In-depth treatment of selected topics in Taiwan law for legal professionals
Taiwan’s Freedom of Government Information Act (FGIA) took effect in 2005. It was enacted to
…establish institutions for the publication of government information, facilitate people to share and fairly utilize government information, protect people’s right to know, further people’s understanding, trust and overseeing of public affairs, and encourage public participation in democracy. FGIA § 1 (translation slightly revised).
Despite these broad policy objectives, disclosure of government information under the Act is preempted by other laws governing disclosure. FGIA § 2. For example, Taiwan’s Classified National Security Information Protection Act provides that top secret documents are automatically declassified after 30 years, but the black out period can be extended once for another 30 years. This rule partially frustrated China Times reporter Jiang Hui-chen’s efforts to investigate the Ministry of Foreign Affairs’s archives by applying under the FGIA for information about Taiwan’s withdrawal from the United Nations in 1972.
The FGIA permits foreigners to apply for information if “the laws of their countries do not restrict nationals of the Republic of China from requesting government information in the foreigner’s country.” FGIA § 9.
The Chinese-language application for government information is available on the Ministry of Justice’s website. A number of government agencies also provide sample applications with instructions. The application can be filed with any central government agency or local government although first-time or overseas applicants may need assistance in determining the correct agency. After an application is filed, the agency has 15 days to act on the request for information. The review can be extended once for 15 more days. FGIA § 12.
If the information relates the rights or interests of another person, legal person, or group, the government agency is required to notify the third party of the request in writing. The third party has 10 days to comment. FGIA § 12.
The agency should approve the application if the public interests served by the requested disclosure outweigh the harm to third party rights caused by the disclosure.
Unfortunately, there is no single source for statistics on requests approved and denied. Subordinate agencies and local governments report approvals and denials on their websites regularly but only in Chinese. Nonetheless, a few examples will show that requests are made and approved with some frequency. For example, the National Immigration Agency had 300 requests for files in the first three quarters of 2012. Of these 111 requests were approved in full while 118 were partially approved. Seventy-one applications were completely denied.
In the first quarter of 2012, The Ministry of Foreign Affairs received 2,070 applications for files and approved all of them in full.
Perhaps surprisingly, the Environmental Protection Agency received just 6 applications in 2011. Four applications were for files and two ere for “other government information.” Of these applications, just one was approved in full, three were partially approved, and two were denied. The Environmental Jurists Association has a thorough discussion (again in Chinese) of a hypothetical application by a citizen who wants to obtain information about a polluting factory where the polluting factory objects to the disclosure.
An applicant for government information can appeal agency decisions that deny access to information. The appeal must be first made to the denying agency before the unsuccessful applicant has standing to challenge the decision in the administrative courts.
Applicants regularly bring actions in the administrative courts when their applications are denied.
In 2010, the Ministry of Justice compiled freedom of information cases that reached Taiwan’s Supreme Administrative Court between late 2005 and 2010. The cases involved 14 of the FGIA’s 24 Articles. Article 18, which sets forth restrictions on government disclosures of information, was the most frequently cited provision.
In these 41 cases, just three plaintiffs prevailed. The prevailing plaintiffs included a construction company who had been the subject of an adverse decision by Taiwan’s Fair Trade Commission. The company sought complete records of the Commission’s proceedings in the case that resulted in the adverse decision. Pan Zi No. 130 (2008).
The second successful plaintiff was an individual seeking information from the Ministry of Defense about a military housing compound for use in other litigation. Cai Zi No. 4335 (2008).
The third successful plaintiff was the Humanistic Education Foundation, a well-known education reform group. The Foundation sought information and documents related to Changhua County’s 2006 Textbook Selection Pilot Program from primary and secondary schools in Changhua. Pan Zi No. 579 (2010).
Taiwan’s Supreme Court recently upheld a decision by the Intellectual Property Court holding that the United Daily News’s reprinting of photograph by rival Apple Daily fell within the scope of reasonable use. The litigation also revealed a split between Taiwan’s lower courts and its appellate courts on the standard for originality in protected photographic works and highlighted the use of US case law by the IP Court.
In 2009, after Taiwanese newspaper United Daily News (UDN) re-printed two photos of a woman with Legislator Wu Yu-sheng taken by a photographer for rival newspaper Apple Daily, Apple Daily filed a criminal complaint against UDN for copyright infringement. The Taipei District Court ruled that UDN was not guilty of violating Apple Daily’s copyright because the photographs lacked enough originality to be protected by copyright. Taiwan’s IP Court and the Supreme Court disagreed, finding the photographs original, but nonetheless affirmed the lower court’s decision on the grounds that UDN’s reprinting was a reasonable use of the images.
Originality: Could anyone have taken that?
The Taipei District Court judge’s decision cited three decisions in establishing that photographic originality could be derived from individual elements such as the selection of subject, lighting, props, grouping, angle, etc. Because the photographer needed to remain undetected, he was unable to choose his angle, lighting, or use any special equipment, and therefore captured the image any other person in the same situation would have captured.
