In-depth treatment of selected topics in Taiwan law for legal professionals
Taiwan has had data protection laws since the mid-1990s, but a new era in data protection began in October of 2012 when the Personal Information Protection Act of 2010 (the “PIPA”) took force.
Enforcement of the PIPA is dispersed. Instead of having a single data protection authority (DPA), central government regulators share responsibility for enforcing the PIPA along with local governments. In addition, the Ministry of Justice plays an important coordinating role and interprets the PIPA.
The only regulator that publishes its data protection enforcement decisions is the Financial Supervisory Commission (“FSC”). The FSC is Taiwan’s super-regulator for financial industries. In this role, it oversees securities and futures firms, banks, and insurers. FSC data protection enforcement decisions are thus an important source for understanding enforcement of the PIPA by Taiwan’s executive branch.
Enforcement Cases by the Numbers
The FSC has published 16 enforcement decisions since the PIPA took force in 2012. The number of enforcement decisions in each year has varied. For example, while seven decisions were issued in 2016, no decisions were issued in 2015. Between 2012 and 2014, the FSC issued an average of two or three FSC enforcement decisions each year.
The seven 2016 enforcement decisions included five enforcement decisions against insurance companies by the FSC Insurance Bureau and two decisions against banks by the FSC Banking Bureau. As of this writing (March 2017), the FSC has already issued two enforcement decisions. Both of the 2017 decisions have been against insurers.
Of the various FSC sub-agencies, the Insurance Bureau has been the most active in its PIPA enforcement. Eleven of the 16 FSC enforcement decisions since 2012 have been insurance cases while just five decisions have been banking cases. Thus two trends can be identified. The first is increasing overall enforcement activity by the FSC since 2016. The second is that the FSC is especially concerned about the collection, processing, and use of personal information by the insurance industry.
We anticipate that these trends will continue and expect to see an increasing number of PIPA enforcement cases issued by the FSC with a focus on the insurance industry.
Types of Enforcement Decisions
FSC Enforcement decisions since 2012 can be categorized into four types: data breach cases, failure to obtain consent cases, inadequate security cases, and cases involving failure to notify.
1. Data Breaches
Data breaches are the most common reason for enforcement decisions. In general, these cases have involved negligent disclosures of customer personal information. In some cases, the disclosures were caused by poorly designed or maintained internal control and internal audit mechanisms while in other cases there were procedural errors in the course of business. Examples of data breaches cases are briefly discussed below in reverse chronological order by the date of the enforcement decision.
10 January 2017: Nan Shan Life Insurance Co., Ltd. improperly mailed policyholder personal information to third parties in the course of mailing notices to policyholders. The FSC found that the personal information disclosures were caused by execution errors in Nan Shan’s computer system. This enforcement decision is notable because the FSC also found that the breach was material and penalized Nan Shan for failing to immediately report the breach. This is the only enforcement decision to date in Taiwan that addresses late reporting.
11 April 2016: A customer requested information about salary transfers to the customer’s account at Cathay United Bank. In its response to the customer’s request, Cathay United Bank’s Da’an Branch disclosed the personal information of another customer to the requesting customer.
22 August 2013: CTBC Bank committed an error in its internet banking operations that enabled any internet user to enter, browse, and obtain customer information stored in the bank’s internal index pages.
2. Failure to obtain consent
Enforcement decisions have also been made against financial enterprises who have violated the PIPA by providing personal information of customers for use by third parties without first obtaining the customers’ consent. This type of case is illustrated by the following enforcement decisions.
29 June 2016: Mega International Commercial Bank, without having obtained the consent of its customers, provided basic customer personal information to its affiliate Chung Kuo Insurance Company Limited to conduct telemarketing.
4 October 2013: A Nan Shan Life Insurance solicitor, without obtaining written permission from the policyholders, gave personal information of customers to a third party whom the solicitor had engaged to answer policyholders’ questions about a policy.
10 July 2013: A Chang Hwa Commercial Bank, Ltd. employee made a query to the Joint Credit Information Center about a customer’s credit information without having obtained the customer’s written consent.
3. Inadequate Security
Cases of this type include the following:
16 November 2016: PCA Life Assurance Co., Ltd. inadequately implemented its 2015 personal information inventory operations, resulting in failure to delete personal information before the expiration of the relevant retention period.
11 November 2016: Mercuries Life Insurance Co., Ltd. was penalized for having inadequate overall personal data protection measures and a lack of effective internal control mechanisms in conducting its information operations.
8 September 2016: A Fubon Life Insurance Co., Ltd. customer complaint handler failed to adopt appropriate security measures and failed to use encryption when sending photocopies of policyholder call-in card applications to personal email addresses.
4. Failure to notify
14 February 2017: Mercuries Life Insurance Co., Ltd. was penalized for failing to expressly inform data subjects of statutorily required matters when it collected personal information of customers through its official website on a web page it provided for customer email queries about insurance.
Under the PIPA, regulators are empowered to order private sector actors to remedy a violation of the PIPA. Failure to remedy the violation by a prescribed deadline will result in an administrative fine ranging from NT$20,000 (c. US$650) to NT$500,000 (c. US$16,300). However the FSC also has the power to fine financial businesses when they violate rules governing internal controls, and these fines are considerably higher than the fines that may be imposed under the PIPA. A notable feature of the FSC enforcement decisions is that when the FSC determines that a financial institution has violated the PIPA, it usually also finds that the same facts simultaneously constitute a violation of internal controls. As a result, the fines imposed in most FSC enforcement decisions are generally the higher fines for violation of internal controls.
