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

When claiming trademark priority in Taiwan, choice of country can make a difference

When filing a trademark application in Taiwan, an applicant may use the first application filed in a foreign jurisdiction to serve as a basis for a priority claim under certain conditions. While the Taiwan Trademark Act allows an applicant to claim priority within 6 months of the first filing date of the foreign application, it is important to note that the Taiwan Intellectual Property Office (TIPO) will only grant a right of priority if the foreign application was filed in a member state of the World Trade Organization (WTO) or in a country that reciprocates recognition of priority rights with Taiwan, in accordance with Article 20 of the Taiwan Trademark Act:

“An applicant who has duly filed an application for trademark registration in a country which has reciprocal recognition of priority rights with the ROC, or filed such application with a member of the World Trade Organization (WTO), may claim a right of priority, for the purposes of registering the same trademark in the ROC for some or all the same goods or services, within six months from the day following the date of filing of the first such application.”

Taiwan does not have any such reciprocity agreements in place at this time with any states that are not also WTO members. As such, only foreign applications filed in WTO member states can serve as the basis for trademark priority claims in Taiwan. This restriction poses significant challenges to applicants seeking to claim priority in Taiwan using an application filed in a country that is party to the Paris Convention for the Protection of Industrial Property (Paris Convention) if that country is not also a WTO member state.[1]

Article 4 (A)(1) of the Paris Convention sets out when the right of priority can be invoked:

“Any person who has duly filed an application for a patent, or for the registration of a utility model, or of an industrial design, or of a trademark, in one of the countries of the Union, or his successor in title, shall enjoy, for the purpose of filing in the other countries, a right of priority during the periods hereinafter fixed.”

For trademarks, the priority period is 6 months from the first filing date in any country of the Union.

Taiwan’s current political status prevents it from becoming a contracting party to the Paris Convention. As it is not a party to the convention, the Taiwan trademark authorities are not bound by obligations under it. As a result, if the first application is filed in a country of the Union that is not also a member state of the WTO, the application cannot be used to claim priority for a further trademark application in Taiwan.

Countries of the Union which are not member states of the WTO include Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Democratic People’s Republic of Korea, Equatorial Guinea, Haiti, Holy See, Iran, Iraq, Lebanon, Libya, Monaco, San Marino, Sao Tome and Principe, Serbia, Sudan, Syrian Arab Republic, Turkmenistan, and Uzbekistan.

Priority claims based on applications filed in any of the above states will not be recognized by the TIPO. This does not mean that an applicant who makes an initial filing in a non-WTO member state is barred from making a claim of priority in Taiwan altogether. In practice, if an applicant makes an initial filing in one of the above states, and then later files a trademark application in a WTO member state, the first filing in the WTO member state will be deemed to be the first filing date when the applicant makes a priority claim during a trademark application in Taiwan.

While Taiwan is not a contracting party to the Paris Convention, like all WTO members it is a party to the Agreement on Trade-related Aspects of Intellectual Property Rights (the TRIPS Agreement). Article 2.1 of the TRIPS Agreement stipulates that WTO member states shall comply with Articles 1 through 12, and Article 19, of the Paris Convention. Furthermore, at the International Patent Cooperation Union Assembly in 1999, the World Intellectual Property Organization (WIPO) released a Memorandum of the Secretariat specifically referring to Article 2.1 of the TRIPS Agreement and Article 4(A) of the Paris Convention, interpreting these to mean that WTO members are obliged to recognize priority claims based on applications filed in a country of the Union, even if that country is not a WTO member.

WIPO is an agency of the United Nations (UN), and Taiwan is not a member state of the UN due to its current political status. Accordingly, the WIPO Memorandum and WIPO’s interpretation of Article 2.1 of the TRIPS Agreement and Article 4 of the Paris Convention are not binding on Taiwan’s trademark authorities. However, Article 2.1 requires all WTO members to comply with Articles 1 through 12 and Article 19 of the Paris Convention. Does this mean the TIPO has obligations under the TRIPS Agreement to recognize priority claims based on trademark applications filed in any Paris Convention state, in accordance with Article 4 of the Convention? TIPO’s position is that since the WTO has not expressly interpreted Article 2.1 of the TRIPS Agreement and Article 4 of the Paris Convention to mean that all WTO members must recognize priority claims from all Paris Convention countries, Taiwan is therefore not required to recognize priority claims based on applications filed in Paris Convention countries which are not also WTO member states. Furthermore, as Taiwan is not a Paris Convention country to begin with, it is not in violation of the letter of Article 4 of the Paris Convention, which only provides that all Union countries shall grant priority rights to trademark applications filed in other Union countries.

Although WIPO interprets Article 2.1 of the TRIPS agreement and Article 4 of the Paris Convention as requiring all WTO member states to recognize priority claims from any Paris Convention countries, the TIPO currently only accepts the WTO’s interpretation of the TRIPS Agreement. While it is true that the WIPO’s interpretation has no legal effect in Taiwan, there is nothing to prevent the TIPO from choosing to adopt and affirm it. The TIPO should reconsider its stance on the WIPO interpretation, and should willingly implement it in order to bring Taiwan in line with international standards on this issue. A willingness to do so could also reflect well on Taiwan if it seeks to become a UN member state in the future. Taiwan should also amend Article 20 of the Taiwan Trademark Act to better conform with the obligations and practices set out by the WIPO. Pending such future changes, the situation remains quite complicated, and the most straightforward path to claiming priority in Taiwan at present is to base the claim on an application in a WTO member state.

