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In-depth treatment of selected topics in Taiwan law for legal professionals

How Taiwan’s TAICCA is supporting creative industries

Taiwan Creative Content Agency (TAICCA) is a new government institute under the Ministry of Culture aimed at catalyzing the development of Taiwan’s cultural and creative industries. Taking the Korea Creative Content Agency (KOCCA) as a model for development, TAICCA is expected to focus more on cultivating projects with greater market potential rather than those with purely artistic value. Currently, TAICCA follows two directions in accelerating the Taiwanese cultural and creative industry:

Backing movie production with foreign investment or government subsidies

Taiwanese movie companies who have signed production contracts with a major international production company, such as HBO, Netflix, Warner, NBCUniversal or Disney; or, for those who have been granted an official subsidy from the Taiwanese government, may now apply for a loan from banks backed by TAICCA.

This policy aims to reduce the financial pressure Taiwanese production companies face when a movie is still under production. Local production companies generally may not receive all the investment funds or subsidies up front leading to cash flow issues. Based on the policy, TAICCA will pledge up to 90% of bank loans secured by the local production company, keeping production running. Since the local production companies may now secure a loan from banks before the foreign production company fulfills its investment fund obligations, this policy may also indirectly give the foreign investors more flexibility to set a timeline for approving budgets awarded to local production companies.

Co-investing in creative content ventures with private investors

Another major policy for TAICCA to encourage the development of Taiwan’s cultural and creative industries is through co-investing with private investors. Venture capitalists, financial institutions, investment corporations and other investors who have previously invested in creative industries (content distributors, platforms and production companies, for example), may apply for co-investment with TAICCA in establishing creative content ventures by leveraging the National Development Fund.

Studio 76, a new venture dedicated to over-the-top (OTT) TV series production established in 2019 sets an example for this policy. It’s reported that paid-in capital totals TWD130 million, Taiwanese streaming music service KKBOX invested TWD55 million, Japan’s Asahi Broadcasting Group invested TWD30 million and the National Development Fund invested TWD45 million.

Unlike the Ministry of Culture that supports the industry through direct subsidies, TAICCA’s main objective is to accelerate Taiwan’s cultural and creative industries through connecting creative content producers with private investors on one hand, and lowering the barrier for loans from private banks on the other.

However, there are also some special subsidies offered by TAICCA for businesses that integrate emerging technology and creative content, such as VR and motion pictures. TAICCA is currently focusing its attention on movie production compared to other kinds of creative content, in large part because movie production may integrate and accelerate other forms of intellectual property. For those who are interested in the film making business in Taiwan, TAICCA’s next steps are sure to be worth following.

For more information on Taiwan’s creative content industry or intellectual property matters, please contact Gary Kuo at gkuo@winklerpartners.com.

Five important issues to consider when investing in or partnering with Taiwanese companies

Whether forming a joint venture company with a Taiwan partner or making an investment in an existing Taiwan company, we strongly recommend clients give careful consideration to the terms and conditions in the operative agreement, be it a joint venture agreement or a shareholders’ agreement. We are routinely asked to review, negotiate, and draft such agreements. In working with these agreements, we invariably identify issues that foreign counter-parties have neglected, the omission of which could have a significant adverse effect on the success of their Taiwan venture. Set out below are important, but often neglected, issues which foreign counter-parties should consider when making an investment or forming a joint venture in Taiwan.

1. Corporate governance procedural defaults

The recent amendment of Taiwan’s Company Act (the “Act”) did a great deal to bring Taiwan’s corporate governance procedures more in line with those in other developed countries. That being said, there are a number of corporate governance procedures which are now allowable pursuant to the Act, but which are not the statutory default. For instance, under the current Act the board of directors may act by written resolution. However, this ability to act by written resolution in lieu of convening a meeting must be explicitly granted in the relevant company’s Articles of Incorporation.The Act requires other corporate governance mechanisms, which foreign counter-parties often take for granted, to be specifically set out in the Articles of Incorporation. In light of this situation, we recommend a thorough review of how the parties plan to govern and operate the Taiwan venture so that we can recommend appropriate amendments to the Taiwan vehicle’s Articles of Incorporation.

2. Statutory preemptive rights

Very often, parties involved in a Taiwan venture wish to restrict share ownership and preserve their initial ownership percentages. The Act grants preemptive rights to each existing shareholder, subject to a requirement that ten (10) to fifteen (15) percent of new equity issuances by a corporation be reserved for purchase by employees (except under very limited circumstances). If the preservation of precise ownership percentages is of paramount importance to the parties, business forms other than a standard corporation could be employed. Alternative business forms each come with their attendant advantages and disadvantages so each would need to be evaluated to determine whether new, more serious, issues were not introduced while attempting to solve the employee preemptive rights issue.

3. Use and control of chops

In Taiwan companies and individuals often use chops instead of signatures. A chop is a stamp or seal that has the same legal effect as a signature. A Taiwan company will have at least one set of chops consisting of the registered chops of the company and its responsible person. These chops can be used to legally bind the Taiwan company, and therefore, their use and control are of great importance. We recommend that at the very least the operative agreement contain basic provisions addressing the custody and permitted use of the company’s and its responsible person’s chops. For larger enterprises with multiple sets of special-purpose chops, we recommend drafting more complete chop control procedures which can be included in the operative agreement as an exhibit.

4. Protection of intellectual property

Often the foreign counterparty is contributing some form of intellectual property right(s) to the Taiwan venture. In such cases, we recommend that the effectiveness of the operative agreement should be made contingent upon the signing of an appropriate intellectual property license agreement which includes, at a minimum, standard confidentiality, non-compete, and non-solicitation clauses. If the foreign counterparty’s intellectual property is of particular value, we often recommend (i) placing an additional affirmative duty on the local Taiwan party(ies) to take reasonable measures to police the local market for infringement of the foreign counterparty’s and/or the Taiwan venture’s intellectual property rights and (ii) making the local Taiwan party(ies) liable for any such infringement of which they were, or should have been, aware but failed to report in a timely fashion.

