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

Do social media influencers need to disclose partnerships?

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

Disclosure of Material Connections in American Law

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

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

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

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

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

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

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

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

Influencers and celebrities should timely disclose their material relationships with companies

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

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

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

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

Employment law changes made for dispatch workers and APRC holders

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

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

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

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

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

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

Labor Dispute Act: three takeaways for employers

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

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

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

Scope

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

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

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

Review all relevant documents

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

1. Wages

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

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

2. Work hours

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

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

Focus on prevention

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

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

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

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

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

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

The Right of Publicity in the US and Taiwan

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

Possible civil liability

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

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

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

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

Possible liability under the Fair Trade Act

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

Conclusion

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

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

Frequently asked patent questions

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

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

2. What categories of patents may be filed?

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

3. What is the term of patent protection?

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

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

4. Unpatentable items under the Taiwan Patent Act

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

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

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

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

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

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

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

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

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

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

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

9. Is accelerated examination available?

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

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

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

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

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

11. What remedies are available for infringement?

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

Actual damages suffered by the patent owner;

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

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

12. Is border enforcement available?

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

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

Digital currency regulation in Taiwan

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

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

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

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

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

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

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

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

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

Jeremy Olivier also contributed to this update.

New reporting requirement for Taiwanese companies

The recently amended Taiwan Company Act (2018) requires most companies to report their board members, registered managers, and major shareholders online by 31 January 2019. To report, log on to the Company Transparency Platform. This site is in Chinese only at the time of writing.

If the company’s registered representative (typically the chairman) is a foreign national without a Taiwan national health card or Digital Certificate IC card, the company will generally need to apply for a Business ID (公司工商憑證) card to use the Company Transparency Platform. Business ID cards can be applied for online from the Taiwan Ministry of Economic Affairs’ Certificate Authority. This site is currently only in Chinese. The company’s registered seals (chops) will be needed during the application process.

Private limited companies, closed companies, and companies limited by shares are subject to the reporting requirement unless they are an exempt business entity.

Business entities exempt from the reporting requirement include listed companies, reporting companies, branches of foreign companies, and representative offices.

Board members include directors and supervisors. Registered managers include the registered managers (such as the CEO or General Manager) of a Taiwan limited company or a company limited by shares. Companies do not need to report managers of branches.

A major shareholder is any shareholder who owns more than 10% of the company. Only one level of shareholders must be reported. Shareholders of parent or grandparent companies do not have to be reported

The following information must be reported about each individual:

  1. Names
  2. Nationality
  3. Date of birth or date of incorporation registration
  4. ID Number
  5. Shareholding or capital contribution

From 2020 on, these reports must be filed for the preceding calendar year between March 1st and March 31st of the following year. For example, you will need to report your company’s responsible persons and major shareholders in 2019 between March 1st and March 31st 2020.

Any changes to reported information must be reported within 15 days of the change.

Failure to report or false reports will trigger a letter to remedy the report by a deadline. Failure to remedy by deadline will result in a fine of NT$50,000 to NT$500,000. Failure to remedy after a second warning letter can result in a fine of NT$500,000 to NT$5 million. The director registered as the company’s representative is personally liable for these fines. In serious cases, the company’s registration can be revoked.

The new reporting requirement is part of Taiwan’s efforts to combat money laundering.

For questions about or assistance with reporting please contact Michael Fahey at mfahey@winklerpartners.com and Daniel Chen at dchen@winklerpartners.com.

Crowdfunding: a possible path for ICOs in Taiwan

Initial coin offerings (“ICOs”) have garnered a significant amount of recent media attention. Regulatory authorities, legislators, and legal practitioners, among others, are all involved in the ongoing discussions as to how ICOs are to be defined and regulated. While such discussions merit their own in-depth exposition and analysis, this article highlights a simple, pragmatic approach to providing a possible pathway for at least a subset of ICO transactions to move forward in Taiwan.

In Taiwan, the Financial Supervisory Commission (the “FSC”) has the authority to regulate any ICO it considers to involve an offering of securities to the public. The FSC has not delineated any specific test for determining whether an ICO would be deemed to be a public offering of securities. It would likely look to Taiwan Supreme Court Criminal Judgment No. 104-Tai-Shang-3215 (“Judgment 3215”) for guidance. Judgment 3215 sets out a test for securities broader than that in the analogous US case SEC v. W. J. Howey & Co., 328 U.S. 293, 301 (1946) and its progeny. Pursuant to Judgment 3215, an ICO would likely be considered a public offering of securities if the tokens or other digital rights being offered (i) had a stated value, (ii) were being purchased for investment purposes, and (iii) were tradable.

In our opinion, it is highly likely that the FSC would consider an enterprise raising funds through an offering of transferable tokens or other digital rights entitling the holder thereof to future distributions of enterprise profit as an offering of securities subject to regulation. In our experience, most enterprises that would wish to carry out such a fundraising effort do not meet the regulatory requirements to conduct a public offering in Taiwan or, even if they did meet such requirements, would likely find compliance with such requirements and navigation of the approval process overly burdensome and thus not cost-effective.

Observers in Taiwan have proposed that, at least with respect to smaller fundraising efforts, the FSC should allow enterprises wishing to conduct an ICO to avail themselves of Taiwan’s already established crowdfunding channels. The FSC has given no indications as to its determination on this proposal, but we remain hopeful that the FSC will allow certain ICOs to be conducted under the rubric of crowdfunding. Such a move would provide startup blockchain enterprises in Taiwan an additional capital raising option.