The IP Court determined that the lower court judge had set the bar for originality too high and that according to both Taiwanese and international standards, the threshold should instead be a “minimum requirement of creativity,” and the two photos more than met this standard as they turned out clearly despite being taken at a distance in poor lighting conditions.
UDN was found not guilty of violating copyright, however, because the IP Court judged the republication of the two photographs to be within the “scope necessary” to the reporting of current events permitted by Article 49 of Taiwan’s Copyright Act, which reads: “When reporting current events by means of broadcasting, photography, film, newspaper, network, or otherwise, works that are seen or heard in the course of the report may be exploited within the scope necessary to the report.”
Judging UDN’s use of the photos in their news reporting to be reasonable, the IP Court found that the public’s interest in understanding the event and the behavior of a public official outweighed the copyright concerns. Furthermore, because UDN published the photos in their evening paper after the potential market value of the images had already reached a low point, this fair use was found not to have infringed on Apple Daily’s economic interests (Copyright Act, Article 65). The Supreme Court agreed with the IP Court’s decision, rejecting Apple Daily’s subsequent appeal on the same grounds.
Interestingly, the IP Court drew much of its reasoning from three U.S. court decisions on fair use, validating these citations by saying that Article 65 of Taiwan’s Copyright Act is essentially a translation of the U.S. Code. The Taiwanese Supreme Court further emphasized that using American court opinions to interpret Taiwan’s fair use law was in accord with the law’s legislative intent, which, according to the court, was to adopt the U.S. model.
Tracing the Development of U.S. Copyright & Fair Use Law
This single case in Taiwan has raced through over a century’s worth of U.S. development in copyright and fair use law. The lower court’s decision echoes the reasoning of the U.S. Supreme Court’s first major decision on photographic copyright in Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53 (1884), which included a similar listing of elements which could be deliberately selected by the photographer, such as “light and shade,” or “arranging the costume, draperies and other various accessories,” that could thereby be used to assess photographic originality. Thirty-seven years later, Judge Learned Hand expanded this standard in Jeweler’s Circular Publishing Co. v. Keystone Publishing Co., 281 F. 83(2d Cir. 1922) to the now-prevailing view that nearly all photographs possess originality in sufficient quantity to claim copyright protection. Taiwan’s IP Court rejected the lower court’s standard and instead established a similarly broad standard for originality, the wording of which is reminiscent of the “modicum of creativity” used in the U.S. Supreme Court case Feist Publications, Inc., v. Rural Telephone Service Co., 499 U.S. 340 (1991).
In establishing fair use, the IP Court’s drew on the U.S. Supreme Court’s reasoning in the famous 1984 Betamax case, which the Taiwanese court interpreted as deciding that the protection of freedom of speech and information allowed the public’s interest in infringement to take priority over the economic rights of the owner. This was linked to fair use in media with the U.S. First Circuit Court’s decision in Nuñez v. Caribbean International News, Corp., 235 F.3d 18 (1st Cir. 2000), which judged republication of an already-disseminated photo that is used in an informative, newsworthy way in a story that would be difficult to report without the photos to be fair use.
Foreign rights holders should be encouraged by the willingness of the IP Court to accept foreign court decisions as persuasive authority and practitioners will be watching to see if expected amendments to the Trade Secrets Act based on US law will also lead IP Court to look to US law for guidance.
UCC Holdings Co. Ltd. v. Ministry of Economic Affairs
SAC, Pan Zi, NO. 48,2012,
IP Court, Xingshang gengyi Zi, No. 1, 2012
Taiwan’s Trademark Act has protected well-known trademarks from dilution since 2003. A trademark shall not be registered if it is identical or similar to the well-known trademark or mark of another person, and is likely to cause confusion or misidentification by the relevant public, or is likely to dilute the distinctiveness or the reputation of the well-known trademark or mark. Trademark Act §30(1)(11).
Thus to receive protection against dilution, a trademark must be well-known (zhuming). Although the Act itself does not define “well-known”, the Ministry of Economic Affairs has defined the term “well-known” in the Enforcement Rules to the Trademark Act as referring to a mark that “proven by sufficient evidence, is commonly known by the relevant enterprises or consumers.”
Nonetheless, in some cases Taiwan’s Intellectual Property Court (“the IP Court”) has effectively upheld an extra element to the test for dilution by holding that to receive dilution protection a mark must be a “highly well-known trademark” (gaodu zhuming), which is recognized by or well-known to the general public and not just by the relevant enterprises or consumers. This “highly well-known test” came from TIPO’s (Taiwan Intellectual Property Office) Examination Guidelines for the Protection of Well-known Trademarks of 2007. In a recent case, though, Taiwan’s Supreme Administrative Court (“SAC”) has rejected this view and adopted a more expansive standard whereby a mark may receive dilution protection if it is either commonly known to the general public or the relevant consumers or enterprises.