5. Specification of legal damages

In Taiwan, like many other jurisdictions, liquidated damages are legally permissible. Unlike many other jurisdictions, contractual punitive damages are also permissible in Taiwan. This creates interesting possibilities to erect significant disincentives to potential future bad behavior. While acknowledging that overly liberal use of punitive damage provisions has the potential to sour the relationship between joint venture partners even before the operative agreement is signed, we often recommend strategic use of such provisions particularly in conjunction with the protection of intellectual property rights of a foreign counterparty.

The list set out above represents issues that we see on a routine basis. However, this list is by no means exhaustive. We highly recommend having a lawyer review all agreements to be signed in connection with a foreign joint venture or other form of joint equity investment in Taiwan.

For more information, please contact Greg Buxton at gbuxton@winklerpartners.com.

Exploring statistics at the Taiwan Intellectual Property Court: part II litigation

After taking a look at the caseload of Taiwan’s Intellectual Property Court (“IP Court”) in part one, we now focus on the number of litigation cases and trends over time.

Number of litigation cases closed

“Closed case” means a case decided at the IP Court, regardless of whether the decided case was subsequently appealed or not. The trend of closed litigation cases is similar to the number of all cases closed which we looked at in Part 1. The peak number was 1178 cases in 2011, after that, the number of cases gradually decreased to 862 cases in 2019. The number of closed litigation cases has never exceeded 1000 from 2012 onward.

Number of closed litigation cases from 2008 to 2019

Source:Judicial Yuan

Proportion of copyright, patent, and trademark litigation cases

The statistics show that patent and trademark litigation cases are the majority of all litigation cases handled and since 2014 have accounted for approximately 35% of cases each year. As for copyright litigation, the proportion has remained between 20% and 30%. Except for these three major categories, the proportion of other litigation, such as those involving trade secrets, shows an upward trend from 7% in 2008 to 13% to 2019.

Proportion of closed copyright, patent, and trademark litigation cases from 2008 to 2019

Number of copyright, patent and trademark litigation cases handled

Copyright litigation

The number of closed copyright litigation cases has remained roughly the same. Since 2009 when the IP Court was in full swing, there have been 190 to 240 cases every year, except for in 2017 where there were 157 cases. The peak was 238 cases in 2010. The number of closed copyright litigation cases has increased for three consecutive years, with 210 cases in 2019.

Number of closed copyright litigation cases from 2008 to 2019

Source:Judicial Yuan

In terms of whether the litigation was civil, criminal or administrative in nature, we find that the majority are criminal cases. In 2008 and 2009, criminal cases accounted for 72% and 66% of all cases respectively.

The proportion of civil litigation cases surpassed those of criminal cases in 2014 for the first time, and has been increasing since then. In the last three years, civil litigation cases have accounted for more than 60% of all copyright litigation cases, peaking in 2019 at 78%. It is clear that the mode of solving copyright disputes in Taiwan has transferred from criminal prosecution by the state to civil litigation between private entities.

The proportion of administrative litigation is comparatively low, except for 2013, 2016 and 2018, never having been higher than 5%.

Proportion of closed criminal, civil, and administrative copyright litigation cases from 2008 to 2019


Patent litigation

The number of patent litigation cases solved has shown a downward trend since the highest period from 2010 to 2011, with 476 and 462 cases. Although there were years with more than 300 cases between 2012 and 2015, the number has never exceeded 300 since 2016. There were 267 patent litigation decided in 2019.

Number of patent litigation cases closed from 2008 to 2019

Source: Judicial Yuan

Only civil and administrative cases are included since there is no criminal liability under Taiwan’s Patent Act. Apart from 2008 where there was a higher proportion of administrative litigation, patent litigation was roughly 60% civil, 40% administrative.

Proportion of closed civil and administrative patent litigation cases from 2008 to 2019


Trademark litigation

The number of trademark litigation cases was comparatively high between 2009 and 2011, with a peak of 390 cases in 2009. There has been a downward trend until 2007 with 248 cases, but the numbers have risen in the last two years. The number of trademark litigation cases handled was 279 in 2019.

Number of closed trademark litigation cases from 2008 to 2019

Source:Judicial Yuan

Administrative litigation has always been the primary type of trademark litigation, accounting for more than half among all trademark litigation every year. It appears to be a decreasing trend in recent years, even though administrative litigation still accounts for 53%, its lowest point reached in 2019. The proportion of criminal litigation has gradually reduced from 25% in 2008 to 13% in 2009. The proportion of reduced criminal and administrative litigation has been replaced by civil litigation, whose proportion has doubled from 17% in 2009 to 34% in 2019. Overall, administrative litigation accounts for the largest volume of cases, while criminal litigation accounts for the smallest.

Proportion of closed criminal, civil, and administrative trademark litigation cases from 2008 to 2019


By looking at these statistics, we now know more about the quantity and type of litigation cases at the IP Court. The proportion of criminal, civil and administrative litigation cases provides interesting insights into each type of litigation. In the next part, we will focus on civil litigation and further explore statistics regarding the success rate, settlement rate and claims awarded.

For more information on IP matters in Taiwan, please contact Gary Kuo at gkuo@winklerpartners.com.

This article was co-written by trainee lawyer Yi-kai Chen.

*Sources: (1) Judicial Yuan (2) IP Court (3) DATA.GOV.TW.

*Note: Some of the figures provided in this report are calculated using raw data and may differ from those figures officially reported.

An update on Taiwan’s regulatory fintech sandbox

The regulatory sandbox was set up in Taiwan two years ago. The Financial Supervisory Committee (FSC) announced that since then, there have been 13 applications with seven of them permitted to start their business under the regulatory sandbox framework.

Two of the seven permitted applications have accomplished their set targets, and therefore, have already “graduated” from the regulatory sandbox. These applications are the KGI Bank’s implementation of an online personal unsecured loan service based on cell phone bill payment records; and Fubon Bank’s interbank transfer and payment system based on blockchain technology. The FSC is considering modifying the regulations based on the result of KGI Bank’s application. Once the regulations have been amended, the business model for KGI Bank’s online personal unsecured loan service may be adopted by other banks.

The FSC has stated that Fubon Bank will probably begin a new sandbox application extending its blockchain technology for international bank transfers. It’s expected that the current regulations for inter-bank or international transfers will not be amended before the filing of the second round of Fubon Bank’s regulatory sandbox application.

The trial operation of innovative financial services is becoming more popular in the financial sector. Those with bank licenses, or those already cooperating with banks, are finding it easier to test out new ventures, which are not in conflict with current regulations, through this channel.