For more information on trademark matters, please contact Jason Yan at jasonyan@winklerpartners.com.

Legal intern Amber Chou contributed to this article.


[1] The Paris Convention is an international agreement established in 1883 for the protection of industrial intellectual property. As of August 2019, there are 177 Contracting Parties to the Paris Convention. These Contracting Parties are referred to as the “countries of the Union” under the treaty.

Does abolishment of the recognition system allow foreign companies to freely obtain property in Taiwan?

Since the amended Company Act came into force, foreign companies that were organized and incorporated in accordance with the laws of a foreign country have legal capacity in Taiwan. Without having to be recognized or establish a branch, a foreign company now enjoys the same rights and obligations as a domestic company, including the right to file a complaint. As such, foreign companies that are the victim of fraud will be able to file criminal litigation seeking relief in Taiwan. However, foreign companies that wish to sign contracts, make price quotations, or engage in price negotiations, bids, and procurement projects, should still establish a Taiwan representative office, while those that wish to conduct business in Taiwan should establish a branch office.

However, of the various rights an unrecognized foreign company can now enjoy, do these include the right to acquire or set up rights in real property? Prior to the 2018 amendments, an unrecognized foreign company without a Taiwan branch could not acquire real estate, or mortgage or pledge personal property. Now, foreign companies, within the extent permitted by law, have the same legal capacity as domestic companies. Although the same scope of activities representative offices and branches can undertake still apply, there remain some questions as to whether an unrecognized foreign company can directly exercise the above-mentioned property rights. We inquired with the competent authorities about this issue and received replies addressing the following topics:

Registration of Property Rights (including registration as title holder and registration of mortgages)

Prior to 2018’s amendments, foreign legal persons who wished to acquire or register real property rights needed to be recognized in accordance with the laws of Taiwan and were required to attach their recognition certificate to the application. The Ministry of the Interior has indicated, however, that foreign companies no longer need to undergo the recognition process to obtain such rights.

Nonetheless, the “Operation Directions for Foreigners to Acquire Land Rights in the Republic of China” amended on 21 March 2019 and letters of interpretation issued by the competent authority still require foreign companies attach their registration documents and that they do so in the name of the head company. A foreign company still needs to establish at least a branch in Taiwan before it can apply for real property registration, and would need its responsible person in Taiwan to file the application on its behalf. This means, that in principle a foreign company can purchase property without a Taiwan branch, but in reality they are still required to form a branch to register their real property rights. We urge the government to revise the Operation Directions for Foreigners to Acquire Land Rights in the Republic of China to remove this restriction.

Registration of Mortgages in Personal Property

Before the Company Act amendments took force, unrecognized foreign legal persons were not permitted to register mortgages in personal property, except in cases where Taiwan had signed a treaty with the home jurisdiction of the foreign legal person containing special provisions that allow for such registration. Now, the Financial Supervisory Commission has explained, a foreign company can register mortgages in personal property in its own name without needing to be recognized by the government. The “evidentiary documentation for contract parties” required for registration will instead be determined by the registration authority on a case-by-case basis. Other than foreign companies, there are no special regulations for other forms of foreign legal person. Registration of mortgages in personal property by non-company foreign legal persons is governed by other legislation, which requires that they first obtain legal personhood.

Pledges of Personal Property

Previously, unrecognized foreign companies had no legal capacity and thus had no rights to pledge personal property. The Ministry of Economic Affairs has stated that now, foreign companies have legal capacity without being recognized by the Taiwan government. Therefore, recognition is no longer required to make pledges.

Although foreign companies have legal capacity without being recognized under the new amendments, a foreign company that has not established a branch cannot acquire or set up rights in real property. The regulations need to be revised to remove this minor administrative obstacle. We believe that such revisions will go some way to making Taiwan an even more attractive place to purchase property.

For more information on this topic, please email Christine Chen at cchen@winklerpartners.com.

TIPO announces directions on third-party opinions regarding trademark applications

The Taiwan Intellectual Property Office (TIPO) has released “Operational Directions on Trademark Applications Submitted by Third Parties”, which allow third parties to provide written opinions to the TIPO regarding pending trademark applications. The TIPO hopes that this will lead to more objective decisions. The Directions are effective as of 20 June 2019.

According to the Directions, a third party must submit its opinion to the TIPO in hard copy form, and they may do so anonymously. If evidence or opinions provided are not submitted as hard copies, or are submitted on compact disc or in the form of computer records, such material may not be referred to by the TIPO during their examinations.

The third party’s opinion should also indicate the grounds on why the trademark shouldn’t be registered and should include related evidence. For example:

1. Where the mark lacks distinctiveness: the third party should provide an explanation of how the industry uses words, pictures, or symbols, which are similar to the mark in question, and submit evidence related to their opinions.

2. Where the mark is identical or similar to another person’s already filed trademark: the third party must submit objective, publicly credible evidence, and:

(a) Evidence of use must demonstrate that the earlier mark is in use for marketing purposes ;

(b) Evidence of use of the earlier mark must indicate the date and the user of the mark, and must conform to standard commercial practices;

(c) Newspaper and magazine materials are acceptable, but they must contain complete information, including the source, volume/issue, date of publication, and page number(s).

(d) Online material is acceptable, but accuracy and objectivity of such information should be cautiously employed.