The case involves the UCC trademark registered by UCC Holdings Co., Ltd., (“UCC Holdings”) a leading Japanese coffee company. UCC Holdings owns a number of registrations for the well-known UCC mark “” that designates use on coffee and related goods and services in classes 7, 8, 11, 16, 20, 21, 22, 24, 25, 29, and 55. Peakwheel & Co., Ltd. (“Peakwheel”) applied to register the UCC mark “” in connection with bicycles and bicycle parts in international class 12. UCC Holdings opposed the registration of Peakwheel’s UCC mark on the grounds that it created a likelihood of confusion or dilution of the distinctiveness of UCC Holdings’s well-known UCC mark. The TIPO approved the opposition on the grounds that Peakwheel’s registration of the UCC mark was likely to dilute the distinctiveness of UCC Holdings’s highly well-known UCC mark, but the Ministry of Economic Affairs (“the MOEA”) vacated that decision on the grounds that UCC Holdings’s UCC mark was not highly well-known, and thus UCC Holdings could not claim protection against dilution. The IP Court upheld the MOEA’s decision that the registration of Peakwheel’s UCC mark did not create a likelihood of confusion or dilute the distinctiveness of UCC Holdings’s UCC mark. UCC Holdings appealed to the SAC and the SAC vacated the IP Court’s judgment in UCC Holdings Co. Ltd. v. Ministry of Economic Affairs, holding that the IP Court had erred in providing in limiting its protection against dilution only to “highly well-known” marks.
In its reasoning, the SAC explained that while determining whether dilution of distinctiveness or reputation exists, the court should examine the similarity between the conflicting marks, the comprehensiveness of the use of the well-known mark, the degree of inherent or acquired distinctiveness, the degree to which the mark is well-known and other factors.
The SAC found that the marks at issues were highly similar. The IP Court had found that UCC Holdings’s UCC mark was well-known to the relevant businesses and consumers but that it was not “highly well-known” by the general public. The SAC ruled that the IP Court has no legal basis on which to create a new category in which a well-known mark must be “highly well-known” before it is entitled to the anti-dilution protections contained in the Trademark Act. The SAC found that the record showed that UCC Holdings had used its marks extensively with coffee, cream powder, paper, stove, water heater products and its fame was upheld by 12 TIPO invalidations and one court judgment since 1996. The SAC also questioned the IP Court’s finding of fact that the well-known UCC mark was not in fact “highly well-known” by the general public, but stated that this was not the appropriate standard to apply.
In addition the SAC held that when using same or similar marks on different goods or services dilutes association with the sources of specific goods or services on which the well-known mark is used, there is a likelihood of diluting the distinctiveness of the well-known mark and that the anti-dilution provisions of the Trademark Act should apply.
The SAC emphasized that the application of the Trademark Act’s anti-dilution provisions does not require the owner of well-known marks to use it on several different services or goods in order to claim protection against dilution. Even if the junior mark is used with completely different and irrelevant goods or services from/to those with well-known mark, the anti-dilution protections should still apply. The lower court also misconstrued the law by implying that UCC Holdings should have demonstrated a connection between its UCC trademark and bicycle products. The SAC found that UCC Holdings had registered the UCC mark for use with food, apparel, stationary, utensils, kitchenware and facilities of bathroom and air conditioning as well as different services including food stores, restaurants, hotels and cafes. Thus, the SAC also questioned the finding of the lower court that UCC Holdings showed no likelihood of using the well-known mark with bicycle goods.
The SAC found that the combination of letters in “UCC” is uncommon and that the mark was inherently distinctive. UCC Holdings had long marketed and protected the trademark, and it had acquired high distinctiveness as a result as well. For these reasons, the SAC vacated the IP Court’s judgment and remanded the case back to the IP Court.
The IP Court delivered its latest judgment on July 2012 and upheld the TIPO’s original decision approving UCC Holding’s opposition and revoking the registration of Peakwheel’s UCC mark. It concluded that the conflicting marks are highly similar and that UCC Holdings’s UCC trademark was well known. If Peakwheel were to use and market the junior mark for a period of time in the future, the UCC mark will indicate more than one source of goods to the consumers. Thus, Peakwheel’s registration of UCC mark will dilute the distinctiveness of UCC Holdings’s UCC trademark. Interestingly, the IP Court also found that Peakwheel’s registration of the UCC mark in connection with bicycle products would dilute the potential distinctiveness of UCC Holdings’s UCC trademark and affect the possibility that UCC Holdings might use its trademark in the vehicle market. The IP Court therefore held that there is a likelihood of dilution of the distinctiveness of UCC Holdings’s well-known UCC mark and the registration of Peakwheel’s UCC mark was properly revoked. However, the use of the very same mark on bicycle goods does not create any negative associations, and thus the dilution by tarnishing was not found.
As dilution of well-known marks remains a relatively new issue in Taiwan, the SAC’s clear rejection of “highly well-known test” affords some clarification on the level of protection provided to well-known mark owners. If a mark is well-known as provided by the Enforcement Rules, it deserves protection both from likelihood of confusion and that of dilution by blurring and tarnishment.
We note, however, the UCC case is not final yet, and the Ministry and Peakwheel may appeal the most recent IP Court decision to the SAC again. It is worth noting that the IP Court specifies in its dicta that even if the highly well-known test had been applied, the UCC trademark would still be highly well-known to the general public. Future judgments will reveal whether this dicta is merely a response to SAC’s doubts about whether UCC Holdings’s UCC mark is highly well-known or somehow reflects the reluctance of the IP Court to follow the SAC’s holding on this issue.