These developments are good news for companies that are looking to take part in Taiwan’s push for innovation and growth. If you or your company would like to know more about the regulatory sandbox or the trial operation for financial sector businesses, you can take a look at our earlier overview here.

If you have specific questions about whether your business qualifies for the sandbox and how to apply, please contact Christine Chen at cchen@winkerpartners.com.

Exploring statistics at the Taiwan Intellectual Property Court: part I overview

Since its inception in 2008, the Intellectual Property Court (“IP Court”) has heard thousands of civil, criminal and administrative actions concerning Intellectual Property Rights (“IPR”). In part one of this report, we examine statistical data from multiple sources*, shedding light on the operations of the IP Court over the past twelve years.

The IP Court

The IP Court was established on 1 July 2008 as Taiwan’s first specialized court with the aim of improving IP law enforcement, the protection of IP rights, and promoting national economic development.

The IP Court exclusively hears IPR cases, mostly relating to the Copyright, Patent, Trademark and Trade Secret Acts. In terms of jurisdiction, the IP Court is the court of first and second instance for civil actions, the court of second instance for criminal actions (i.e. appeals against District Court decisions in the first instance), and the court of first instance for administrative actions.

Number of judges and amount of cases

There are currently 14 judges at the IP Court, including 8 male and 6 female judges. The number of judges has almost doubled from the original 8 presiding at the establishment of the IP Court. The proportion of female judges has gradually increased over the years, with female judges outnumbering male judges from 2014-2016.

Number of judges from 2008 to 2019

Source: Judicial Yuan

Numbers of cases closed by each judge per month

As of March 2020, a total of 16,208 cases, litigation and non-litigation, have been lodged with the IP Court. Of these, the IP Court has closed 15,717 cases. Since 2009, when the IP Court was in full swing, an average of about 2,000 cases have been lodged every year. The peak number was 2,380 cases in 2010. The number of cases gradually decreased from 2010 to 2017, but has again increased in the past two years. Please note that the number of cases lodged in particular year include cases previously lodged but not closed as well as newly lodged cases.

The IP Court closes approximately 70% of cases lodged per year.

We now turn to the average number of cases handled by each IP Court judge per month. In 2009 and 2010, due to the large number of cases and comparatively lower number of judges, the burden on each judge was as heavy as 17 to 20 cases to be closed per month. But after 2011, with the general decrease in the number of cases and increase in the number of judges, the average number of cases per judge went down to 7 to 8 cases per month. There has been an upward trend in the number of cases per judge in the past two years.

Number of cases and average number of cases closed by each judge per month from 2008 to 2019

Source: Judicial Yuan

Proportion of civil, criminal and administrative cases handled

The IP Court hears civil and administrative IPR cases, as well as appeals in criminal IPR cases. Statistics on closed cases show that by proportion, most cases heard by the IP Court are civil suits. From 2008 to 2019, the proportion of civil cases has gradually risen from 41% to 63%. The remaining cases are split equally between criminal appeal cases and administrative cases, with about 20% each in recent years.

Proportion of civil, criminal and administrative cases closed from 2008 to 2019

Source: Judicial Yuan

Average number of days to close a case

The average number of days for a case before the IP Court from lodging to closing gradually increased from 114.87 days in 2009 to 209.14 in 2015, the highest on record. From 2016 to 2018 the average time to a decision was about 200 days, but this dropped to 182.45 days in 2019.

Average number of days to close a case from 2008 to 2019

Source: Judicial Yuan

Comparing the time required to disposition of civil, criminal and administrative cases before the IP Court, it is clear that civil cases are the most time consuming. Since the establishment of the IP Court, the number of days to disposition for a civil case has continuously gone up, peaking in 2015 at 267.68 days. From 2016 to 2019, the IP Court has steadily reduced the length of time it takes for a case to be closed. In 2019, the number of days to disposition of a civil case fell below 200 days.

As for criminal cases, the number of days to disposition has slowly increased from 88.96 days in 2009 to 142.43 days in 2019. The trend for administrative cases is similar, from 130.27 days in 2009 to 190.87 days in 2019.

Overall, criminal cases take the fewest days to a decision, while civil cases take the most. But in the last two years, the number of days to disposition for administrative cases has exceeded or equaled that for civil cases.

Average number of days to close a case from 2008 to 2019

Source: Judicial Yuan

The above statistics provide some interesting insights into the general operations of Taiwan IP Court. We will have a closer look at IP litigation statistics in part two of this report.

For more information on IP matters in Taiwan, please contact Gary Kuo at gkuo@winkerpartners.com.

This article was co-written by trainee lawyer Yi-kai Chen.

*Sources: (1) Judicial Yuan (2) IP Court (3) DATA.GOV.TW.

*Note: Some of the figures provided in this report are calculated using raw data  and may differ from those figures officially reported.

#Metoo Taiwan: how to handle sexual harassment cases at work

The #Metoo movement has increased people’s awareness of sexual harassment in the workplace. By law, companies have an obligation to create safe work environments and prevent sexual harassment from happening.

When employees report claims of sexual harassment, the objectives for the company are to a) determine whether sexual harassment occurred, b) protect the individual(s), and c) prevent it from happening again, all while maintaining a positive working environment. This sounds daunting, but can easily be accomplished by following some simple rules.

We list the following frequent asked questions and answers addressing issues which concern all employers.

What is sexual harassment in the workplace?

Taiwan’s laws define sexual harassment in the workplace into two categories:

1. Unequal targeting of an employee of one gender including pranks, jokes, yelling or other offensive conduct

This includes making sexual requests, using verbal or physical conduct of a sexual nature or with the intent to discriminate based on gender, creating a hostile, intimidating, and offensive working environment that leads to a negative impact on the victim’s personal dignity or physical liberty; or affects job performance, education, training, services, plans, activities, or other normal habits.

2. Unequal treatment of an employee because of the employee’s gender, including unequal discipline

This includes instances where an employer explicitly or implicitly makes a sexual request toward an employee or a job applicant, uses verbal or physical conduct of a sexual nature or with the intent to discriminate based on gender as an exchange for the establishment, continuance, modification of a labor contract or as a condition to their placement, assignment, compensation, evaluation, promotion, demotion, award and discipline.