In less serious cases, the administrative fine for a violation of internal controls in a data protection case is NT$600,000 (c. US$19,570). However higher fines are imposed in more serious cases. For example the FSC imposed a fine of NT$1.2 million (c. US$39,100) in the 2016 PCA Life Assurance case where PCA Life Assurance failed to delete personal information by the expiration of the retention period. Relatively high fines were also imposed in two cases involving external leaks of personal information: NT$3 million (c. US$97,830) in a 2014 case in which an ex-employee of Cathay United Bank had downloaded personal information of customers onto a private external storage device, and NT$4 million (c. US$130,400) in the 2013 CTBC Bank data breach case.
Typically, these fines for violations of internal controls are also accompanied with an order to remedy the PIPA violation by a prescribed deadline. In the majority of cases, a deadline of one month was set to remedy the PIPA violation. In a minority of more serious cases, a deadline ranging from seven to ten days was set.
To date, the FSC has imposed stand-alone PIPA fines in just three cases: the 2016 Mega International Commercial Bank decision, the 2013 Nan Shan Life Insurance decision, and the 2013 Chang Hwa Commercial Bank decision. The administrative fines imposed by these decisions were respectively: NT$50,000 (c.US$1,630), NT$20,000 (c. US$650), and NT$50,000 (c. US$1,630). All three of these cases fall in the category of providing a customer’s personal information for use by a third party without having obtained consent.
Taiwan’s Financial Supervisory Commission is actively enforcing violations of the PIPA with remedy orders and fines. While fines remain low by international standards, Taiwan’s media covers violations of data protection law extensively. As a result, members of the public and consumers are increasingly aware of their rights under the PIPA and are already highly sensitive to disclosures of personal information. This will put pressure on other regulators to follow the FSC’s lead and publish enforcement decisions. Ultimately Taiwan is likely to follow regional and international trends and replace dispersed enforcement with centralized enforcement by a unitary data protection authority.
For more information on data protection and privacy matters in Taiwan, please contact Chen Hui-ling at email@example.com.
We receive regular inquiries from foreign clients as to whether a particular transaction requires making a merger control filing in Taiwan. The following is the first installment of a multi-part series in which we explore commonly asked questions related to merger control in Taiwan. This first installment covers basic questions related to the scope and coverage of Taiwan’s merger control regulations.
1. Does Taiwan have merger control regulations?
Yes. Taiwan’s Fair Trade Act (the “FTA”) includes merger control provisions. The FTA empowers Taiwan’s Fair Trade Commission (the “FTC”) to prohibit transactions it determines would have a net-negative market impact, after weighing the transaction’s anti-competitive or other adverse effects on the Taiwan market against any countervailing economic benefits.
2. Does Taiwan have pre-merger reporting requirements?
Yes. The FTA requires pre-merger notification if a regulated transaction meets certain market impact thresholds.
3. Do global transactions require filing in Taiwan?
Yes, provided that the transaction: (i) falls within one or more of the categories of regulated transactions and (ii) meets certain market impact thresholds, as set forth in the FTA.
4. What types of transactions are covered by the FTA?
The FTA applies to typical merger and acquisition transactions such as statutory mergers and share or asset purchases. Share and asset purchases for less than the entirety of a target business may be deemed regulated transactions under the FTA. With respect to share purchases, any transaction resulting in the acquirer holding one-third or more of the voting shares of the target would be covered by the FTA. Likewise, an asset purchase of a principal or major portion of the assets of a target would fall within the scope of the FTA. The FTA’s regulatory purview also extends to other business combinations including joint ventures and various other arrangements whereby one entity has de facto or contractual control over the operations of another.
5. What are the relevant market impact thresholds?
The FTA requires filing if any one of the following conditions exists with respect to a regulated transaction:
- upon consummation of the proposed transaction, the combined entity would control one-third of the relevant market in Taiwan;
- prior to the consummation of the proposed transaction, one of the participants in the transaction controls one-fourth of the relevant market in Taiwan;
- during the immediately preceding fiscal year, (A) one of the transaction participants had sales revenue in Taiwan exceeding NT$15 billion (~US$465.5 million) and (B) the other participant had sales revenue in Taiwan exceeding NT$2 billion (~US$62.1 million); or
- during the immediately preceding fiscal year, (A) one of the transaction participants had global sales revenue exceeding NT$40 billion (~US$1.32 billion) and (B) two participants each had sales revenue in Taiwan exceeding NT$2 billion (~US$62.1 million).
6. Are there any exemptions to the FTA filing requirements?
Yes. Common restructuring transactions are exempted from the FTA filing requirements. Such transactions include:
- the merger of (i) a parent enterprise (the “Parent”) with (ii) another enterprise, 50% or more of the voting interests of which is held either directly by the Parent or indirectly by a wholly-owned direct subsidiary of the Parent;
- the merger of enterprises 50% or more of the voting interests of which are held directly or indirectly (not illustrated below) by the same Parent;
- a transfer by a Parent of (i) all or a principal part of its business or assets or (ii) all or any part of its business that could be operated separately, to another newly established enterprise wholly-owned by the Parent; and the redemption of shares from certain shareholders by an enterprise (pursuant to certain provisions in the Company Law or the Securities and Exchange Law) resulting in any remaining shareholder(s) holding more than one-third of the outstanding shares of the enterprise.