The UCC Case History
|Date of Result||Procedure||Result|
|2008.11.27||Peakwheel applied for the registration of UCC trademark “”.||TIPO approved the registration.|
|2010.7.23||UCC Holdings opposed to Peakwheel’s registration.||TIPO invalidated the registration.|
|2010.12.22||Peakwheel filed an administrative appeal to the MOEA, the superior agency of TIPO.||The MOEA reversed TIPO’s invalidation in its administrative decision|
|2011.7.28||UCC Holdings brought an action against the MOEA.||The IP Court held for the MOEA.|
|2012.1.12||UCC Holdings appealed to the SAC.||The SAC vacated the judgment and remanded it to the IP Court.|
|2012.7.26||The IP Court delivered the latest judgment.||The IP Court held for UCC Holdings and vacated the decision of the MOEA.|
 UCC Holdings had submitted history of the company, sales figures from NT$2-300 million per year from 2002 to 2007, the record of UCC Holdings’s products entering into Taiwan’s market since 1985, records of promotions in all kinds of event and mass media, and its successful opposition records in TIPO, appeal decisions from the MOEA and court judgments from the IP Court.
In addition to the TIPO’s bill to amend Taiwan’s Trade Secrets Act, KMT at-large legislators Lee Guei-min and Chen Pi-han have introduced a bill criminalizing trade infringement. The original Chinese text of the bill is here. The bill would add one article (10-1) to the Act as follows:
A person who, intending to procure an unlawful benefit for himself or for a third person, or intending to injure the interests of a third party, infringes on a trade secret, shall be punished by imprisonment for not more than five years, , and may additionally be fined a criminal fine of not more than NT$1 million .
If the unlawful profits of a person who so acts or a third person exceed the maximum amount of the criminal fine in the preceding paragraph, that person’s unlawful profit shall be the maximum amount of the fine without limitation by the preceding paragraph.
Prosecution for the offense specified in this Article may be instituted only upon complaint.
We posted a bilingual translation of the TIPO’s more extensive draft legislation here.
There are a number of ways for foreign business to operate in Taiwan. This memo provides an introduction to some of the most common types.
Of the four types of companies under Taiwan’s Company Act (unlimited companies, unlimited companies with limited liability shareholders, limited companies, and companies limited by shares), with limited companies and companies limited by shares being the two forms of companies most commonly used for foreign investment.
Also, there are significant tax advantages to setting up as a branch office and it is quite common for foreign companies to set up either a branch directly under the home office or to first set up a subsidiary in a third country and then set up a Taiwan branch of that subsidiary.
Note that the following is only a summary and there are specific issues for specific industries. Also, a number of basic administrative issues such as opening of a bank account, notarization and legalization of documents, company name reservation (all must have Chinese language names), obtaining a registered address and so on can often be quite time consuming and it is generally advisable to have someone “on the ground” looking out for these matters.
Another important issue that must be planned from the beginning is work authorization for any foreign employees. In general, the entity will need to have NT$5 million in capital to hire technical personnel (for example, a software engineer from India) in its first year of operation. After the first year, the entity will need NT$5 million in revenue to renew the work authorization. There is no capital requirement for a manager in the first year but the NT$5 million revenue requirement applies from the second year on.
Finally, the tax consequences of the structure will vary and thus various issues such as how orders will be placed (i.e., by home or local entity), payment, whether royalties are involved and so on, should be discussed at early stages.
Subsidiary of a Foreign Company in the form of a Company Limited by Shares
A company limited by shares is the Taiwan corporate form that most closely resembles a U.S. corporation. Shareholder liability in a company limited by shares is limited to the shareholder’s investment. Requirements for a company limited by shares include the following:
- Foreign Investment Approval from the Investment Commission of the Ministry of Economic Affairs (IC).
- At least two individual shareholders or one corporate shareholder.
- At least three directors and one supervisor (the supervisor has audit rights for all company affairs, financial and operational).
- One of the directors must be appointed chairperson. The chairperson has the right to represent the company in matters involving third parties.
- Shares must be issued within three months of incorporation if the capitalization is more than NT$500 million (approximately US$15 million). Share transfers are unlimited, except that promoters’ (founders) shares may not be transferred within one year of company establishment.
- The requirement of minimum paid-in capital of NT$500,000 (approximately US$16,000) was eliminated in April 2009. In practice, the competent authority will approve the incorporation application if the paid-in capital is greater than the cost of establishment.
- Repatriated shareholder funds must be in the form of dividends, which are taxed at a rate of 20% unless the country of the shareholder entered into double taxation agreement with Taiwan and the agreement provides a beneficial tax rate.
- The corporate income tax rate is 17% of net income.
Subsidiary of a Foreign Company in the form of a Limited Company
The form of a limited company (similar to a “closed corporation”) places restrictions on share transfers, thereby permitting certain shareholders to control the company. Requirements for a limited company include the following:
- Foreign Investment Approval from the IC.
- At least one individual or corporate shareholder.
- One to three directors. A corporate shareholder may be elected as a director itself or may appoint a representative to be elected as a director.