Companies, local labor regulators and the courts will determine whether the behavior at issue constitutes sexual harassment based on the totality of the circumstances, including the facts of the incident, the work environment, the relationship between the parties, the accused’s testimony and conduct, and the victim’s perception of the incident.

How to prevent sexual harassment?

By law, companies have an obligation to prevent sexual harassment. Posting a sexual harassment policy in the workplace is one option.  Companies with more than 30 employees are statutorily required to announce and post a sexual harassment prevention, correction, complaint, and punishment policy.

In addition, employees should be given sufficient training on sexual harassment prevention and policies. If an employee has suffered or witnessed sexual harassment they should feel encouraged to document it and report it to the company. Fostering an open and transparent work environment can help ensure that employees feel safe and that their concerns are being listened to. Similarly, employees should be informed that the company will take necessary measures to combat harassment and that they risk punitive measures including the possibility that they will lose their job. Employees should also know that employers have an obligation to assist victims file complaints with the police. Sexual assault and other serious offenses carry criminal liability.

What should companies do when they receive a complaint?

Once the company becomes aware of a sexual harassment complaint, it is required to conduct an investigation and implement immediate and effective corrective and remedial measures. The measures include:

(i) trying by all available means to protect the victim’s rights and privacy;

(ii) strengthening maintenance and improvement of the safety and security of the workplace;

(iii) setting up a Sexual Harassment Grievance Committee (“Committee”) to investigate the complaint and make a decision within two months after the complaint is lodged (this can be extended for one more month if necessary); and

(iv) adopting other preventive and improvement measures.

Taiwan’s laws on sexual harassment at work do not have a statute of limitations for complaints. Any complaint should be addressed even though it might refer to conduct from several years ago.

How should the companies conduct an investigation and make a decision?

The key principle is to keep the matter highly confidential. Except for the victim(s) and the accused, the company should carefully select other employees as witnesses to sit in on any interviews held. In addition, all Committee members, the victim(s), the accused, and the interviewees should be informed that they have an obligation to keep all information and discussions confidential and private. Signing a non-disclosure statement would therefore be good practice. Interview records and/or meeting minutes are important documentation to serve as evidence if needed. After the investigation, the Committee should make a written decision including its grounds based on the findings of the investigation.

For confidentiality purposes, different versions of the decision can be prepared for the victim(s) and the accused. The company should give the victim(s) and the accused written notice of the conclusions of the investigation. Both the victims and the accused can file written appeals within a specific period (e.g. twenty days) from the date of receiving the decision if they are not satisfied with it. The Committee should then make a decision on whether to conclude the case or not. After this, no more complaints can be lodged with respect to the same incident.

Can companies terminate employees found to have conducted sexual harassment?

If through the investigation process it is found that the accused’s behavior constitutes sexual harassment, the company can terminate them as this constitutes a serious violation of the work rules. A termination on these grounds must be carried out within 30 days of the completion of an investigation. Advance notice and severance pay are not required in cases of sexual harassment.

Conclusion

Due to their unpleasant nature, sexual harassment complaints are not something many companies will want to deal with. Ignoring the problem however will not make it go away, and will likely make it worse. It is better for companies to be prepared before a claim is brought to their attention. We suggest companies review and check whether their current sexual harassment prevention policy is compliant with relevant laws, that all employees are aware of it, have access to it, and that related training is provided to all staff.

When sexual harassment complaints are raised, it is better for companies to consult with their legal team who will be able to advise on the process and the next steps, prepare necessary documents, review evidence, and even take part in the investigation. Doing so can help the company avoid violating the law and prevent potential legal disputes in the event that a sexual harassment complaint was handled incorrectly.

For more information on employment matters in Taiwan, contact Christine Chen at cchen@winklerpartners.com.

What should you know about food labeling in Taiwan?

When food and beverage products enter the Taiwanese market, is it advisable to use labeling in the original language only, or can you just translate it into traditional Chinese characters based on the original labeling content? Perhaps surprisingly, the answer to each of these questions is, in general, “No”.

This article will shed some light on the legal and linguistic issues involved in labeling items and using promotional claims for food and beverage products (“food products”) in Taiwan.

1. What the law says

The most important law dealing with the labeling of food products in Taiwan is the Act Governing Food Safety and Sanitation (the “Food Safety Act”). However, other laws and regulations may also be applicable depending on the nature of the products. For example, if a beverage contains more than 0.5% alcohol by volume (ABV), it will be classified as an alcoholic beverage, which means it will be governed by the Tobacco and Alcohol Administration Act.

2. What language should be used in labeling

In accordance with the Food Safety Act, labeling of food products should list all information in Chinese, written in traditional Chinese characters. Information can also be supplemented with additional text in English or other foreign languages.

To meet the language requirement, Taiwanese distributors of imported food products typically affix a separate sticker written in traditional Chinese characters in cases where the original packaging is not already localized for the Taiwan market.

Because Taiwanese distributors usually use a white sticker, some brands prefer to label their products themselves, and will discuss this with their Taiwanese distributors in advance. For instance, one well-known mineral water brand prefers to print its own translucent labels in order to maintain its brand aesthetic, and works with its Taiwanese distributor to ensure the labeling information complies with Taiwan law.

3. What information must be included on labels

3.1 General requirements

Compulsory labeling items for food products include: (i) the product name, (ii) a list of ingredients, (iii) net weight, volume, or quantity, (iv) a list of food additives, (v) information about the producer, or the local importer or distributor, (vi) the place of origin, (vii) the expiry date, (viii) nutritional information, (ix) a list of any genetically modified raw materials, and (x) any other information requested by the government.

Among these compulsory labeling items, please note that nutritional information must be included in the format requested by the Taiwan Food and Drug Administration (the “FDA”). The relevant categories are (i) calories, (ii) protein, (iii) fat, saturated fat, and unsaturated fat, (iv) carbohydrates and added sugar, (v) sodium, and (vi) other nutrients mentioned or declared in a claim on the product packaging. The quantities of the various categories can be written either as ratios expressed in terms of standard units (e.g. grams of sodium per 100 grams of the product) or as percentages based on the recommended intake of an average person per day in Taiwan.

