corporate transactions without running afoul of these restrictions. The analysis of which activities are permissible is highly fact specific and a Taiwanese lawyer should be consulted in advance of any proposed activities in Taiwan by an unregistered foreign company.

For more information on company formation and corporate matters in Taiwan, please contact Chen Hui-ling at hchen@winklerpartners.com.


[1]臺灣高等法院 92 年上易字第 2625 號刑事判決

[2]臺灣臺中地方法院 102 年金訴字第 6 號刑事判決

[3]臺灣高等法院 104 年上字第 1036 號民事判決

[4]台灣高等法院86年上易字 2532刑事判決

[5] Ibid.

[6]經濟部92.10.29經商字09202221350函,經濟部97.04.28經商字0970204508函

[7] The prohibitions on transacting business or performing legal acts in the name of a unregistered company also apply more generally to Taiwanese nationals.

[8] 灣高等法院 92 年上易字第 2625 號刑事判決

WP welcomes new associates

We recently welcomed several new members to our legal team.

Brian Yang joins Winkler Partners from a well-known Taiwanese law firm. He will be focusing on intellectual property enforcement matters, investments, employment and dispute resolution. Brian is admitted to practice in Taipei.

Danny Yang has joined our Legal Translation Department, where he will be specializing in the translation of securities laws, contracts and government documents.

Lewis Chen joined Winkler Partners’ Legal Information Department in 2004, but has recently transitioned to working as part of our employment and intellectual property practices.

Yen-yi Wu will be supporting our intellectual property protection and dispute resolution work, with a particular focus on trademarks. Yen-yi originally interned with us as part of our trainee lawyer program.

Yu-ti Tsai will be working as part of our intellectual property enforcement and employment law teams. Yu-ti also joined us as part of our trainee lawyer program.

WP installs solar panels to generate 18% of our energy needs

This weekend we successfully installed solar panels on our roof and once we get the all clear, will begin generating our own power later this month. The panels cover approximately 23 ping (76 square meters), or roughly half the available roof space. The panels are capable of generating 13,000 kilowatt hours of electricity annually.

According to estimates by our Green Office team, this is equivalent to around 18% of our own energy needs. The panels will help us reduce our carbon footprint, as well as lowering our reliance on other energy sources. Any energy that we do not use will be sold back to the grid, so other energy users in Taiwan will benefit too. Of course, the actual amount of energy produced will depend on the number of sunny days we receive.

So, in future, the energy you use may have been generated on our roof, and our hope is that more businesses will install solar power to meet their own and others’ needs. Our commitment to install solar panels is one of Winkler Partners’ 2017 Oath of Actions for 1% for the Planet.

How does Taiwan’s Fair Trade Commission define the relevant market?

This article is the second installment in our FAQ on merger control in Taiwan (Here you can read part one).  Here, we set out in broad brush strokes the factors and methodologies that the Fair Trade Commission (the “FTC”) and Taiwan courts use to determine the relevant market in horizontal merger cases.

The Fair Trade Act (the “FTA”) defines the relevant market with respect to any particular product or service as the geographic area or scope in which firms compete with respect to such product or service.  In 2015, the FTC issued relevant market definition guidelines (the “Taiwan Guidelines”) based on the European Union’s Commission Notice on the Definition of the Relevant Market for the Purposes of Community Law, the United States’ Federal Trade Commission’s 2010 Horizontal Merger Guidelines, and the FTC’s own past cases.[1]

According to the Taiwan Guidelines, demand substitution is the primary market constraint that the FTC evaluates in its analysis of relevant markets; however, the FTC may also evaluate supply substitution as part of its analysis.

The FTC evaluates the effect of these competitive constraints to define the relevant market both in terms of the nature of the product or service being offered and the geographic sales area of such product or service.  The Taiwan Guidelines separately list the factors used to assess (i) product or service scope and (ii) the appropriate geographic sales area.  However, these factors are largely the same and are each aimed at providing information as to the substitutability of a product or service within a geographic area.  According to the Taiwan Guidelines when establishing the appropriate relevant market, the FTC will typically consider a variety of factors, including:

  1. the general nature of the product or service and its use;
  2. views of customers and competitors regarding substitutability of the product or service generally and specifically within a particular geographic area;
  3. historical data on past substitution of similar products or services;
  4. the cross-price elasticity of demand;
  5. effects of price variation generally, the effect of price changes in different regions and related transportation costs between such regions, and the diversion of orders to other geographic areas in response to price changes; and
  6. costs to customers associated with switching to different products, including ease with which customers can obtain products from different regions and transaction costs for customers purchasing products from different regions.