In the coming months, we expect to publish additional installments of this FAQ. Future installments will cover questions related to the definition of “relevant market” as well as filing procedures and content. For more information on mergers and acquisitions in Taiwan, please contact Gregory A. Buxton at firstname.lastname@example.org.
 Note that different sales revenue thresholds apply to financial holding companies.
This is a Spanish translation of our English article “Ten tips for Taiwan employment contracts”, which you can find here.
Esta es la traducción al español de nuestro artículo en inglés “Ten tips for Taiwan employment contracts”, el cuál se encuentra disponible aquí.
El ámbito laboral se ha convertido en un tema de suma importancia en Taiwán dado que el número de demandas laborales iniciadas por empleados ha incrementado significativamente en años recientes. En este artículo presentamos una lista de diez consejos a tener en cuenta toda vez que un empleador se encuentre negociando o elaborando un contrato de trabajo en Taiwán. Pese a no proporcionar una lista exhaustiva, este artículo contiene información vital para los contratos de trabajo a ser implementados en Taiwán para evitar los problemas que vemos de forma regular en nuestra práctica laboral.
1. Uso de un contrato de trabajo escrito
Taiwán no tiene leyes o regulaciones que específicamente regulen los contratos de trabajo y por tanto, los empleadores gozan de cierta flexibilidad con respecto al formato de sus contratos de trabajo. Pese a que no existe una ley explícita que requiera contratos laborales escritos, para asegurar claridad y evitar potenciales disputas con los empleados en el futuro, es recomendable que los empleadores usen contratos laborales escritos en Taiwán.
2. Uso de un manual del empleado / reglas de trabajo
Empleadores que contraten 30 o más empleados deben tener un manual del empleado o reglas de trabajo. Aunque no se llegue al límite de 30 empleados, muchas empresas eligen tener de forma separada, un manual del empleado o reglas de trabajo que también formen parte del contrato laboral. Tener un documento separado (pero vinculante) que detalle elementos de la relación laboral como los derechos de propiedad intelectual, disciplina y convenios restrictivos, otorga a los empleadores mayor seguridad respecto a los derechos y obligaciones mutuas emergentes del contrato de trabajo.
3. Establecer claramente el término del contrato
Los contratos laborales en Taiwán son de término indefinido a menos que se especifique un término fijo. Los empleados empiezan a gozar de todos los derechos laborales otorgados bajo ley en cuanto comienza la relación laboral. Mientras que los periodos de prueba pueden existir en los contratos laborales, éstos son de uso limitado en Taiwán. Esto se debe a que la terminación de la relación laboral en Taiwán no puede ser a mera voluntad del empleador, sino que dicha terminación debe cumplir siempre con los requisitos especificados bajo la Ley de Normas Laborales (“LSA” por sus siglas en inglés).
4. Protección a la propiedad intelectual
Entre las buenas prácticas en contratos laborales está la clara definición de los derechos de propiedad y creación en relación a toda propiedad intelectual ya existente y futura que se encuentre dentro del alcance de las funciones del empleado. La protección puede ser reforzada haciendo referencia en el contrato laboral al manual del empleado o cualquier otro acuerdo escrito que detalle con especificidad los derechos de propiedad intelectual relevantes.
5. Definir claros convenios restrictivos
De forma similar a los derechos de propiedad intelectual, describir claramente los derechos y obligaciones de los empleados durante y después de terminada la relación laboral con respecto a secretos comerciales, información confidencial, y restricciones a la competencia y solicitación, es un aspecto crucial en cualquier contrato de trabajo en Taiwán. El alcance de los convenios restrictivos con respecto a la no competencia y solicitación deben ser razonables. Por ejemplo, el término de duración de la prohibición a la competencia no puede ser más de dos años, el empleador debe tener un interés legítimo a proteger, las funciones laborales y la posición del empleado que se retira deben ser suficientes para otorgarle acceso al interés legítimo que el empleador pretende proteger, y el empleado debe recibir compensación razonable por cualquier pérdida ocasionada por aceptar el convenio de prohibición a la competencia. Si la cláusula no se ajusta a los principios antes mencionados, es muy probable que las cortes de Taiwán no la consideren válida y ejecutable.
6. Cumplir con leyes relacionadas a la transferencia / despido de empleados
Todo empleado despedido a raíz de un proceso de restructuración o cambio de propietarios de la empresa tiene derecho a indemnización y preaviso bajo la ley. La LSA especifica las circunstancias en las que un empleado puede ser despedido legalmente en Taiwán con preaviso e indemnización, como en el caso de transferencia de propiedad o suspensión de actividades de la empresa. Existen muy pocas circunstancias en las que un empleador puede despedir a un empleado sin preaviso o indemnización. Ejemplos de estas limitadas circunstancias son el grave incumplimiento del contrato laboral o la divulgación de secretos comerciales de la empresa por parte del empleado.
7. Elegir el idioma correcto
Las cortes de Taiwán reconocen los contratos de trabajo redactados en chino o inglés. En el caso de existir un contrato laboral en ambos idiomas, es recomendable especificar en el contrato, cual versión rige en caso de un conflicto entre ambas versiones. Es bueno tomar en cuenta, que muchas veces las cortes en Taiwán deciden que la versión que rige es la del idioma chino.