- If there is more than one director, one may be chosen as chairperson of the company, who will then be the legal representative of the company.
- If no chairperson is chosen from among multiple directors, then all directors will be considered legal representatives.
- The minimum paid-in capital was abolished in April 2009. In practice, the competent authority will approve the incorporation application if the paid-in capital is greater than the cost of establishment.
- Repatriated shareholder funds must be in the form of dividends, which are taxed at a rate of 20% unless the country of the shareholder entered into double taxation agreement with Taiwan and the agreement provides a beneficial tax rate.
- The corporate income tax rate is 17% of net income.
Although technically a dependent of the foreign parent, a branch office of a foreign company is for many practical purposes an independent company. Income tax for a branch office is 17% of net income. The major benefit of a branch, compared to establishment of a subsidiary, is that all after-tax profit may be remitted out to the parent company without additional taxes. Certain branch offices may apply for work permits for foreign nationals to act as the branch manager and/or responsible person. Some of the requirements of a branch office include the following:
- The branch manager must have Taiwanese domicile or residence (the legal representative and the branch manager may be the same person).
- The operating capital must be remitted before establishment:
- The minimum operating capital requirement was abolished in April 2009. There may not be an exact equivalent to this type of entity in each foreign jurisdiction, although the European SA, SARL, GMBH and AG forms more closely resemble their Taiwan counterparts.
While a representative office may operate in Taiwan on behalf of an overseas principal, it may not engage in profit-seeking commercial activities or act as principal in any domestic business transactions. Within these parameters, permitted activities include the procurement and inspection of goods, the signing of contracts, bidding, and the handling of litigious and non-litigious matters. Representative offices must be registered before beginning operations.
Note that individuals signing contracts governed by Taiwanese law on behalf of the overseas principal shall be jointly and severally liable with the principal.
Taiwan’s Financial Supervisory Commission has announced draft revisions to the Regulations Governing Public Company Board Meetings (“the Regulations”) and is inviting public comment. The proposed revisions address corporate governance changes recently enacted in amendments to Taiwan’s Securities and Exchange Act and the Company Act. Important changes have been proposed to Articles 7, 8 and 16 of the Regulations.
Public companies would be allowed to notify directors of board meetings by email. Regulations § 3. Currently, board meetings, which are required to be held at least quarterly, have to discuss, amongst other matters, annual and semi-annual financial statements. The draft proposes that if a semi-annual financial statement does not legally require certification by an accountant, the board does not need to take it up at its meeting. Regulations § 7.
Furthermore, the draft would require board members to discuss any donations to related parties, and large donations to non-related parties. Regulations § 7. Related parties currently can include certain types of subsidiaries, foundations established with donations from the company, and close relatives of the directors.
A ‘large donation’ is to mean a donation of at least NT$100 million (c. US$3.3 million), or alternatively, a donation of at least 1% of annual net revenue or 5% of issued share capital. The board of a foreign issuer must discuss a large donation exceeding 2.5% of shareholder equity if the foreign issuer’s shares do not have a par value of NT$10. Regulations § 7.
Lawyers, accountants, and other advisors will continue to be allowed to report at board meetings but would now be required to leave the meeting during board discussions and votes. Regulations § 11.
Another important change has been proposed in relation to disclosure of possible conflicts of interest.The current Regulations do not require board members to disclose the nature of a conflict of interest although they are prohibited from discussing or voting on transactions in which they are conflicted. However, the new draft will require board members to disclose any relevant information to the board about a possible conflict of interest at the meeting during which the transaction raising the conflict of interest is discussed. Regulations § 16. Any information disclosed about the potential conflict must also be included in the minutes. Regulations § 17.
After the public hearing on proposed amendments to the Trade Secrets Act in late April. the Taiwan Intellectual Property Office revised its draft bill criminalizing trade secret theft. Here is our translation.
A person who, intending to procure an unlawful benefit for himself or for a third person or intending to injure the interests of the owner of a trade secret, does any of the following, shall be punished by imprisonment for not more than five years, or detention, and may additionally be fined a criminal fine of not less than NT$50,000 and not more than NT$10 million:
1. acquires a trade secret by stealing, embezzlement, fraud, coercion, unauthorized reproduction, or other improper conduct;
2. uses or discloses a trade secret after the actor in the preceding sub-paragraph obtains it;
3. knowing of or possessing a trade secret, reproduces, uses, or discloses that trade secret without authorization or exceeding the scope of authorization;
4. knowing of or possessing a trade secret, fails to delete or destroy the trade secret after having been instructed to do so by the owner of the trade secret or who continues to conceal the trade secret;
5. acquires, uses, or discloses a trade secret knowing that a trade secret was acquired, reproduced, used, or disclosed by another person under the preceding four sub-paragraphs.
Any attempt to commit the crime in the preceding paragraph is punishable.
Whoever commits an offense listed in any subparagraph of paragraph 1 of the preceding article with the intent to use [a trade secret] in a foreign country, the Mainland Region, Hong Kong, or Macau shall be imprisoned for not less than six months and not more than five years and may additionally be fined a criminal fine of not less than NT$500,000 and not more than NT$50 million.
Any attempt to commit the crime in the preceding paragraph is punishable.