When assessing the considerations listed above, the FTC employs familiar qualitative and qualitative analysis methodologies including (i) reasonable interchangeability of use; (ii) the hypothetical monopolist test (and the related concept of a small but significant non-transitory increase in price); and (iii) cross elasticity of demand measurements.  It is important to note, however, that the FTC emphasizes that it may use other tests depending on the particular circumstances of each case.

In most cases, we recommend that the best practical approach to determining the relevant market in Taiwan for any particular product or service is to begin by analyzing the relevant market as if preparing for an antitrust inquiry in the United States or the European Union.  However, each case is unique and we strongly recommend anyone contemplating a business combination that may impact the Taiwan market to contact us to get more specific advice as to how the relevant market should be defined for the purposes of (i) determining whether a Taiwan merger control filing is required and (ii) making any such filings, if required.

For more information on mergers and acquisitions in Taiwan, please contact Gregory A. Buxton at gbuxton@winklerpartners.com.


[1] 公平交易委員會對於相關市場界定之處理原則.   No English translation available.

Taiwan labor law amendments: five key takeaways for employers

In December 2016, Taiwan’s Legislative Yuan made controversial amendments to the Labor Standards Act (the “LSA”) in order to implement a five-day work week and protect employees’ annual leave rights. In order to further clarify how employers can comply with these new laws in practice and to deal with some commonly raised concerns, the Ministry of Labor made various amendments to the Enforcement Rules of the LSA (the “Rules”) which were announced and put into effect in June 2017.

Five of these key amendments most pertinent to employers are:

(1) Working hours on flexible rest days are expressly treated as overtime

In line with recent amendments to the LSA regarding flexible rest days, working hours on rest days are expressly treated as overtime.

(2) Itemization of pay slips and ways of providing pay slips to employees

Employers must provide a detailed itemization of employees’ pay slips, including the employee’s total base salary as agreed upon between the employer and employee, the amount of each item which makes up the employee’s total base salary, any deductions which are required by law or by mutual agreement between the employer and employee, and the actual payment amount. When employers are required to provide employees’ pay slips, they can choose to provide hard copies, send the information electronically, or provide some other means for employees to access and print the information at any time.

(3) Acceptable methods of recording employee work attendance

In order to clarify how employers can record employees’ work attendance and comply with relevant laws, the amendments to the Rules now list the following as acceptable methods of recording employee attendance for both employers and employees to follow:  attendance books, attendance cards, swipe card machines, entry access cards, biometric identification systems, and computer attendance record systems.

(4) Relaxation of the period within which annual leave must be used

While employees’ annual leave is provided based on years of service and calculated from each employee’s on-board date, the period within which accumulated annual leave must be used has now been relaxed. The period must be mutually agreed upon between the employer and employee, and can be based on service years, calendar years, school years, fiscal years, or any other kind of annual system agreed upon between the employer and employee. Furthermore, employers must inform employees that they can arrange their annual leave and their annual leave entitlements within 30 days of the employee being eligible for annual leave.

(5) Calculation and payment of wages in respect of unused annual leave

Where an employee’s service year ends (if applicable) or where their employment contract is terminated, one day’s regular wages must be paid for each day of unused annual leave remaining. An employee’s “daily wage” is based on their regular working hours and wage at the time one day prior to the end of their service year or termination of their employment contract. Where an employee is paid monthly, “daily wage” is based on their regular working hours and wage at the time one month prior to the end of their service year or termination of their employment contract, divided by 30.

Employers can pay this amount either on the employee’s regular pay day, or within 30 days of the end of the employee’s service year. In the case of termination, the amount should be paid to the employee immediately.

Employers should notify their employees of their annual leave entitlements and the total amount to be paid in respect of unused annual leave on an annual basis, and should record this information in each employee’s salary roll. Employees should be notified in writing, electronically, or be provided with some means to access and print out the information, prior to the period when wages are usually paid each year.

For more information on Taiwan employment matters, please contact Christine Chen at cchen@winklerpartners.com or on +886 (0) 2 2311 8307.

 

Archives