3. Where the applicant has the intent to counterfeit or imitate the other person’s marks: the third party must provide evidence that the applicant has an existing contractual, regional, transactional, or other material relationship with the owner of the earlier mark that is allegedly being imitated. Such evidence could include the following:

(a) Correspondence, transaction documents, or purchase information showing a relationship between the applicant and the owner of the earlier mark;

(b) Documentary evidence showing a dependent or contractual relationship between the applicant and the owner of the earlier mark;

(c) Evidence showing that the place of business of the applicant is in close proximity to the place of business of the earlier mark’s owner;

(d) Evidence showing that the applicant was once a shareholder, representative, manager, or employee of the earlier mark’s owner, or vice versa; or

(e) Other evidence proving that the applicant was aware of the existence of the earlier mark. If they were aware, this could be covered by the blanket provision regarding “other relationships”. Where the applicant is a competitor of the earlier mark’s owner, evidence may be submitted to the examiner showing the time period, region, and scope of actual use of the trademark, as well as the accumulated goodwill of the earlier mark’s owner.

4. Where the mark is identical or similar to a well-known mark: a third party may refer to the “Examination Guidelines for the Protection of Well-known Trademarks” to determine what kind of evidence should be submitted.

5. The mark in issue involves infringement of another party’s copyrights, patent rights, or other rights: When arguing infringement of this kind, a third party should submit documentary evidence of a final civil judgment, or documents showing that a complaint citing the applicant’s infringement has been lodged with a court of relevant jurisdiction. If no final judgment has been handed down, the trademark application may be suspended pending the issuance of such judgment.

6. Other objective, concrete evidence showing that the disputed application should be denied registration according to the Trademark Act.

After the TIPO receives a third-party opinion, they may request that the applicant provide a response. However, if the examiner does not notify the applicant of a third-party opinion, that opinion cannot be used as basis for rejection.

Lastly, as third parties are not parties to the trademark application, the TIPO will not notify the third party about their opinions, nor notify them of any decisions. If a third party disagrees with the TIPO’s decision on a given application, they may file a separate opposition or invalidation action against the trademark in issue.

The Directions can be found on the TIPO’s website (in Chinese) here.

For more information on trademark matters in Taiwan, please contact Peter Dernbach at pdernbach@winklerpartners.com and Jesimy Yu at jesimy@winklerpartners.com.

Further liberalization of Taiwan’s foreign investment rules

Taiwan’s Executive Yuan has approved draft bills to amend the Statute for Investment by Foreign Nationals and the Statute for Investment by Overseas Chinese in an effort to simplify Taiwan’s foreign investment approval process. If passed into law by the Legislative Yuan, it is expected that 85% of foreign investment in Taiwan would be subject to post-investment reporting rather than pre-investment approval. The draft bills simplify review procedures, shorten the review process, and strengthen regulation of foreign investment.

Review Procedure Simplification

Under the draft bills, investments would require pre-approval or post-investment reporting depending on the nature of the investment. Investments that would require pre-approval include:

  1. Investments above a certain amount or level of shareholding
  2. Industries in which investment is restricted by law
  3. The investor is a foreign government, government-related entity, or from a jurisdiction under sanctions.

It is expected that investments over US$1 million would require pre-approval. The level of shareholding that would require pre-approval is still under review.

Restricted industries include broadcasting, power transmission and distribution, and telecommunications. The complete list may be found in the Negative List for Investment by Overseas Chinese and Foreign Nationals last revised in February 2018.

Examples of sanctioned jurisdictions include Cuba, Iran, and North Korea.

All other types of investment would be subject to post-investment reporting.

Shortened Review Process

The draft bills would also tighten deadlines for regulatory approval. The Ministry of Economic Affairs would be required to notify investors within five days if application documents are incomplete. After accepting an application, the Ministry would have one month to rule on the application unless other agencies need to be consulted. If other agencies are involved, the deadline for a decision would be two months.

Strengthened Foreign Investment Regulation

The bills would also strengthen the regulator’s post-investment regulatory powers. If irregularities requiring review are discovered in an investment following reporting of the investment, the regulator could order the investor to apply for approval. The investor could also be ordered to withdraw the investment if it is discovered that the investment affects national security. Currently the regulator’s powers are limited to ordering withdrawal of the investment or cancellation of the right to settle foreign exchange.

Registered foreign investors in listed securities would be subject to new fines of NT$240,000 (c. US$7,660) to NT$4.8 million (c. US$153,000) for violations of the Taiwan Financial Supervisory Commission’s securities regulations. Failure to remedy such violations could lead to suspension of investments in securities by the foreign investor for up to one year or revocation of the investor’s registration.

Failure to apply for equity investment approval when required would be subject to fines of NT$120,000 (c. US$3,800) to NT$600,000 (c.US$19,000) while failure to report an investment would be subject to fines of NT$60,000 (c. US$1,900) to NT$300,000 (c. US$9,600). Orders to rectify, suspending shareholder rights, and to stop or withdraw the investment could also apply.

The draft bills also would expand the definition of an investor to include foreign funds and partnerships. Currently investors include only natural and legal persons. The definition of investment would also be expanded to include agreements giving control over domestic sole proprietorships, partnerships, and companies as well as acquisition of domestic sole proprietorships, partnerships, or companies.

The Legislature is expected to review these bills during its 2019 fall session at the latest.

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

Do social media influencers need to disclose partnerships?