Prosecution for the offenses specified in the previous two articles may be instituted only upon complaint.
When the representative of a legal person, the agent of a legal person or a natural person, an employee, or other personnel commits one of the offenses defined in Articles 13-1 and 13-2 in the course of his duties, the legal person or natural person shall also be fined under the provisions of those articles in addition to the punishment of the actor. If however the representative of the legal person or the natural person has done his utmost to prevent these acts, he shall be exempt from the fine.
The effect of the initiation or withdrawal of a complaint against any one of an actor, legal person, or natural person under the preceding paragraph shall not extend to others.
In civil proceedings arising from infringement of trade secrets, where a party asserting infringement of trade secrets or a likelihood of infringement has clarified the concrete circumstances of the thing or method constituting the infringement and the counterparty denies the acts of infringement, the counterparty shall clarify the concrete circumstances of his acts. This duty [to clarify] shall not apply if the counterparty has good reason for his inability to clarify.
The Apple-Proview dispute now being litigated in China is an excellent opportunity to share some fundamental lessons regarding trademark and commercial practice from Taiwan that apply in a general way to China. While China and Taiwan are completely independent legal jurisdictions in which you need separate and qualified legal counsel, Taiwan in many ways serves as the best test case available for how legal issues may be viewed and even resolved in China. In addition to linguistic and cultural affinities, China and Taiwan also share a common civil law legal heritage and, until 20 years ago, Taiwan was also a one party state that did not brook judicial independence. The result was a significant disjunction between legal conservatism and commercial practice in a rapidly changing society. While the sheer size of China and its ideological commitment to socialism, and authoritarian politics make it very different from Taiwan, Taiwan is the best laboratory we have for thinking about how China’s legal system might develop. Moreover, the presence of so many Taiwanese companies like Proview operating in China means that these Taiwanese lessons may also be helpful in understanding these important business partners and potential competitors.
Register Your Trademarks
In 2001, Proview Technology (Shenzhen) Co., Ltd. registered two “IPAD” trademarks in China back in 2001 (the China Marks). The periods of exclusivity for the China Marks has been renewed for another ten years until 2021.
Like China, Taiwan is a first-to-file jurisdiction. The person who files first and obtains a trademark registration obtains very important rights and bargaining power as the Proview litigation in China is now demonstrating. In many cases, people who first came to Taiwan to source goods never planned to sell their trademarked goods here and therefore never registered their trademarks. This was shortsighted not only because plans change, but also because people in Taiwan became of aware of even very obscure brands in specialized fields through Taiwan’s highly diversified manufacturing sector. As a result, there was a rush in the 1980s and 1990s as Taiwan’s economy quickly internationalized to register foreign trademarks and later domain names. Compared to the relatively low cost of registering trademarks, the cost of not doing so is often very high indeed. While Apple could not have registered first in this case, this first lesson from Taiwan is so important that it bears repeating once again.
Deal with the Right Entity
Proview Shenzhen is the current registered trademark owner of the China Marks as can be easily verified by a search for ‘IPAD’ on the China Trademark Website.
Nonetheless, according to documents released by Apple, a Proview Shenzhen employee told Apple’s agents that “…Mr. Ray Mai and I are located in Shenzhen. But the trademark is not belong to Shenzhen company but Taiwan company.” This representation apparently led Apple’s Agent to enter into an agreement with Proview Electronics Co., Ltd. (Proview Taiwan) in which Proview Taiwan agreed to transfer ten marks including the 2 China Marks (the Transfer Agreement).
In Taiwan, the representation that the trademark belonged to the Taiwan company should have been checked on the Taiwan Intellectual Property Office’s online trademark database.
Of course, even if Proview Taiwan were the registered owner of the two China Marks, it would have registered these marks in China, not Taiwan. But the Taiwan lesson applies. A simple search on the China Trademark Website’s English-language interface shows that Proview Shenzhen is the registered owner of the two marks and has been since 2000.
In Taiwan, it is essential to identify the entity registered as the owner of trademarks because the doctrines that would disregard the separate legal identities such as piercing the corporate veil, reverse piercing, or group enterprise liability are either not available or work differently than they do in other jurisdictions. Our Taiwanese lawyer colleagues are very surprised to hear that anyone would simply assume that an agreement entered into by Proview Taiwan could be enforced against Proview Shenzhen on a theory that Proview Taiwan and Proview Shenzhen are alter egos of the Proview Group’s principals. In proceedings brought by Apple in Hong Kong seeking interlocutory injunctions, Judge Pon noted that “Proview Holdings [a Bermuda-registered holding company listed in Hong Kong, Proview Electronics, and Proview Shenzhen, all clearly under [Proview Holdings Chairman] Yang’s control, have refused to take any steps to ensure compliance with the agreement… Mr. Yang… as the chairman and chief executive officer of Proview Holdings and the responsible person and director of Proview Electronics [Proview Taiwan] as the legal representative, general manager and chairman of Proview Shenzhen…he had at the material time management and control over them.” It would be much more difficult to persuade a Taiwanese court that Proview Holdings, Proview Electronics, and Proview Shenzhen are all merely alter egos of the same entity under Mr. Yang’s control. Hence entering an agreement with any entity other than the registered trademark owner will cause serious problems if enforcement becomes necessary.