8. Definir jurisdicción y mecanismos de resolución de disputas
La vía de mediación es disponible a los empleados ya que cada gobierno local en Taiwán tiene una oficina que ofrece mediación y apoyo legal sin costo a empleados que tengan disputas con sus empleadores. Las cortes de Taiwán tienen divisiones especializadas en manejar casos relaciones a temas laborales. Es común que los contratos laborales, particularmente aquellos que implican a entidades o empleados extranjeros, contengan una cláusula que indica que la ley aplicable en caso de disputa es la de la República de China (Taiwán) y que las partes deben usar sus mejores esfuerzos para llegar a un acuerdo mutuo mediante consultación o mediación antes de iniciar un litigio.
9. Especificar beneficios requeridos por ley
Las leyes de Taiwán establecen que los empleadores que tengan una entidad legal constituida en Taiwán deben aportar al Seguro Nacional de Salud y al Seguro Laboral de cada empleado. Estos y otros beneficios, los cuales deben ser pagados por el empleador, no pueden ser alterados por parte del empleador de forma desfavorable en el contrato laboral.
10. Evitar cambios a las condiciones laborales
Existen restricciones impuestas a empleadores que pretendan cambiar las condiciones laborales del empleado (como el lugar de trabajo) en un contrato de trabajo. Por ejemplo, muchas empresas transnacionales desean poder decidir el lugar de trabajo de sus empleados arbitrariamente; sin embargo, nuevas modificaciones a la LSA establecen que los empleadores que pretendan hacerlo deben cumplir con algunos principios generales o sino estarían incumpliendo el contrato laboral y la LSA. Los principios generales incluyen: (a) el cambio debe ser por las necesidades de la empresa y por un propósito justificable; (b) no pueden hacerse cambios desfavorables en cuanto a salario u otras condiciones de trabajo; (c) los cambios deben ser adecuados a las habilidades especificas del empleado; (d) los empleadores deben proporcionar asistencia a los empleados si el lugar de trabajo es inconveniente; y (e) los empleadores también deben poner en consideración los intereses de los familiares del empleado.
Tomando en cuenta los diez consejos arriba mencionados al redactar sus contratos de trabajo puede ayudar a evitar potenciales disputas laborales de forma preventiva. Para más información sobre temas laborales en Taiwán, favor contáctese con Christine Chen email@example.com o +886 (0) 223112345 externo 307.
Transactional attorneys are intimately familiar with due diligence requests (“DDR”). A prospective buyer (“Buyer”) will typically deliver to a target company (“Target”) a DDR which includes a section requesting information related to a Target’s employees and the circumstances of their employment. In Taiwan, we advise Buyers to take steps to ensure they do not inadvertently collect such employees’ personal information, thus violating Taiwan’s Personal Information Protection Act (“PIPA”).
PIPA permits personal information to be collected and processed only in situations where there exists: (i) a specified purpose for such collection and processing; and (ii) one or more of six qualifying conditions.
Although the specified purpose must be reasonable, the data collector or processor is largely left free to determine the purpose for collecting or processing any personal information. There is no indication that due diligence associated with an acquisition transaction would not be considered a reasonable purpose for the collection or processing of personal information under PIPA.
Unlike the purpose requirement, the list of qualifying conditions is strictly limited to the specific conditions delineated in the statute. In the context of an acquisition transaction, the relevant qualifying conditions would likely be one or more of the following:
- a contractual or contract-like relationship between data processor or collector and the data subject; or
- the data subject’s consent.
Contract or contract-like relationship
In an acquisition context, a Buyer, as data collector, is not in direct privity of contract with Target’s employees; therefore, no direct contractual relationship exists between the data collector and the data subject. However, PIPA and related regulations allow for a less formal contract-like relationship to suffice as a qualifying condition for personal data collection. Such relationships are typically found to exist in pre-contract negotiations or contract formation processes. For example, a contract-like relationship would exist between an employer and a potential employee during the hiring process, prior to any contract actually being signed. Given that Buyers normally do not negotiate with a Target’s employees during the pre-signing phase of a transaction, it is extremely doubtful that any contract-like relationship would be found to exist which would justify the collection of Target employees’ personal information.
We note that this reading of the PIPA creates a slight tension with Taiwan’s Business Merger and Acquisition Act (“BMAA”) pursuant to which a Buyer may negotiate with a Target to determine which of Target’s employees will be retained post-closing. However, the intention of the BMAA to allow such negotiations is not a basis to find that a Buyer has a contract-like relationship with a Target’s employees sufficient to justify collection of their personal information.
If there is neither a contractual nor contract-like relationship between the Buyer and Target’s employees, the only remaining qualifying condition that would allow for the collection of the employees’ personal information would be receipt of consent from the employees themselves. In the vast majority of cases, this is both impractical and undesirable as Buyers normally wish to keep transactions as confidential as possible.
Absent a clear cut path to the legal collection of Target employees’ personal information, we encourage prospective Buyers to take steps to ensure that no personal information is collected from Taiwan data subjects.
In Taiwan, personal information is defined as any information that can directly or indirectly identify a natural person. Buyers should, therefore, request any Target to redact employees’ names, national identification numbers, addresses, and any other information that could identify an employee from all employment agreements before disclosing such agreements. Similarly, payroll information can be disclosed only if employees’ names and other identifying information are redacted.
We recommend that any DDR sent by a Buyer to a Taiwan Target clearly request that any and all employee information to be provided pursuant to such a DDR must not contain employees’ personal information. For more information on data protection and privacy matters in Taiwan, please contact Chen Hui-ling at firstname.lastname@example.org and Daniel Chen at email@example.com.