Social media influencers are the celebrities of the internet age, with their every movement watched closely by followers and media alike. This can have its advantages and disadvantages, as just recently a well-known influencer in Taiwan was fined by the Taipei City Department of Health for posting a review of an at-home cervical cancer test kit. The government determined that her behavior constituted advertising of a product with a medical purpose that had not received the necessary regulatory approvals. This incident gives one pause to reflect, if posting a written or video review of a product online can be construed as a form of advertising, how should consumers view articles or videos posted by influencers? Are they merely natural observations made by the influencer about certain products, or do they indicate some sort of partnership between the influencer and the companies behind those products? Also, if the influencer uses a less conspicuous approach to advertise a product in an online review, how can consumers’ rights and market order be safeguarded? This article will take a closer look at these questions from a legal point-of-view.

Disclosure of Material Connections in American Law

In order to address this new method of product promotion, the U.S. Federal Trade Commission in 2009 amended the Guides Concerning the Use of Endorsements and Testimonials in Advertising, adding posts and reviews made on social media to its regulatory scope. These amendments provide that if there is a material relationship between the poster and the producer or provider of the goods or services being reviewed, this could impact the credibility of the review and the poster must therefore provide a “Disclosure of Material Connections.” For example, when posting on social media, the poster can use hashtags, such as “#ad” or “#sponsored”, to indicate the nature of the post. On top of this, the producer or provider must also guarantee that such disclosure obligations are fulfilled. That being said, are there similar regulations and applications in Taiwan?

The obligation to disclose material relationships of endorsers and advertisers under Taiwanese law

Taiwan’s current laws and regulations do not contain anything specifically directed at the sharing of experiences by influencers or celebrities. However, if such sharing involves the influencer or celebrity’s opinions, trust, discovery, or personal experience with respect to a product or service, this could fall under the scope of an “endorsement/testimonial” provided in the Fair Trade Act (FTA).

The “Statement on the Fair Trade Commission’s Directions Regarding Advertising Endorsement and Testimonials” (hereinafter “Endorsements and Testimonials Statement”) clarifies these concepts, explaining that the terms “endorsements/testimonials” not only refer to those commercial endorsements made by celebrities, but also include experience sharing by average consumers. Moreover, “endorser” as regulated under the FTA, refers to an individual or organization who offers their reflection on a product or service, or their personal experience using that product or service. Therefore, anyone from a well-known personality, to a professional individual or organization, to an average consumer, can be considered an “endorser”. Given this, if an influencer or celebrity shares their experience with or opinions on a certain product or service with the public and such behavior is advertising in nature and is likely to affect market order and consumer interests, it will be governed by the provisions of the FTA.

Because fans and consumers are savvy to the interests and recommendations made by influencers and celebrities and purchase products and services based on these, this therefore represents their trust in the personal experience such influencers or celebrities have had with the recommended products or services. If it were to come to light that an influencer or celebrity was receiving free products or services from the producing company, or if there was another material relationship between the two, this could possibly affect consumers’ desire to purchase the product.

According to the “Truthful Representations Principle” described in the Endorsements and Testimonials Statement, if a “material relationship between the endorser and the advertiser that cannot be reasonably expected by the general public” exists, such a relationship should be fully disclosed in the testimonial. If it is not disclosed, depending on the particulars of each case, the testimonial could be considered a false or misleading representation relevant to goods or services sufficient to influence trading decisions, and thus be in violation of Article 21 of the FTA. It could otherwise be deemed a violation of the blanket provision regarding unfair practices in Article 25.

In addition, the “Obligation to Disclose Material Relationships” is specifically discussed in Point 5 of the Endorsements and Testimonials Statement. This item explicitly states that if an endorsement or testimonial is posted on social network websites (including online blog posts and posts in forums), any material relationship between the endorser and the advertiser that cannot be reasonably expected by the general public, which is not fully disclosed in the advertisement, and is sufficient to affect trading order, is in violation of Article 25 of the FTA.

We can better understand the term “material relationship that cannot be reasonably expected by the general public” by taking a look at the 2013 incident in which it came to light that the Taiwan subsidiary of South Korean electronics manufacturer Samsung was paying Taiwanese netizens to post negative online review and comments about HTC products on message boards and blogs, scrub the internet of negative news and reviews regarding Samsung’s products, and contrast Samsung’s products with those of their most prominent competitors by highlighting the deficiencies of the competitors’ products. Because consumers viewing these message boards and blogs would assume that the posts were the opinions or recommendations of average consumers like themselves, they would be unable to reasonably expect that there was a material relationship between the poster and the company. That these facts were concealed by Samsung significantly affected the credibility of the posts, and given Samsung’s long-term use of this particular approach, the FTC fined the company NT$10 million (approximately US$320,000) as a warning.

Influencers and celebrities should timely disclose their material relationships with companies

In order to maintain the impression of neutrality, and boost the credibility of their online posts, influencers and celebrities recommending certain products or services will frequently downplay the material relationship they have with the providers of those products or services. However, when there is such a relationship between the two sides, the articles, pictures, or videos posted are no longer purely experience sharing, and are rather closer to advertisements in nature. Given this, the FTA specifically includes experience sharing by celebrities or average consumers in the scope of “endorsements and testimonials,” and requires that any material relationship between the experience sharer and the company behind the product or service that cannot be reasonably expected by the general public be disclosed.