Containers or packaging should not include claims or declarations regarding the nutrients contained in the products, unless: (a) claiming such nutrients is permissible, and (b) certain FDA standards are met. For example, declarations such as “low calorie” or “low energy” are not allowed unless the caloric value is lower than 20 kcal per 100 ml. Also, in order to claim that your product “contains Vitamin C”, the quantity of vitamin C should exceed 7.5 mg per 100 ml.

3.2 Specific requirements

The FDA has different labeling rules depending on the ingredients contained in a product. For example, prepackaged food products containing allergens should be clearly labelled with warnings on their containers or packaging. Prepackaged food products that contain genetically modified organisms (GMOs) should display the words “genetically-modified” or “with genetic modification” on the products.

4. Misleading, exaggerated claims, or those implying medical efficacy

The Food Safety Act provides that claims or declarations on labeling, promotional material, or advertising material should not be false, misleading, or exaggerated, nor should they imply medical efficacy. Generally speaking, a claim related to maintaining or improving organ function, tissue function, physiology, or physical appearance would be deemed misleading or exaggerated, except for those specially permitted by the FDA under the relevant regulations. For instance, a claim that a product “strengthens the body’s immune system” may be deemed misleading or exaggerated by the FDA, as this claim references maintenance or improvement of human physiological function. However, such a claim could be replaced with a permissible claim that the product “enhances physical strength”. In any event, the question of whether labeling, promotional material, or advertising material might be false, exaggerated, or misleading will be assessed in its entirety on a case-by-case basis.

For more information on product labeling matters in Taiwan, please contact Ling-ying Hsu at lhsu@winklerpartners.com.

Tips on entering into agreements with Taiwanese companies

Foreign parties entering into contracts with Taiwanese entities are often surprised by the simplicity of the proposed terms. While contracts drawn up between two Western parties are likely to be lengthy and exhaustive, Taiwanese contracts tend to be shorter and lighter on detail. For businesses making their first foray into the Taiwanese market, this unfamiliar style of contract may be cause for alarm, and may raise certain questions – is the other party leaving out certain important terms intentionally? What are our obligations and liabilities under the contract? And how will such a concise agreement be enforced by a court?

If you find yourself asking these or similar questions about a Taiwanese contract you’ve been asked to sign, we have good and bad news for you. The good news is that the other party is not necessarily trying to take advantage of you, and while the contract they’ve draw up might appear to be overly short, this is not unusual in Taiwan. The bad news is that such contracts tend to be short because they only contain the parties’ major rights and obligations, leaving out other potentially important details that would likely have been included if the foreign party had drafted the agreement.

This discrepancy in contractual style is largely due to differences between common law and civil law jurisdictions, as well as to differences in how Taiwanese and Western parties may view the role of the contract. In common law jurisdictions, the law is generally silent regarding the parties’ obligations, whereas in civil law jurisdictions the law already defines the parties’ obligations to some extent. Furthermore, for many Western companies the goal of a contract is to make the obligations and liabilities of the parties as explicit as possible, providing an exhaustive set of rules for how the parties’ relationship will be governed, and attempting to account for every possible eventuality. By contrast, for Taiwanese parties the contract itself is often viewed as something more like a memorandum of understanding between the parties, with the idea being that the parties can hash out the remaining details over the course of their cooperative and trust-based relationship.

In attempting to bridge this gap, instead of providing a lengthy version of revisions, foreign parties negotiating with Taiwanese entities might consider drafting a point-form summary of their proposed additions to the agreement as a start. This approach can give the Taiwanese party an overview of those added terms and conditions, making them easier to understand.

In addition to a point-form summary, foreign parties who are unsure of how to proceed in negotiations with a Taiwanese entity might consider adopting the following rules of thumb:

1. Make the wording of your clauses as concise and understandable as possible, and avoid using redundant lists of synonymous terms as a way of exhaustively covering a single concept. For example, if you want to include a requirement that your Taiwanese partner not deploy your technology or copyrighted work in any way, consider just stating this directly in plain language, rather than saying that you shall not “use, develop, extend, enhance, or deploy” the work, etc. While foreign parties may be used to this kind of “legalese”, it could be confusing and unfamiliar for a Taiwanese party.

2. Make efforts to ensure that the parties’ obligations are feasible, and do not include any unrealistic requirements that neither party will actually comply with in practice. For example, if you would like to include a requirement that your Taiwanese partner submit any and all marketing materials for your approval before their use, be sure that you also have a workable mechanism in place for them to do so. If you do not expect to actually enforce such a requirement in practice, consider leaving it out entirely.

3. Emphasize the key points of your proposed additions to the agreement. If you regard some aspect of an additional clause as being particularly important, make this clear in the wording of the clause itself. For example, if you would like your Taiwanese partner to keep certain specific information strictly confidential, it might be better to explicitly identify the information you are concerned about, rather than to rely on a blanket confidentiality requirement.

4. Localize your agreement to ensure that it does not violate any laws in Taiwan that could render the clause invalid or unenforceable. For example, the Fair Trade Act prohibits imposing restrictions on the resale price of goods, and the Personal Data Protection Act requires notice and consent to collect, process, and use personal information.

For large foreign entities using standard templates for their contracts, it might seem inconvenient or inefficient to customize an agreement in the ways suggested above. That said, localizing an agreement in this way can reduce the risk of a bad outcome in your contractual relationship with a Taiwanese party. It is also advisable to highlight the major obligations that you would like your Taiwanese partners to pay attention to in your email correspondence with them.

For more information on contract matters in Taiwan, please contact Ling-ying Hsu at lhsu@winklerpartners.com, or Peter Dernbach at pdernbach@winklerpartners.com.

Working in Taiwan as a creative professional part II: the Employment Gold Card for special professionals in culture and the arts

This is the second of two FAQs on how creative professionals can live and work in Taiwan after the Act for the Recruitment and Employment of Foreign Professionals came into force in February 2018. We have updated this FAQ to reflect changes made between February 2018 and March 2020.

Part I focused on how to obtain a freelance artist work permit. Part II focuses on how to obtain an Employment Gold Card as a special professional in the field of culture and the arts. Click on the question to be taken to the answer, click back to return to the list of questions.

1. What is the difference between the freelance artist work permit and an Employment Gold Card for a special professional in the field of culture and the arts?