 It is important to note that a Buyer’s liability extends to the acts of its agents and professional advisors. So, a Buyer would remain liable even if a DDR were sent out on its behalf by its lawyers or other professional advisors.
The Taiwan Customs Administration, Ministry of Finance, amended the Regulations Governing Customs Measures in Protecting Rights and Interests in Trademarks (“the Regulations”) on 30 December 2016. The amendment is aimed at providing more complete protection for the rights of trademark holders and strengthening border control measures by Taiwan Customs against trademark-infringing goods. It also is designed to harmonize with Taiwan’s policies of promoting e-government and streamlining administrative procedures. The amended Regulations entered into full force from 1 January 2017.
Below are some key points of the amendment:
1. The amended Regulations provide for protection on a per-registration rather than per-design basis
Among the protective measures under the Regulations are a mechanism for trademark rights holders to apply, by a notice to Customs, for protection of registered trademarks (“protection-upon-notice”), and a mechanism for rights holders to file complaints with Customs about specific goods suspected of infringing trademark. In the past, applications for protection-upon-notice of registered trademarks were required to be submitted on a per-design basis, with the result that multiple registrations of a single trademark design would be bundled into a single protection-upon-notice case. But as different registrations may have different protection periods and scopes of protection, a need to differentiate between registrations was recognized. The amended Regulations, in Article 3.1, therefore expressly require trademark rights holders seeking protection to apply on a per-registration rather than per-design basis and to separately record with Customs the information for each trademark registration number.
2. The protection-upon-notice period is lengthened, and renewal procedures are simplified
Before the amendment, Customs would grant approval for protection-upon-notice for a one-year term only, and trademark rights holders were required to apply for renewal annually. To simplify matters, Article 4.1 of the amended Regulations revises the protection-upon-notice period to “from the date of approval by Customs to the expiration of the trademark rights term”, eliminating the need for annual renewal applications. A trademark rights owner who applies for and obtains renewal of an expiring trademark now needs merely to present Customs with documentary proof of the renewed trademark term to update the information on record with Customs and renew the protection of the registration.
3. The amendment specifies the obligation of the trademark rights holder or agent to cooperate with Customs, and allows Customs to terminate the protection period if unable to contact the rights holder or if an offshore rights holder no longer has a Taiwan agent
To strengthen the obligation of trademark rights holders or their agents to cooperate in trademark protection, the amendment newly provides, in Article 5, that Customs may terminate the protection-upon-notice period early in either of the following circumstances: (1) Customs is unable to contact the trademark rights holder or the rights holder’s agent using the information submitted in the application for protection-upon-notice; (2) a trademark rights holder without a domicile or place of business or no longer has an agent in Taiwan because its relationship with its agent has been terminated or is extinguished by some other cause.
4. When a trademark rights holder files a complaint against specific import or export goods suspected of infringement, Customs is now required to notify the trademark rights holder of the acceptance of the complaint or the reasons for non-acceptance of the complaint.
When a trademark rights holder takes the initiative to file a complaint against import or export goods suspected to infringe the holder’s trademark rights, under Article 6.2 of the amended Regulations, Customs is required to notify the trademark rights holder of whether the complaint is accepted, and when Customs declines to accept a complaint, it is further required to specify the reasons for non-acceptance.
5. The amendment permits Customs, upon application, to provide photographs of suspected infringing items to trademark rights holders to help them assess whether products are genuine or counterfeit, to expedite handling procedures
To help trademark rights holders judge more quickly whether to proceed to Customs to assess suspected infringing goods, Article 7.5 of the amended Regulations permits Customs, upon application, to provide photographs of suspected infringing items to trademark rights holders. Rights holders may not, however, base their determination of whether there is infringement simply on photographs of import or export goods provided by Customs.
6. A trademark rights holder who lacks a domicile or a place of business in Taiwan is required to designate an agent to act on the rights holders’ behalf in exercising the trademark protections under the Regulations
In principle, a trademark rights holder may choose at its own discretion whether to designate an agent to act on its behalf to exercise the protections under the Regulations. The exception is a trademark rights holder who has neither a domicile nor a place of business in Taiwan. Under the amended Regulations, such a rights holder is required to appoint an agent to liaise with and carry out infringement assessments at Customs, and receive service of documents or notices from Customs.
7. The amendment newly provides that a recorded exclusive licensee has standing equivalent to a trademark rights holder
The amended Regulations provide, in Article 15, that a recorded exclusive licensee is entitled to enjoy, in the licensee’s own name, the border control measures implemented by Customs for trademark protection under the Regulations, and is further entitled to exclude applications by third parties for those protective measures. This amendment brings the Regulations into harmony with the provisions of the Trademark Act concerning exclusive licensees.
In addition to lengthening the period of protection in cases of protection-upon-notice, the amended Regulations offer greater convenience to trademark rights holders by allowing them to use electronic means to apply for protection-upon-notice and to query information related to their applications. Rights holders nevertheless should remain mindful, as the expiration of a trademark term approaches, to present Customs with documentary proof of trademark term renewal, in order to renew the term of the protection and ensure that their trademark rights remain safeguarded. Foreign holders of Taiwan trademark rights who do not have a domicile or place of business in Taiwan should also pay special attention to the new provisions regarding the compulsory use of an agent when such rights holders apply for protections under the Regulations.
For more information on trademark and IP protection and enforcement matters in Taiwan, please contact Gary Kuo at firstname.lastname@example.org.
This is a translation by Paul Cox, of the original Chinese article found here.