A great number of consumers are accustomed to buying products or perusing services based on the tastes and preferences of influencers or celebrities they follow online. Accordingly, if these tastemakers do not sufficiently disclose their material relationships with companies whose products or services they are reviewing, average consumers may go out and make purchases based on the mistaken belief that such reviews were made objectively in good faith. Based on previous cases, influencers or celebrities that conceal such relationships could be punished by the FTC if it is determined that the concealment is severe enough to affect market order. Moreover, if it is determined that they clearly knew or were capable of knowing that their endorsement or testimonial is misleading but still made it, the influencer and the company could also be held jointly and severally liable for civil damages.

Therefore, to reduce any possible legal risk and safeguard the trust fans and followers have in their idols, influencers and celebrities should disclose any material relationships they have.

For more information on social media and advertising in Taiwan, please contact Peter Dernbach at pdernbach@winklerpartners.com and Ling-ying Hsu at lhsu@winklerpartners.com.

Employment law changes made for dispatch workers and APRC holders

Amendments to Taiwan’s Labor Standards Act (“LSA”) passed the legislature on 26 April 2019. These amendments aim to keep pace with the rise of the gig economy and an increasingly atypical workforce. Currently, there are around 150,000 dispatch employees in Taiwan. In order to provide greater protection for these dispatched employees, two key provisions were passed:

Firstly, dispatch agencies can now only sign permanent employment contracts with dispatch employees. Such a restriction prevents agencies from using fixed-term contracts to circumvent their obligations to provide statutory severance pay. In the past, agencies would sign fixed-term contracts with dispatch employees based on the period of the dispatch project. Thus, the agency could terminate the dispatched employees on the end date of the fixed-term contracts, which meant that they did not need to have a statutory cause for termination or pay the dispatched employees severance pay. This loophole has now been closed.

Secondly, if agencies do not pay wages on time, dispatch employees can request that the client enterprise pay them instead. Client enterprises can then ask for reimbursement from the dispatch agency or deduct it from the expenses payable as outlined in the contracts they’ve signed with the agency. This measure would effectively mitigate the risk that dispatched employees would not receive their wages from the dispatch agency. It could also encourage the client enterprise to select well-operating agencies to prevent any costs being incurred from paying wages to the dispatched employees.

In separate amendments made to the Labor Pensions Act, eligibility for pensions under this act has been extended to all permanent residents (APRC holders), regardless of how they gained permanent residency status (through marriage, professional employment etc). Previously, only permanent residents married to Taiwanese nationals or those on certain work permits were able to join the pension scheme under the LPA. This change will affect how other payments, such as severance, are calculated. Any seniority accrued under the old (Labor Standards Act) pension scheme will remain the same, but seniority under the LPA will only begin to count from the time the employee decides to switch to the new pension scheme. This issue was a long standing concern of the foreign community in Taiwan, as it was seen as an obstacle to people settling here long term. The government expects 15,000 permanent residents will be positively affected by these changes.

These amendments are likely to have a significant impact on the dispatch industry, and we will continue to monitor developments once these changes go into force. Similarly, the inclusion of all permanent residents in the pension scheme will go some way to ensuring foreign nationals living and working in Taiwan receive equal treatment to their Taiwanese colleagues and neighbors.

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

Labor Dispute Act: three takeaways for employers

Taiwan’s Labor Dispute Act (“LDA”) was announced on 5 December 2018 and even though related laws, regulations and implementation dates have yet to be set, it is likely that it will come into force sometime in 2019.

The core principles of the LDA are speed, appropriateness, professionalism, effectiveness and fairness, with the given aims of readjusting the structure of the employee-employer relationship, reducing the barrier to litigation for employees and strengthening their employment rights.

It’s important to note that labor disputes that arise before the implementation of the LDA can still be dealt with under the new law, as long as they have not been completed (i.e. by settlement or final and binding judgment) by that date. Businesses employing people in Taiwan should therefore take advantage of this period and prepare ahead of time for the implementation of the LDA. Below, we outline three main points worth considering.

Scope

Employers should be aware that the scope given for disputes to be settled under the LDA is quite broad. The law defines disputes as civil in nature, covering the rights and obligations between employers and employers, or those where employment rights have been infringed upon.

However, due to the law’s basis for expanding the rights and obligations of both parties, the definition of “employee” and “employer” is relaxed, and the fact that related civil matters can be combined with or added to labor disputes, as well as allowing for counterclaims to be made during the litigation process mean that with this new scope comes increased risk. Two things that deserve special attention include:

  1. In addition to regular employers, recruitment agencies, dispatch employee companies, those that recruit people in trainee positions or similar roles are, under the LDA, considered employers. As an example, if there is a discrimination, sexual harassment or occupational safety dispute brought by a dispatched employee, then this falls within the scope of the LDA.
  2. Secondly, the court will consider the work rules, labor-management conference decisions, labor norms and so on as the basis for trials, alongside the rights and obligations provided for by law.

Review all relevant documents

Businesses should use this time to review labor contracts and work rules and ensure that all employee records are up to date and maintained according to the law. As businesses bear the responsibility for proof, they should determine that employee records are complete (employee lists, attendance records, salary information etc.) and make sure that all contracts, work rules and other internal guidelines clearly define the obligations and rights under the employee-employer relationship. Clear definitions of what constitutes “wages” and “work hours” should be given.

1. Wages

Disputes over wages occur when it is difficult to judge the amount of money that a company should provide to an employee. It is a recurring payment, for a service performed, or given as a favor (ex gratia payment), for example retention bonuses. The determination of wages will affect how salary, pensions and/or severance pay are calculated.