2. What kinds of special professionals in the field of culture and the arts are eligible to apply for an Employment Gold Card?

3. What does broadcasting mean?

4. What does cultural administration mean?

5. Is there a minimum salary requirement for special professionals in culture and the arts?

6. What are the basic qualifications for performing arts?

7. What international arts organizations, key positions, international arts events, and awards does the Ministry of Culture recognize for performing arts?

8. What are the basic qualifications for visual arts?

9. What international arts organizations, key positions, art events, recognized awards and international arts events does the Ministry of Culture recognize for visual arts?

10. What are the basic qualifications for publishing?

11. What international media/publishers, academic awards and literary awards, and international publishing events does the Ministry of Culture recognize for publishing?

12. What are the basic qualifications for film/broadcasting/popular music?

13. What is an example of a major award from Taiwan? The United States? Europe?

14. What if I have won a major award but it is not on this list?

15. What are the basic qualifications for crafts?

16. What crafts competitions or organizations are recognized?

17. What are the basic qualifications for cultural administration?

18. How do I show outstanding performance in arts and culture to be recognized as a special professional in cultural administration?

19. What international arts and culture NGOs qualify?

20. What if I don’t meet any of the basic qualifications for recognition as a special foreign profession in culture and the arts?

21. What if my application is rejected? Are there any other paths to working in Taiwan as a professional in culture and the arts?

22. What are the benefits of obtaining an Employment Gold Card as a special professional in arts and culture?

23. Will I be eligible to enrol in Taiwan’s national health insurance program?

24. How many special professionals in the field of arts and culture have received Employment Gold Cards?

25. How do I apply?

26. What kind of documentation should I submit to show my qualifications?

27. Does my documentation to be translated into Chinese?

28. How long does the application process take?

29. Who will review my application?

30. Can I renew my Employment Gold Card?

31. Can I become a permanent resident based on an Employment Gold Card?

32. Where can I read the law and regulations myself?

33. Who can I contact in the government if I have questions?

34. If I obtain an Employment Gold Card overseas, how long do I have to enter Taiwan?

Special Professionals in Culture and the Arts FAQ

1. What is the difference between the freelance artist work permit and an Employment Gold Card for a special professional in the field of culture and the arts?

In general, the freelance artist work permit is for practicing artists. A special professional in the field of arts and culture could be an artist but more typically would be a professional with expertise in culture and the arts such as an event organizer, a NGO or government art administrator, or a literary agent. While there is some overlap, special professionals in culture and the arts encompass a broader range of professionals.

There are also some benefits to being a special professional that artists do not enjoy such as a possible income tax deduction and the ability to sponsor parents and grandparents for longer visitor visas. See Question 20 below.

An Employment Gold Card is also slightly more convenient because it combines a work permit, resident visa, and Alien Residence Certificate (ARC) on one card. As a result, the successful applicant does not need to make separate applications for a work permit, visa, and an ARC. In contrast, a freelance artist will need to make three separate applications.

2. What kinds of special professionals in the field of culture and the arts are eligible to apply for an Employment Gold Card?

Special professionals who work in the following fields are eligible:

(a) Performing Arts,

(b) Visual Arts,

(c) Publishing,

(d) Film/Broadcasting/Popular Music,

(e) Crafts, and

(f) Cultural Administration

3. What does broadcasting mean?

Broadcasting means television and radio work.

4. What does cultural administration mean?

Cultural administration means arts management or arts administration.

5. Is there a minimum salary requirement for special professionals in culture and the arts?

This has been the subject of some confusion. Unlike other kinds of special professionals, current or past salary is not a qualification for special professionals in culture and the arts. For example, one way that special professionals in finance or science and technology can qualify is to have or have had a monthly salary of at least NT$160,000. There is no equivalent salary qualification for being recognized as a special professional in culture and the arts.

6. What are the basic qualifications for performing arts?

(a) Membership in an international arts organization,

(b) Key position in government or a private organization related to culture or the arts,

(c) Key position at a leading arts or culture event,

(d) Recipient of recognized award,

(e) Judge on panel for recognized award, or

(f) Special approval by the Ministry of Culture.

7. What international arts organizations, key positions, international arts events, and awards does the Ministry of Culture recognize for performing arts?

The Ministry of Culture has listed examples in the document that can be downloaded at the bottom of this page. The key point is that these are non-exhaustive lists of examples. You can and should apply with similar organizations, positions, awards, or events. In general, alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples on the list include:

(a) American Theatre Wing (international arts organization),

(b) Manager (key position),

(c) Festival d’Avignon (international arts event)

(d) National Dance Award (award)

8. What are the basic qualifications for visual arts?

(a) Membership in an international arts organization,

(b) Key position in government or a private organization related to culture or the arts,

(c) Key position at a leading art event (such as major art exhibition or biennial),

(d) Recipient of recognized award,

(e) Judge on panel for recognized award, or

(f) Special approval by the Ministry of Culture.

9. What international arts organizations, key positions, art events, recognized awards and international arts events does the Ministry of Culture recognize for visual arts?

The Ministry of Culture has listed examples in the document that can be downloaded at the bottom of this page. The key point is that these are non-exhaustive lists of examples. You can and should apply based on similar organizations, positions, awards, or events. In general, alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples include:

(a) National Endowment for the Arts (international arts organization),

(b) Director (key position),

(c) Art Taipei (event), or

(d) New York Arts Directors Club Annual Awards.

10. What are the basic qualifications for publishing?

(a) High level position at major international media company or publisher,

(b) Literary agent with at least 10 years of experience in publishing or mass media,

(c) PhD in publishing and an international academic award,

(d) National or international literary prize,

(e) Curator for major international publishing event, or

(f) Special approval by the Ministry of Culture.

11. What international media/publishers, academic awards and literary awards, and international publishing events does the Ministry of Culture recognize for publishing?

The Ministry of Culture has listed examples here. The key point is that these are non-exhaustive lists of examples. You can and should apply based on other publishers, media, positions, awards, or events. In general, these alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples.

Please see Academia Sinica’s list of international academic research awards for awards recognized for purpose of qualification 9(c) PhD in publishing and international academic award. Examples on the Ministry’s list include:

(a) The Financial Times (media),

(b) Random House (publisher).