After lengthy discussion and public debate, amendments to the Labor Standards Act (“LSA”) were passed after its third reading on 6 December 2016. The main changes that employment law practitioners, human resource managers, employers and employees must be aware of include:
Changes to annual leave
The qualifying threshold for taking paid annual leave has been reduced from one year of service to six months of service. Employees earn additional annual leave based on years of service up to a maximum of 30 days per year. Minimum annual leave allowances as of 1 January 2017, when the new rules go into effect, are:
- More than six months but less than one year; 3 days
- More than one year but less than two years; 7 days
- More than two years but less than three years; 10 days
- More than three years but less than five years; 14 days
- More than five years but less than ten years; 15 days and
- Over ten years; one extra day of annual leave per year up to a maximum of 30 days.
Unused annual paid leave days must be cashed out by the end of each year of service. Failure to do so may lead to an administrative fine of between NT$20,000 and NT$1 million (approximately US$630 and US$31,500).
Elimination of national holidays
Seven national holidays have been eliminated for private sector workers. This is to make up the difference in time away from work when Taiwan switched from a 48 hour workweek to a 40 hour workweek earlier this year. When remaining national holidays occur on rest days (usually a weekend), employers must provide another day off for employees. The national holidays which have been eliminated include:
- The day after the Founding Day of the Republic of China (January 2);
- Revolutionary Martyrs’ Day (March 29);
- Confucius’ Birthday (September 28);
- President Chiang Kai-shek’s Birthday (October 31);
- Taiwan’s Retrocession Day (October 25);
- Dr. Sun Yat-sen’s Birthday (November 12) and
- Constitution Day (December 25).
Implementation of a five-day work, two-day rest week
The changes provide for two rest days in seven, an increase from one rest day in seven. This brings the rest of the private sector into line with the public sector and most office-based industries. Of the two rest days, one is a mandatory day off; the other is flexible. An employee cannot agree to work on the mandatory rest day. The employee may agree to work on the flexible rest day but higher overtime rates will apply.
Overtime on flexible rest days
Employees and employers need to be aware of the new overtime calculations for flexible rest days:
- Between 0 and 2 hours; 1.34 times regular hourly wage
- Between 3 and 12 hours; 1.67 times regular hourly wage
Actual time worked will now be calculated at the top end of three four-hour periods. Less than 4 hours worked will be counted as the employee having worked four hours; between four and eight hours will count as eight hours and between eight and twelve hours will count as twelve hours. In other words, if an employee agrees to work on a flexible rest day and only works one hour, she must be paid for four hours at the increased overtime rate.
The above amendments will come into force once they are promulgated by the President. The changes to annual leave and elimination of national holidays will come into force on 1 January, 2017.
For more information on employment law matters, please contact Christine Chen at email@example.com.
In Taiwan, when deciding design patent infringement cases, the Intellectual Property Court (IP Court) will refer to the Directions for Determining Patent Infringement issued by the Taiwan Intellectual Property Office (TIPO). These Directions were recently amended to expressly incorporate the holding of the Egyptian Goddess, Inc. v. Swissa, Inc. decision handed down by the United States Court of Appeals for the Federal Circuit.
The amended Directions include the following significant changes to factors to be considered in determining design patent infringement:
- Design patent infringement should now be assessed taking into consideration only the perspective of the “ordinary observer.” Prior to the amendment, the “point of novelty” was also considered in determining infringement;
- The ordinary observer is defined as someone who is reasonably familiar with the patented product as well as with the prior art; and
- The analysis of the similarity between the patented design and the accused product now adds the “three way comparison test” (i.e. comparison based on visual analysis of the prior art, the patented design and the accused product).
In the past, it was challenging for design patent holders to succeed in their infringement lawsuits (from 2008 to the present, only 30% of design patent infringement cases resulted in a determination of infringement) because minor differences between the patented design and the accused product would often be deemed to constitute a point of novelty. The existence of a point of novelty in the accused product led to a determination of no infringement. This was sometimes the case even if, from the ordinary observer’s perspective, the patented design and the accused product looked extremely similar or nearly identical.
The point of novelty issue was extensively discussed and ultimately abolished by the US Court of Appeals for the Federal Circuit in the Egyptian Goddess case. The same standard has now been adopted in Taiwan, which shows that the TIPO continues to monitor international developments and trends in intellectual property to see where modifications may be needed.
We are confident that the incorporation of Egyptian Goddess into the determination of design patent infringement in Taiwan will result in more consistent decisions handed down by the IP Court and a more predictable scope of protection for design patent holders.
When an employer needs to dismiss a certain amount of its Taiwan workforce over a defined period of time, the employer must comply with the provisions of the Act for Worker Protection of Mass Redundancy (the “MRA”). Any employer who does not follow the procedures under the MRA may be subject to administrative fines of up to NT$500,000. Mass layoffs are quickly becoming a prominent issue in Taiwan, with a total of 4,357 employees reported to the Ministry of Labor having been laid off during the period of January to April 2016 alone.
As Taiwan is not an at-will termination jurisdiction, any termination must comply with the Labor Standards Act (the “LSA”). Any employee termination in Taiwan must be made pursuant to one or more of the specific causes set forth under Article 11 and 12 of the LSA, and the employer must provide advance notice (or an amount in lieu thereof), severance pay, and any outstanding payments or benefits where an employee is terminated for any of the causes stipulated under Article 11. The most commonly used causes for termination under the LSA are where the employer’s business suffers operating losses or business contractions, where the employer’s business is transferred, or where there is a change in the nature of the business which necessitates a reduction of workforce.