Under the LDA, employees are only required to prove that payments occurred as part of an employer-employee relationship. It is the responsibility of the employer to prove that bonus payments are not wages. Businesses should therefore set rules that cover bonus payments, including eligibility, payment conditions, calculations and payment terms to serve as evidence should any disputes arise in the future.

2. Work hours

Disputes over work hours usually involve the calculation of overtime. Whether or not the employee was granted permission to work outside of their normal work hours has in the past been difficult to determine. The LDA similarly provides that employees are considered to have obtained approval for any work conducted outside of their normal working hours. Employers are obligated to prove that approval was not obtained by the employee before overtime commenced.

Businesses should therefore include overtime application procedures in their employment contracts, in the work rules or other overtime guidelines. Attendance record control should also be strengthened to serve as evidence in the event a dispute arises.

Focus on prevention

Now that the cost of recourse through the courts has been lowered for employees, it is essential that employers are aware of the increased burden of proof they have to meet. To avoid costs associated with the lengthy mediation and litigation process, businesses should try to prevent cases reaching the courts. As an example, businesses should determine whether a cause for termination is lawful, and whether they have enough evidence to support their claims should a dispute be brought, and whether they have followed the law regarding terminations, before they terminate the employee. If a business is unsure, they should consult with legal counsel before they take any steps.

Once the LDA is implemented a judge will be appointed to take part in both the court-led mediation and litigation stages, and because the judge will disclose their impression in certain circumstances during mediation, it will be clear whether an employer will be successful or not during subsequent litigation. Mediation therefore will become the critical stage once the LDA is implemented. It goes without saying that it is advisable that businesses retain legal counsel before a dispute occurs or at least before the dispute enters the mediation phase.

Employees are ever more aware of their rights, and there are more avenues for recourse than before, once the LDA becomes law businesses should spend time considering how management of their employees can be adjusted to minimize disputes. By preventing disputes from occurring in the first place, the employee-employer relationship can be a harmonious one, which in turn is good for business.

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

Can special features of a celebrity’s appearance be used to sell goods?

Given the special attention the public pays to famous people, many businesses have invited celebrities to endorse their products or services as a way of increasing their exposure and improving sales. However, the cost of obtaining such celebrity endorsements can be prohibitively expensive, forcing businesses to take a step back. In such cases, would it be acceptable to instead use some identifying aspect of the celebrity’s personality or appearance in an advertisement as a means of saving some money? For example, would using a cartoon character bearing the hairstyle and No. 17 basketball jersey sported by Jeremy Lin promoting a certain product produce the desired effect of influencing word of mouth and controlling costs? Would such an approach give rise to potential legal liabilities?

The Right of Publicity in the US and Taiwan

The “Right of Publicity” in the American legal system indicates the right of a person to prohibit others from misappropriating his or her name, image or likeness, gesture, voice, or other indicia of his or her personal identity for commercial purposes without first obtaining his or her consent. This right also enables the person in question to control and profit from the commercial use of his/her name, likeness and persona. Although there is no directly corresponding right in Taiwan, in practice, Taiwan’s courts do acknowledge infringement of an individual’s portrait rights, meaning a violation of that individual’s legal interests in his or her personality. Such individuals may also, in accordance with the Civil Code, claim relevant damages against the perpetrator. Until now, however, there have been no decided cases that deal with the specific situation in which the special features of a person’s appearance are used without their permission in Taiwan. This article will therefore rely on court judgments related to portrait rights as reference in discussing the legal risks of this approach.

Possible civil liability

According to Article 18, Paragraph 1 of the Civil Code, “when one’s personality is infringed upon, they may apply to the court for removal of the infringement; if there is a likelihood of infringement of one’s personality, they may apply for prevention of the infringement.” Article 195, Paragraph 1 also provides that “if a person has wrongfully damaged the body, health, reputation, liberty, credit, privacy, or chastity of another, or has wrongfully damaged other legal interests in another’s personality and the extent of such damage is severe, the injured person may claim a reasonable amount of monetary compensation, even if such injury is not a purely pecuniary loss.” Based on these provisions, in 2012 Taiwan’s Intellectual Property Court handed down Civil Judgment No. 101-Min-Zhu-Su-19, which referred to the American concept of the “Right of Publicity” in determining that portrait rights, when viewed in terms of the commercial use of an individual’s portrait, possess commercial value, and encompass both personality and economic rights. A party that engages in the unauthorized use of the rights holder’s name, image, or other aspect to obtain benefits is in violation of the rights holder’s publicity rights. This judgment also explained that portrait rights are the right of an individual to decide whether their image or likeness, exhibiting distinctive aspects of their personality, may be publicized, and that such rights involve personality interests. Therefore, portrait rights should be classified as the “personality rights” of Article 18 of the Civil Code, as well as the “other legal interests in one’s personality” of Article 195, Paragraph 1, and should be protected as such.

According to the judgment, portrait rights allow the rights holder to decide whether and how their image or likeness is used, involve personality interests, and are economic rights in nature in that they possess commercial value when used in certain ways. However, celebrities should also have the right to decide whether to publicize the special or identifiable aspects of their appearance or personality, and to control the commercial use of these aspects. Such rights should therefore also be classified as the “personality rights” and “other legal interests in one’s personality” provided in the Civil Code.