(c) Managing editor (key position), or

(d) Man Booker Prize (literary award).

12. What are the basic qualifications for film/broadcasting/popular music?

(a) Received major award for motion pictures, broadcasting, or popular music from Taiwan, from the applicant’s native country, or a major international award for the same,

(b) High level executive with at least five years of relevant experience at a medium-sized or large film, broadcasting, or popular music company,

(c) Has made special contributions to film, broadcast, or popular music and have at least five years of relevant experience, or

(d) Special approval by the Ministry of Culture.

13. What is an example of a major award from Taiwan? The United States? Europe?

Kaohsiung Film Festival awards are major awards from Taiwan. An example of US awards are New York Festivals  TV & Film Awards. European major awards include the MTV Europe Music Awards and the BRIT Awards. Download the document at the bottom of this page and check the ‘Required Documents’ section for Film, Broadcast and Pop Music.

14. What if I have won a major award but it is not on this list?

You can make a case for your award with the Ministry of Culture. Submit your award certificate, documentation about the award (web information is fine), and a short statement about why it is an important award.

15. What are the basic qualifications for crafts?

(a) Award in national or internationally recognized crafts competition,

(b) Recognized as a Living National Treasure by a recognized Taiwanese or international organization, or

(c) Special approval by the Ministry of Culture.

16. What crafts competitions or organizations are recognized?

The Ministry of Culture has listed examples here. The key point is that this is a non-exhaustive list of examples. You can and should try to have other awards or organizations recognized by the Ministry. In general, these will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples on the Ministry’s list include:

(a) Faenza Prize (competition award),

(b) The World Crafts Council (organization), or

(c) International Ceramics Competition Mino, Japan.

17. What are the basic qualifications for cultural administration?

(a) Position in a government department of arts and culture and evidence of outstanding performance in work related to arts and culture while holding the position,

(b) Expert or research position at a registered culture and the arts organization and evidence of outstanding performance in work related to arts and culture while holding the position,

(c) Position at an international arts and culture NGO involving arts and culture and evidence of outstanding performance in work related to arts and culture while holding the position, or

(d) Special approval by the Ministry of Culture.

18. How do I show outstanding performance in arts and culture to be recognized as a special professional in cultural administration?

Submit a letter of recommendation from the department, organization, or NGO.

19. What international arts and culture NGOs qualify?

See the list of UNESCO partnership NGOs here.

20. What if I don’t meet any of the basic qualifications for recognition as a special foreign profession in culture and the arts?

You can apply under the catch-all “Special approval by the Ministry of Culture” in each of six categories of special professionals in culture and the arts. This is to cover professionals in these fields who have other qualifications. Indicate on your application that you want the reviewing agencies to consult with the Ministry of Culture. See Question 29.

21. What if my application is rejected? Are there any other paths to working in Taiwan as a professional in culture and the arts?

Yes. If you are a practicing artist you may be able to qualify for the freelance artist work permit. Please see Part I of this FAQ. Otherwise you will need to find a qualified employer to hire you for Class A specialized (professional) or technical work if your background is in media, film, television, or arts management. If you are a practicing artist, a qualified employer can apply for a Class F artist work permit on your behalf. Please check the Workforce Development Agency’s EZ Work website for information on the requirements.

22. What are the benefits of obtaining an Employment Gold Card as a special professional in arts and culture?

(a) Ability to work in your field independently or change employers if you applied for the Employment Gold Card yourself rather than having an employer apply on your behalf,

(b) 50% deferrable income tax deduction on annual income over NT$3 million for first three years in Taiwan, and

(c) Ability to sponsor parents and grandparents for visits of up to one year. A visit may be extended.

Please see the Regulations Governing Reduction and Exemption of Income Tax of Foreign Special Professionals §3 for details of eligibility for the deferrable income tax deduction.

23. Will I be eligible to enrol in Taiwan’s national health insurance program?

Yes, but you will meet a six month residence period first if you do not have an employer. To meet the residence requirement, you must be physically present in Taiwan for a total of six months although you may make one trip abroad for no more than 30 days. The time spent abroad does not count toward the six months residence requirement.  If you are hired by an employer, you are immediately eligible for health insurance.

24. How many special professionals in the field of arts and culture have received Employment Gold Cards?

65 Gold Employment Cards were issued to special professionals in the field of Arts and Culture in the first two years of the program. In addition, employers successfully applied for 54 five year work permits for special professionals in the field of Arts and Culture based on the same qualifications.

25. How do I apply?

You or your employer must apply online through the National Immigration Agency’s Employment Gold Card platform.

26. What kind of documentation should I submit to show my qualifications?

Please see the various documentary requirements in the document available at the bottom of this page.

27. Does my documentation need to be translated into Chinese?

English language documents do not need to be translated. Documents in languages other than English or Chinese need to be translated into English or Chinese.

28. How long does the application process take?

The application review period is 30 days although this can be extended if more documents are required. In practice, it currently takes most applicants 1-2 months.

29. Who will review my application?

Applications are reviewed by the National Immigration Agency, the Ministry of Labor, and the Ministry of Foreign Affairs. In special cases, these reviewing agencies may consult with the Ministry of Culture.

30. Can I renew my Employment Gold Card?

Technically no. However, you can apply for a new Employment Gold Card before the current one expires. Your qualifications will be reviewed again.

31. Can I become a permanent resident based on an Employment Gold Card?

Yes. Currently you will become eligible to apply for permanent residence after five years of continuous residence based on a series of Employment Gold Cards. You must be present in Taiwan for at least 183 days each year. Your spouse and minor children will become eligible for permanent residence five years after you become a permanent resident if they meet the foregoing residence requirement.

32. Where can I read the law and regulations myself?

You can read the Act for the Recruitment and Employment of Foreign Professionals here. The articles that apply specifically to special foreign professionals are §4(2), §§7-9, and §13. You can read the basic qualifications for special professionals in culture and the arts here in the document available at the bottom of this page. The National Immigration Agency also has a helpful FAQ.

33. Who can I contact in the government if I have questions?

The current designated contact at the Ministry of Culture for a special professional in culture and the arts is:

(a) Ms.Chen Yu-qi (陳鈺淇): (02)8512-6772 for questions about qualifications.