The Ministry of Labor has the power to restrict the representatives or responsible persons of an employer from leaving Taiwan if the employer does not meet its obligations under the MRA. While the LSA sets statutory entitlements for all employees in Taiwan, the MRA must be followed where an employer intends to terminate a significant portion of its workforce over a defined period of time.
Whether the MRA applies to the employer’s intended layoff plan hinges on the number of employees the employer intends to lay off at each separate office location or work site (each, a “Site”). The employer will be subject to the provisions of the MRA when the number of employees to be laid off at any particular Site exceeds any one or more of the thresholds set out in the table below. These thresholds are based on (i) the number of employees at each Site and (ii) how many of these employees the employer intends to lay off either (a) in a single day, or (b) over the course of sixty days.
|No. of Employees at Site||Time Period||No. of Employees to be Laid Off|
|< 30||60 days||> 10 employees|
|30 – 200||1 day||> 20 employees|
|60 days||> 1/3 of workforce|
|200 – 500||1 day||> 50 employees|
|60 days||> 1/4 of workforce|
|> 500||1 day||> 80 employees|
|60 days||> 1/5 of workforce|
|Any Number||1 day||> 100 employees|
|60 days||> 200 employees|
If the number of employees that an employer intends to lay off for any given Site exceeds the applicable single day or sixty day threshold set forth above, then the MRA will apply. Pursuant to the MRA, the employer must create a mass layoff plan (a “Plan”) for each Site where the thresholds are exceeded. Each Plan must include:
- the cause of the mass layoff;
- the department(s) of the business entity affected by the mass layoff;
- the scheduled effective date of the mass layoff;
- the number of employees to be laid off;
- the criteria for selecting the employees to be laid off;
- the method for calculating severance pay; and
- whether the employer will provide any job transition assistance to affected employees.
The Plan must provide the affected employees with at least their minimum statutory entitlements upon termination as set out under the LSA.
An employer seeking to implement a Plan must notify the relevant authorities/agencies or personnel in the following order: (i) local labor authority; (ii) labor union/ labor representatives; (iii) the employees to be laid off. Actual notification requirements for each of these three groups are set forth below:
- Local labor authority. The employer must firstly submit the Plan to the relevant local labor authority. The relevant local labor authority is typically the Department of Labor of the local government nearest the Site.
- Labor union/ labor representatives. If a labor union exists within the business entity at the Site, then the employer must first notify the relevant labor union of the Plan. Absent a labor union, the employer must notify the labor representatives of the labor management committee or conference (the “LMC”).
- Employees. If the Site has no applicable union or LMC, the employer must deliver the Plan to the employees in the department(s) of the Site affected by the Plan. Delivery to these employees must be made publicly, and can be done via email or by posting a visible notice and copy of the Plan at each Site.
The above groups must be notified of any Plan at least 60 days prior to the proposed first termination date. Once notification has occurred, the affected employees and employer must enter into negotiations within 10 days from the start of this 60-day period. An employer cannot dismiss or transfer any of the employees involved in the mass layoff during this negotiation period.
If an agreement between the employer and employees is not reached within 10 days from the commencement of negotiations, the relevant local labor authority will invite the employer and employees to form a negotiating committee to finalize the terms of the Plan. This committee is chaired by a representative of the relevant local labor authority and typically meets every two weeks until an agreement is reached. Where a negotiating committee is formed, the local labor authority will dispatch consulting, employment services and vocational training personnel to the Site to assist affected employees. Employers must set times for such personnel to provide assistance.
At the expiry of the 60-day period, the employer can implement the Plan, provided the laid-off employees are provided all their statutory entitlements under the LSA.
While employers can offer more generous severance packages than that mandated under the LSA, it is not necessary to do so. If an employer seeking to implement a Plan believes that their legal basis for the layoff under the LSA is not strong enough or there is insufficient evidence to support the cause for termination, a more generous package that the statutory minimums offered under the LSA can be provided to the affected employees in order to facilitate a more efficient mass layoff process and reduce the risk of future disputes arising. Generally speaking, Taiwan employees are acutely aware of their minimum entitlements and are likely to try to negotiate for better terms of their termination.
For more information on Taiwan employment matters, please email Christine Chen at firstname.lastname@example.org or call +886 (0) 223112345 ext. 307.
 For the purposes of the MRA, “employees” does not include foreign employees working under work permits or employees on fixed-term contracts.
In cases involving trademark squatters, the main remedies available to brand owners are filing an invalidation or opposition action against the squatter with the Taiwan Intellectual Property Office (“TIPO”) in an attempt to cancel or revoke the registration.
However, the statute of limitations bars a brand owner from filing an invalidation or opposition if five years have elapsed since registration of the mark. It is often the case that a brand owner does not discover the squatted mark soon enough and it is left without an administrative remedy.
A relatively recent judgment (2014) issued by the Taiwan Intellectual Property Court (the “IP Court”) held that Taiwan’s Civil Code and Fair Trade Act provide causes of action sounding in tort against a person who registers a trademark in bad faith. Min Gong Su Zi No, 5 (102). While the judgment does not create a precedent and was not appealed, it is significant because the statute of limitations in a tort action is two years from discovery of the harm or ten years from the time of the injury.
In other words, the door is open to seek alternative relief under the Civil Code and Fair Trade Act even after the statute of limitations for an invalidation or cancellation has run.