Accordingly, using the identifiable gesture, voice, or other special feature of a celebrity’s appearance in an advertisement to sell products without their permission is likely to be considered an infringement of that celebrity’s personality rights and interests. The celebrity in question may request removal of the infringement, in accordance with Article 18 of the Civil Code, and if the infringement is severe, may claim emotional distress damages under Article 195, Paragraph 1. There is currently no clear definition of “severe infringement” of personality interests in Taiwan, and no consensus on what would constitute such infringement in practice, either. However, as expressed in the above-mentioned judgment, and in the Taiwan Taipei District Court’s Civil Judgment No. 96-Su-2645, if the person whose portrait rights were infringed is a public personality, using their image for commercial purposes without their permission is undoubtedly a case of “severe infringement”, in that such image possesses considerable economic value.

In addition, the commercial value in a celebrity’s image or persona also entails his or her economic rights in those characteristics (referring to the holdings of the Intellectual Property Court’s Civil Judgments No. 101-Min-Zhu-Su-19 and No. 105-Min-Zhu-Su-38). Celebrities may thus, in accordance with Article 184 of the Civil Code, also request compensation for economic loss if the identifiable aspects of their appearance or personality are used without their permission. Furthermore, as economic rights are used to understand the infringement of a person’s publicity rights, such infringement would be akin to someone using that person’s property to obtain benefits without having first received the property owner’s permission. In this case, the benefits obtained by the infringing individual from such use rightfully belong to the property owner, who can, by claiming unjust enrichment, request the return of those benefits to them (see the Taiwan Taipei District Court’s Civil Judgment No. 96-Su-2645 and the Intellectual Property Court’s Civil Judgment No. 105-Min-Zhu-Su-38).

Possible liability under the Fair Trade Act

Furthermore, would using a celebrity’s gesture, voice, or other distinguishing aspect of their personality in an advertisement constitute a violation of the Fair Trade Act? The Taipei High Administrative Court’s Administrative Judgment No. 89-Su-3144 held that whether the content of an advertisement is false or misleading depends on the awareness of the party being advertised to and should be determined based on the full content of the advertisement, rather than on certain parts. Also, according to the Taiwan High Court’s Civil Judgment No. 96-Chong-Shang-323, if the advertising company uses a celebrity’s image for a commercial without having received that celebrity’s prior authorization and such use is sufficient to cause consumers to mistakenly believe that the celebrity is endorsing the advertising company’s products, this is a blatant violation of the legal principle that the representations in an advertisement must be truthful, expressed in Article 21 of the Fair Trade Act. Given the above, an advertisement whose content, when considered in its entirety, contains an unauthorized use of the special gesture, voice, or other aspect of a celebrity’s appearance, could be found to constitute false endorsement and therefore a violation of Article 21. If the advertisement involves other deceptive behavior or free-rides on the commercial reputation of another, this could also be deemed a violation of Article 25.

Conclusion

Although in practice there have been no relevant court judgments in Taiwan that specifically discuss the use of a celebrity or famous person’s gesture, voice, or other distinguishing aspects of their personality in advertising, when considering those judgments that deal with portrait rights, one can conclude that such special features are the celebrity’s legal interests in his or her personality protected under the Civil Code. Furthermore, portrait rights also involve the celebrity’s economic rights in those features. Given the forgoing, if such features are infringed upon, the celebrity may request both emotional distress damages and compensation for economic loss. Lastly, advertising that has not received the authorization of the celebrity it depicts could be considered false advertising under the Fair Trade Act and violate fair trade standards. Therefore, companies looking to keep marketing budgets low should think twice before adopting this inexpensive but highly risky method.

For more information on publicity rights in Taiwan, please contact Peter Dernbach at pdernbach@winklerpartners.com and Ling-ying Hsu at lhsu@winklerpartners.com.

Frequently asked patent questions

1. Can a Patent Cooperation Treaty (PCT) application be filed as a national phase entry application in Taiwan?

No, a PCT application cannot be filed as a national phase entry application in Taiwan, because Taiwan is not party to the PCT. However, Taiwan is a member of the WTO, and a PCT application filed in a WTO member state can serve as the basis for a priority claim in Taiwan. Taiwan’s Patent Act allows for reciprocity with WTO member states and with countries that allow Taiwan nationals to claim priority. Please note that priority claims in Taiwan should be filed within twelve months of the filing date of the foreign application.

2. What categories of patents may be filed?

There are three categories of patents that may be filed in Taiwan:  Invention Patents, Utility Model Patents, and Design Patents.

3. What is the term of patent protection?

Terms of patent protection are assessed from the filing date of the application:

  • Invention Patent: 20 years
  • Utility Model Patent: 10 years
  • Design Patent: 12 years

4. Unpatentable items under the Taiwan Patent Act

  1. Animals, plants, and essential biological processes for the production of animals or plants, except for processes for producing microorganisms;
  2. Diagnostic, therapeutic and surgical methods for the treatment of humans or animals; or
  3. Inventions contrary to public order or morality

5. Does Taiwan’s Patent Act address innocuous disclosure?

Yes. For an Invention or Utility Model patent, an applicant may claim innocuous disclosure up to twelve months after the date of the occurrence of such disclosure; for a Design Patent, up to six months after the disclosure.

6. How long does it take for a patent to be granted?

Invention Patent applications are subject to substantive examination by the Taiwan Intellectual Property Office (TIPO) within three years from the filing date upon request by the applicant. The time frame from filing a request for examination through to a decision is typically 18-36 months.

Utility Model Patent applications are subject only to formal examination. The time frame from filing to a decision is generally about 6 months.