The Trademark Assignment Agreement was signed on behalf of Proview Taiwan by Mai Shih Hung in his capacity as “Legal General Counsel.” Did Mr. Mai have the authority to bind Proview Electronics?
In Taiwan, perhaps not. Consequently, a prudent business person would be unwise to rely on this form of execution. As in other jurisdictions, a Taiwanese board of directors can delegate authority to corporate officers. However, in practice most corporate officers with the exception of the General Manager do not have the power to bind the corporation.
Moreover, in-house legal counsel, despite English-language titles such as ‘General Counsel’, is rarely deemed to be a corporate officer. As a result, even very senior in-house counsel rarely has significant authority over any corporate decisions in Taiwan and generally acts in strictly advisory role. As a result, it is not at all surprising that Proview has since argued that Mr. Mai lacked authority to sign the Transfer Agreement.
Fortunately, there is a much simpler way to ensure that the entity you are dealing with is bound by your agreement. Although signatures are a valid method of executing a contract, the gold standard is to have the counterparty execute the contract by using the registered corporate seals. In Taiwan there are two of these: the registered seal of the corporation (often referred to as the ‘Great Seal’) and the registered seal of the corporation’s Chairman (often referred to as the ‘Lesser Seal’). The first step is again to go online to check Department of Commerce’s online database for the corporation’s Chairman. In the case of Proview Taiwan, the Chairman is a Yang Yun-cai (楊運財).
Both Proview Taiwan and Mr. Yang’s seals can be verified by using public records at the New Taipei City Department of Commerce, where Proview Taiwan is registered. The advantage of using corporate seals is that their use bypasses the whole question of whether a given person such as Mr. Mai is authorized to bind the company since the seals are prima facie evidence of actual authority to bind and in practice it is very difficult to overcome the presumption that the use of seals was authorized except in cases of egregious fraud.
While we understand that verification of seals in China is much more difficult (see this excellent discussion by Steve Dickinson over on the China Law Blog), the general outlines of this Taiwanese lesson also apply in China.
Although Taiwan and China are independent jurisdictions, their legal systems share many commonalties such as having a first-to-file registration system and the use of registered seals to execute agreements. In both jurisdictions, common law legal doctrines such as group enterprise liability may not be recognized by the courts or may be understood differently. In both jurisdictions, corporate personality is not easily disregarded even where failing to do so might promote injustice.
La mundialmente conocida multinacional Apple se encuentra en plena batalla legal contra una compañía China por la propiedad de la marca IPAD en China. Todos los detalles del caso a continuación.
- Apple y IP Application. IP Application es una compañía registrada en Reino Unido y creada en Agosto del año 2009 con el especial propósito de adquirir para Apple los derechos de marca registrados con el nombre IPAD en el mundo.
- Proview Group. Proview group es una empresa productora de monitores y otros dispositivos electrónicos. Tiene negocios y oficinas en Taiwán, China, Hong Kong y Europa.
Su empresa Holding es Proview International Holdings Limited inscrita en Bermuda y que opera en la bolsa de Hong Kong.
Yang Long San, Rowell, de nacionalidad Taiwanesa, es el fundador de Proview Group. Él era el Presidente de Proview Holdings hasta que la empresa fue declarada en quiebra en Agosto del 2010.
Otras compañías que forman parte de Proview Group y que están involucradas en esta disputa, son la compañía Taiwanesa Proview Electronics CO., LTD Proview Technology CO., LTD y Yoke Technology CO. LTD ambas compañías con sede en Shenzhen, China.
En Enero del año 2010 Apple anunció el lanzamiento de un nuevo producto, las Tabletas Electrónicas. En preparación para el lanzamiento de este novedoso producto, Apple inició investigaciones alrededor del mundo con el fin de identificar y adquirir los derechos de marcas registradas con el nombre IPAD.
La investigaciones revelaron que una compañía de origen Chino, llamada Proview Group tenía registrado, desde el año 2000, el nombre IPAD en China y en otros 8 países.
Las negociaciones entre IP Application y Proview Group para la transferencia de los derechos sobre la marca IPAD se llevaron a cabo entre Agosto y Diciembre del año 2009. Como resultado de las negociaciones, Proview acordó transferir sus derechos sobre la marca IPAD en los 9 países a IP Application por la suma de 35.000 libras.
Previo a la celebración del contrato y transferencia de las marcas registradas, representantes de Proview Group informaron a IP Application que el actual titular de todos los derechos de la marca IPAD era una filial de Proview Group, llamada Proview Electronics CO., LTD. con sede en Taiwán. Es por esta razón, que el contrato es finalmente celebrado entre IP Application y Proview Electronics Taiwán.
Sin embargo y después de que Apple anunciara el lanzamiento de iPad en Enero del 2010, Apple descubrió que Proview Electronics Taiwán no era el dueño de los derechos de la marca IPAD en China; otra filial, Proview Technology Shenzhen, era el real titular de los derechos de marca en China.