In the instant case, a mark was registered in Taiwan and 16 other jurisdictions despite having been registered for decades in leading European and North American jurisdictions. This conduct was held to be a intentional tort offending against good morals (Civil Code §184(1)) because it violated the Fair Trade Act’s catch-all prohibition against deceptive or obviously unfair conduct that interferes with the proper functioning of the market (Fair Trade Act §25).
The IP Court held that “the filing of these applications (by the Defendant) seems an attempt to free ride on the hard-won reputation of the Plaintiff’s mark for economic benefit and thus has adversely affected the trading order. This conduct violates business competition ethics and constitute violations of Article 24 of the Fair Trade Act.” The IP Court further held that the Defendant’s prior knowledge of the brand, and the effort and resources spent by the Plaintiff in attempting to cancel the registrations in multiple jurisdictions constituted dishonest commercial practice that caused the Plaintiff to suffer economic injury.
As a result, the IP Court awarded the plaintiff brand owner compensatory damages and issued an order directing the defendant to abandon its rights to the mark in Taiwan.
For more information on trademark enforcement matters in Taiwan, please contact Gary Kuo at email@example.com or +886 223112345 ext. 534.
 After February 2015 amendments to the FTA, Article 24 became Article 25.
This article briefly explores under what circumstances a Buyer involved in a corporate asset purchase might be subject to successor liability in Taiwan. This question would obviously be relevant to any foreign Buyer purchasing Taiwan corporate assets, whether in a one-off transaction or as part of a larger global acquisition.
Anyone that has been involved in an asset purchase in the United States has likely heard of successor liability. The doctrine of successor liability in the US derives generally from common law (both state and federal) and in a few specific areas from statute. For the more adventuresome soul, there are academic articles of over one hundred pages in length devoted to the myriad variations of successor liability. However, stated simply, successor liability refers to the body of judge-made law and statutes that creates exceptions to the general rule of no successor liability in the context of asset acquisitions. This simple definition will suffice for the purposes of this short article.
As a threshold matter, it is important to note that Taiwan is a civil law jurisdiction. Therefore, most law related to successor liability is derived from statute. Apart from this distinction, the analysis in Taiwan begins, as it does in the US, with the general doctrine that no liability is transferred to Buyer in an asset acquisition.
Again, as in the US, there is the obvious exception that liabilities may be transferred to Buyer if Buyer has assumed such liabilities. Although Taiwan courts have decided cases on the express assumption of liabilities, the courts offer little guidance on the exact contractual language which would specifically disclaim the transfer of such liabilities.
Theoretically, Taiwan also has successor liability based on a de facto merger rule. Taiwan’s Civil Code provides that a court may re-characterize an asset purchase transaction as a merger if the court determines that despite taking the form of an asset purchase, the substantive result of such transaction is a merger of Buyer’s and Seller’s businesses. If a de facto merger is deemed to have occurred, Buyer would inherit all liabilities of Seller. However, to date Taiwan courts have not heard a related case. It is unclear what factors would be instructive as to whether an ostensible asset purchase rose to the level of a de facto merger.
In addition to rules related to express assumption of liabilities and de facto mergers, Taiwan has a number of statutory provisions in its Civil Code designed to provide relief to any person (“Creditor”) (i) originally owed an obligation (financial or otherwise) by Seller and (ii) who has been denied the ability to enforce such obligation due to a spurious or disingenuous asset sale, i.e. a fraudulent transfer. It is important to note that the definition of Creditors for the purposes of Taiwan law in this area is very broad. It is not limited to financial creditors, but would include a wide range of persons who have valid claims to enforce monetary or performance obligations against Seller, e.g., employees who are owed back pay or pension amounts, product liability claimants, etc.
In addition to the general anti-fraud provisions of Taiwan’s Civil Code, Taiwan’s Business Mergers and Acquisitions Act (“BMAA”) contains a procedural mechanism to inhibit fraudulent transfers. Pursuant to the BMAA, any Seller intending to transfer all or substantially all of its assets must notify its Creditors of such transfer. Seller must then allow Creditors thirty days to object to the transfer. If Seller fails to provide notice and allow sufficient time for Creditors’ response or does not otherwise provide for the settlement of obligations owed to its Creditors, the asset sale would be invalid with respect to later objecting Creditors. Such Creditors could theoretically enforce their rights against the purchased assets, even after such assets were transferred to Buyer. Any such enforcement action would likely encounter a considerable number of substantive and procedural difficulties but is theoretically possible. Again, there exist no Taiwan judicial opinions on point in this area.
In short, Taiwan statutes provide a theoretical basis for successor liability in Taiwan. However, there is limited judicial guidance as to specific application. Under these circumstances, Buyers would do well to foreclose the possibility of inadvertently acquiring unwanted liabilities by (i) conducting thorough legal diligence to identify potential unwanted liabilities; (ii) entering into well-drafted purchase agreements pursuant to which (A) Seller makes adequate representations and warranties with respect to, and (B) Buyer expressly excludes the assumption of, any such liabilities; (iii) refraining from conduct that would indicate Buyer’s assumption of any excluded liabilities; (iv) ensuring that Seller properly notifies all of its Creditors of any proposed sale of all or substantially all of its assets; (v) having Seller make adequate indemnifications; and (vi) if possible, providing for an escrow fund against which indemnification obligations may be claimed.
For more information on mergers, acquisitions, and foreign investment matters in Taiwan, please contact Gregory Buxton at firstname.lastname@example.org or +886 223112345 ext. 548.