Design Patent applications are automatically subject to substantive examination upon filing. The TIPO will generally issue a decision within 10-12 months from the filing date.

7. Does Taiwan have a Patent Prosecution Highway (PPH)?

Yes. Taiwan uses the Patent Prosecution Highway (“PPH”) to expedite the examination process for corresponding applications filed in different intellectual property offices around the world. The PPH program can only be used for invention patents, and does not apply to utility model or design patent applications. To date, the TIPO has collaborated with the United States Patent and Trademark Office (USPTO), the Japan Patent Office (JPO), the Korean Intellectual Property Office (KIPO) and the Spanish Patent and Trademark Office (SPTO). The TIPO says that applications using the PPH program on average receive their first office actions within two months from the date of the PPH request, and a decision within six months, compared to a normal time frame of 18-36 months.

8. Does Taiwan have a Patent Document Exchange (PDX)?

Yes. Taiwan currently has PDX agreements in place with the KIPO and the JPO. Both agreements permit applicants filing invention or utility model patents with the TIPO (the ‘Office of First Filing’, or OFF) to obtain an access code that can be used to file priority documents with either the KIPO or the JPO (the ‘Office of Second Filing’, or OSF). Similarly, applicants filing in Korea or Japan can obtain an access code for a priority filing in Taiwan. The TIPO requests that these codes be received within 16 months of the first filing date.

9. Is accelerated examination available?

Yes. An applicant may request accelerated examination under any of the following conditions:

The Invention Patent application’s corresponding foreign application has been allowed upon substantive examination by a foreign patent office;

  1. The EPO, JPO, or USPTO has issued an examination opinion with applicable search report on the corresponding foreign application but has not yet allowed the application;
  2. The invention claimed in the Taiwan application is essential to commercial exploitation; or
  3. The invention is related to green energy.

10. Are post-grant amendments of an invention patent possible?

Post-grant amendments of an Invention Patent are allowed, but only to delete claims, narrow the scope of claims, correct errors, or clarify ambiguous statements. Except for an amendment to correct a translation error, a post-grant amendment may not extend the scope of the claims as published in the Patent Gazette.

11. What remedies are available for infringement?

A civil suit for patent infringement may be brought as an independent civil claim in Taiwan. Civil damages are based on:

Actual damages suffered by the patent owner;

  1. The benefit to the defendant arising from the infringement of patent rights; or
  2. Reasonable royalties that may be collected from exploiting the invention patent being licensed.

Taiwan has a specialized Intellectual Property Court, which acts as the court of first instance for civil infringement claims.

12. Is border enforcement available?

Yes. Patent owners may apply to Customs to detain infringing imports or exports. The patent owner will need to post a security bond with Customs. The patent owner must also file an action for patent infringement within 12 days of filing the application to Customs.

For more information regarding patents in Taiwan please contact Peter Dernbach at pdernbach@winklerpartners.com and Betty Chen at betty@winklerpartners.com.

Digital currency regulation in Taiwan

Digital currency has been around since currency account balances were first stored on digital machines (i.e., computers). Later, banks effected electronic transfers of this digital currency. Credit card and debit cards then allowed consumers to make purchases using digital currency. Early digital currency was digitized fiat currency issued by governments and held with and transferred among financial institutions and consumers. Over the past two decades, advances in technology have allowed currencies to be issued by organizations other than governments and transferred and held by organizations other than financial institutions.

As technology advances, market participants are increasing in number and becoming more decentralized. Financial market regulators are struggling to keep pace with the financial products and services that technological innovation is making possible.

Some regulators have moved more swiftly than others to address market changes resulting from this technological innovation. Although Taiwan’s financial and banking regulators have not moved as rapidly as, say, their counterparts in Singapore, in recent months an encouraging trend is taking shape. Possibly taking cues from the Monetary Authority of Singapore, Taiwan appears to be consolidating the regulation of digital currency related issues under a single regulatory body, the Financial Supervisory Commission (the “FSC”). Placing primary responsibility for the regulation of digital currencies in the hands of a central authority will likely result in a more comprehensive, cohesive regulatory landscape.

Recent legislative amendments to the Money Laundering Control Act (the “MLCA”) are already paving the way for the FSC to regulate cryptocurrency transactions more closely. Passed in November 2018, the amended MCLA states that platforms selling virtual currency (“VCP”) fall under the purview of the MCLA and shall be regulated as financial institutions. As the FSC is the primary regulator with respect to other financial institutions, it is expected that it will also oversee VCPs.

The FSC has already begun exerting its influence over virtual currency exchange by prohibiting Taiwan banks from entering into cryptocurrency transactions in which the identity of the e-wallet holder is unknown.

FSC Chairman Wellington Koo recently announced that the FSC will also be moving forward to provide guidance on security token offerings. Mr. Koo promised such guidance by the end of June of this year.

In addition to regulation of cryptocurrencies, the trend towards a more unified, consolidated approach to digital currency regulation is evident in the electronic payment area. Currently, electronic stored value cards (電子票證) are regulated separately from other forms of electronic payment (電子支付). The FSC expects to send a draft comprehensive electronic payment law to the Legislative Yuan as early as March of this year. This draft law will place the regulation of all forms of electronic payment (including electronic stored value cards) under the same regime.

Taiwan is proceeding cautiously into the digital currency world. However, recent announcements by the FSC indicate that under their guidance the pace of change may quicken in 2019. We will continue to monitor the developments in this area closely.

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

Jeremy Olivier also contributed to this update.

 

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