The current designated contacts at the National Immigration Agency for Employment Gold Cards are:

(a) Mr. Yang Ying-cong (楊英聰): (02)2388-9393 #2558 (legal questions)

(b) Ms. He Zhi-ying (何芷瑩): (02)2388-9393 #2426 (for questions about applying through the online portal)

The current designated contact at the Ministry of Labor for Employment Gold Cards is:

(a) Mr. Huang He-qun  (黃胡群): (02)2380-1720

The current designated contact at the Ministry of Foreign Affairs for Employment Gold Cards is:

(b) Ms. Zhang Jia-hong (張嘉紘): (02)2343-2901

Please check this list of contact windows on the official website for the Act for the Recruitment and Employment of Foreign Professionals. The list also has email addresses.

34. If I obtain an Employment Gold Card overseas, how long do I have to enter Taiwan?

According to the Ministry of Foreign Affairs, you can enter (and re-enter) Taiwan so long as the Employment Gold Card is valid.

Legal issues to consider when choosing a SaaS business model

For companies offering software solutions to clients, one of the earliest and most important decisions will be whether to adopt a business model based on software licensing, or to instead opt for a “Software as a Service” (SaaS) approach. Under a licensing-based approach, the company provides a copy of its software to the customer, who may then use the software independently, subject to the terms of the licensing agreement. Under a SaaS approach, the customer is not provided with an actual copy of the software, but is instead allowed to access it remotely and use it according to the terms of a service agreement with the provider.

While the license-based approach was the dominant model for many years, recent trends in the industry indicate a shift towards SaaS as the preferred model. Following on the first major SaaS success story of Salesforce, a number of major software providers that traditionally relied on software licensing started pivoting towards SaaS, with a major example being Microsoft’s decision to offer its signature line of Office products as an online service known as Office 365. Along with Salesforce and Microsoft, other major tech companies in the field of SaaS include Amazon, Google, Fujitsu, Symantec, and IBM, just to name a few. The SaaS sector overall is booming, growing by more than 20% annually, with the global SaaS industry expected to be worth more than US$130 billion by the end of 2020.

Given the industry-wide trend towards SaaS, prospective founders of new companies will want to know the pros and cons of using a SaaS approach for their business. It is certainly not without its downsides – for example, many SaaS businesses take significant losses in the early stages of their development, as the investment made to acquire an initial customer base is only recovered slowly through regular subscription payments. That said, SaaS is appealing for other reasons, perhaps the most important being that many consumers would rather pay a regular fee for remote access instead of a single lump sum for installation of an expensive piece of licensed software, especially now that near-constant availability of internet access has become the norm in most developed economies. The age of licensing agreements and expensive, single-purchase software may be coming to an end.

Business considerations aside, what are some of the legal issues to consider before adopting a SaaS approach? Perhaps unsurprisingly, they are many and varied, and may differ from the typical issues that arise under a license-based approach. As a straightforward example, service outages are unavoidable with SaaS, including outages for scheduled maintenance. If the service contract is not worded properly, these outages could constitute a breach of contract by the provider. Service outages of this kind are generally not an issue for licensed software. It is therefore important to tailor the service contract specifically for SaaS, rather than simply adapting a pre-existing licensing agreement template. Ultimately, a well-crafted SaaS agreement – often presented to the customer as a so-called “clickwrap” contract which can be entered into with a single mouse click – may look quite different from a traditional software licensing arrangement.

Another legal issue which is increasingly important for SaaS providers is that of data security and digital privacy. SaaS users generally disclose at least some personal information to the provider when using the service, the extent and sensitivity of which can vary greatly depending on the nature of the services being provided. There is also the possibility that users may disclose information of a non-personal nature that is nonetheless highly confidential, such as when companies outsource their email, payroll, or document management systems to a SaaS provider. Whatever the nature of the confidential information being disclosed, this creates a potentially major source of liability for the SaaS provider that is unlikely to be an issue with licensed software. Moreover, the storage and transfer of such information through online networks often has an inter-jurisdictional aspect that may increase the provider’s exposure to liability for non-compliance with unfamiliar regulatory regimes in other countries. This creates a need to adapt and update data protection practices to comply with regulatory changes across all jurisdictions where the SaaS is available, which may create unforeseen expenses for the company – a lesson which many SaaS providers recently learned when the European Union’s General Data Protection Regulation (GDPR) entered into force. Even SaaS providers with no physical presence in Europe and no familiarity with European law should consider whether they are GDPR-compliant when offering their services to European clients.

There are also legal issues which can be avoided or mitigated by using SaaS instead of a licensing agreement. One much-touted advantage of SaaS is the supposed avoidance of taxes that would otherwise apply to licensing royalties, but this advantage requires closer scrutiny. While it is true that licensing royalties are generally taxable, the notion that revenue from SaaS will never be subject to tax is incorrect, and will depend on the jurisdiction where the services are offered. SaaS may be taxed differently in the various jurisdictions where it is available, even when those jurisdictions are within the same country. For example, according to currently available information, there are many jurisdictions in the United States which impose sales tax on SaaS (such as California, Illinois, and New Jersey), as well as others which do not impose such tax (such as Texas, Washington State, and New York). The situation is similar when offering SaaS across national borders. An American SaaS provider unaccustomed to dealing with a national value-added tax (VAT) will have to take VAT into consideration when expanding into Europe, where all EU member states are required to meet minimum VAT standards. VAT in the EU used to depend on the location of the seller, which notably led Apple to domicile the European wing of iTunes in Luxembourg for its relatively low VAT. However, when the EU later changed its VAT requirements to make the rate dependent on the location of the purchaser rather than the seller, VAT increased for most iTunes transactions in Europe. As changes like this continue to happen, the global landscape of SaaS taxation will continue to evolve.

Ultimately the benefits and drawbacks of SaaS will be case-specific, and will depend on factors such as the nature of the software, the nature of the customer base, the domicile of the provider, and the jurisdictions where the service will be offered, among other considerations. If you are trying to decide whether SaaS would be the right fit for your company, seek the advice of legal counsel before making a decision. And if you are already operating in the SaaS market, it is crucial that you retain legal counsel to protect you from liabilities of which you may not be aware.

For further information, please contact Greg Buxton at gbuxton@winklerpartners.com and Peter Lavelle at plavelle@winklerpartners.com.

 

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