Ante esta situación, Apple solicitó a Preview Electronics Taiwán que enmendara el error pero Proview se rehusó a hacerlo exigiendo a Apple la suma de 10 millones de dólares para transferir los derechos de la marca IPAD en China a Apple.
Demandas en orden cronológico
El 28 de Junio del año 2011, el Tribunal Superior de Hong Kong aprobó un interdicto prohibitorio solicitado por Apple en contra de Proview Group para preservar la marca IPAD en China y así evitar su venta y disposición por Proview.
El Juez del Tribunal superior de Hong Kong señaló en su fallo que Proview maquinó una verdadera conspiración en contra de Apple y IP Application debido a problemas financieros que aquejaban a la empresa. Proview incurrió en un incumplimiento de contrato con el fin de mantener la titularidad de la marca IPAD en China y de esta forma poder obtener un mayor provecho económico del uso de la marca.
Juicio en primera instancia
Apple inicio acciones legales en contra de Proview en Junio del año 2010.
En su demanda Apple y IP señalaron que adquirieron los derechos de la marca IPAD en China de Proview Electronics Taiwán a través de un contrato celebrado en Diciembre del 2009 y que Proview incurrió en un incumplimiento de contrato.
El 17 de Noviembre del 2011, el Tribunal Superior de Shenzhen falló a favor de Proview Electronics Taiwán, señalando que el verdadero titular de la marca IPAD en China es Proview Technology Shenzhen y no Proview Electronics Taiwán.
En el fallo el tribunal señaló que si Apple quería adquirir los derechos de la marca IPAD en China, debió haber celebrado el contrato y posterior transferencia con el verdadero titular de la marca y de acuerdo al procedimiento establecido por las leyes de China.
Apple y IP Application apelaron el fallo del Tribunal Superior de Shenzhen ante el Tribunal Superior de Guangdong. En su apelación Apple acompaño nueva prueba documental no presentada en primera instancia.
Evidencia presentada por Apple y IP Application:
- Correos electrónicos enviados entre IP Application y Proview Group durante el periodo de negociaciones (agosto-diciembre 2009).
- Copia del contrato.
- Tarjeta de presentación del Sr. Mai Ray, individualizado como Director y Abogado Jefe del Departamento Legal de Proview Technology Shenzhen.
- Documento de cesión de los derechos la marca IPAD en China firmado por el Sr. Mai en representación de Proview.
Durante la vista de la causa el juez sugirió a las partes resolver la disputa a través de mediación. La fecha para la dictación de la sentencia aun no ha sido fijada.
Recientemente (Mayo 2012) Apple, intentó llegar a un acuerdo extrajudicial con Proview ofreciéndole 16 millones de dólares por los derechos de la marca IPAD en China. Proview, aparentemente, habría rechazado la oferta.
Proview Electronics Taiwán demanda a Apple en el Tribunal de Santa Clara, California Estados Unidos
En su demanda, presentada el 28 de febrero del 2011, Proview acusa a Apple de adquirir los derechos de la marca iPad en forma fraudulenta al crear una entidad con el propósito específico (IP Application) de comprar la marca IPAD sin revelar a Proview la participación de Apple en la compra. Proview en su demanda describe cómo abogados de IP Application se negaron a decir para qué necesitaban la marca registrada.
Por otra parte Apple señalo en su oportunidad, que la demanda presentada por Proview ante el tribunal de Santa Clara, California debía ser desestimada porque en el contrato las partes expresamente estipularon que en caso de cualquier conflicto o disputa legal, este debía ser resuelto a través de la ley de Hong Kong y de sus tribunales.
El 4 de Mayo del 2012, el juez Mark Pierce desestimó la demanda presentada por Proview al considerar que ambas partes acordaron solucionar sus discrepancias en los Tribunales de Hong Kong y además por tratarse de un caso que solo afecta al mercado Chino.
Diferentes Sistemas Jurídicos en China, Taiwán y Hong Kong
Finalmente es este caso es importante señalar que Taiwán, China y Hong Kong tienen sistemas jurídicos independientes el uno del otro.
Hong Kong cuenta con un sistema legal basado en el Derecho Anglosajón o Derecho Común al igual que Inglaterra y Estados Unidos. Por otra parte China y Taiwán tienen un sistema jurídico basado en el Derecho Continental o Derecho Civil. Pero, no obstante compartir una misma base legal, China y Taiwán tienen sistemas judiciales que operan de forma absolutamente independientes el uno del otro.
El contrato celebrado en entre Apple y Proview Electronics estipula que en caso de cualquier disputa legal entre las partes, se aplicará la ley y los tribunales de Hong Kong para su solución. Es por esta razón, que Apple solicita un Interdicto Prohibitorio en contra de Proview en los Tribunales de Hong Kong. Y es por este motivo además, que el Tribunal de California desestima la demanda presentada por Proview Electronics.
Pero en relación a la disputa sobre la propiedad de la marca IPAD en China, Proview Tecnology Shenzhen (y no Proview Electronics Taiwán) resulta ser el real titular de los derechos de la marca, es por esta razón que Apple recurre a los Tribunales de China y no a los de Taiwán para presentar sus acciones legales en contra de Proview.