Interestingly, the FSC never directly promulgated crowdfunding regulations.  Instead, the FSC authorized the Taipei Exchange (the “TPEx”) to establish the Go Incubation Board for Startup and Acceleration Firms (the “GISA Board”) primarily to conduct equity crowdfunding activities.  The board allows small and medium-sized startups to conduct online fundraising activities in a cost and time effective manner. The GISA Board does not facilitate secondary market transactions. The TPEx operates the GISA Board pursuant to rules approved by the FSC.

The GISA Board began accepting registration applications in 2013. Since then, ninety-one (91) companies have successfully registered and forty-seven (47) companies are currently in the process of registration. In total, companies on the GISA Board have raised approximately NT$6.3 billion (approximately US$206.5 million) in funds.

In 2015, the FSC approved additional TPEx regulations that allowed private companies to establish crowdfunding platforms separate from the GISA Board. To date, Masterlink Securities Corp. and First Securities have each established their own online equity crowdfunding platforms (the “Crowdfunding Platforms”).

Over recent years, regulations governing crowdfunding offerings, whether conducted on the GISA Board or through Crowdfunding Platforms, have been relaxed. Such changes have allowed more companies and investors an opportunity to participate in crowdfunding offerings. GISA Board companies are no longer subject to a maximum capital threshold, and the maximum capital threshold for companies on the Crowdfunding Platforms has been raised from NT$30,000,000 to NT$50,000,000. The maximum annual investment limit per company has also been increased from NT$15,000,000 to NT$30,000,000 on both the GISA Board and Crowdfunding Platforms.

Given the interest in blockchain technologies and ICOs demonstrated by the Taiwanese media and government agencies, we are hopeful that the FSC can and will distinguish ICOs that are, in essence, securities offerings from those that have attributes more akin to currency or other digital assets. If this distinction can be made, Taiwan’s increasingly robust crowdfunding channels may become open for use by blockchain startups as a viable funding alternative. We continue to monitor the crowdfunding and ICO space and will keep our clients informed as to any significant developments.

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

Security interests in IP rights in Taiwan

Security interests in IP may be recorded with the Taiwan Intellectual Property Office (TIPO) as a pledge, either by the rights owner or by the pledgee. The recordal of IP security interests in Taiwan only applies to registered trademarks or granted patents. A pending trademark or patent application may not be the subject of a pledge. It should be noted that an unrecorded pledge may not be asserted against third parties. Also, where a pledge on IP rights is altered or extinguished, the same should also be recorded with the TIPO.

A short-form version security agreement is acceptable for recording a pledge. The value of the pledge must, however, be indicated in the agreement. The pledge documents need not be notarized or legalized.

In order to obtain a first priority security in IP rights, before recording a pledge, rights holders should first conduct searches for senior pledges on the register that may affect their rights. To maintain the validity of the IP rights pledged, the security agreement should specify which party is obligated to pay the renewal or annuity fees for said rights. A pledge of rights recorded with the TIPO remains effective in perpetuity unless it is terminated.

Acquiring a security interest in trademarks or patents by means of a pledge is a straightforward and inexpensive means of leveraging intellectual property assets in Taiwan.

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

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

This is the second of two FAQs on how creative professionals can live and work in Taiwan after the Act for the Recruitment and Employment of Foreign Professionals came into force in February 2018.

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

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

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

3. What does cultural administration mean?

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

5. What are the basic qualifications for performing arts?

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

7. What are the basic qualifications for visual arts?

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

9. What are the basic qualifications for publishing?

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

11. What are the basic qualifications for motion pictures/television/popular music?

12. What is a Category I Film Award?

13. What are the basic qualifications for crafts?

14. What crafts competitions or organizations are recognized?

15. What are the basic qualifications for cultural administration?

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

17. What international arts and culture NGOs qualify?

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

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

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

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

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

23. How do I apply?

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

25. Does my documentation to be translated into Chinese?

26. How long does the application process take?

27. Who will review my application?

28. Can I renew my Employment Gold Card?

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

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

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

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

Special Professionals in Culture and the Arts FAQ

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

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

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

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

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

Special professionals who work in the following fields are eligible:

(a) Performing Arts,

(b) Visual Arts,

(c) Publishing,

(d) Motion Pictures/Television/Popular Music,

(e) Crafts, and

(f) Cultural Administration

3. What does cultural administration mean?

Cultural administration means arts management or arts administration.

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

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

5. What are the basic qualifications for performing arts?

(a) Membership in an international arts organization,

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

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

(d) Recipient of recognized award,

(e) Judge on panel for recognized award, or

(f) Special approval by the Ministry of Culture.

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

The Ministry of Culture has listed examples here. These are non-exhaustive lists of examples. You can and should apply with similar organizations, positions, awards, or events. In general, alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples on the Ministry’s list include:

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

(b) Manager (key position),

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

(d) National Dance Award (award)

7. What are the basic qualifications for visual arts?

(a) Membership in an international arts organization,

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

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

(d) Recipient of recognized award,

(e) Judge on panel for recognized award, or

(f) Special approval by the Ministry of Culture.

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

The Ministry of Culture has listed examples here. These are non-exhaustive lists of examples. You can and should apply based on similar organizations, positions, awards, or events. In general, alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples on the Ministry’s list include:

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

(b) Director (key position),

(c) Art Taipei (event), or

(d) New York Arts Directors Club Annual Awards.

9. What are the basic qualifications for publishing?

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

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

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

(d) National or international literary prize,

(e) Curator for major international publishing event, or

(f) Special approval by the Ministry of Culture.

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

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

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

(a) The Financial Times (media),

(b) Random House (publisher).

(c) Managing editor (key position), or

(d) Man Booker Prize (literary award).

11. What are the basic qualifications for motion pictures/television/popular music?

(a) Nominated for or received Category I Film Award,

(b) Nominated for or received Grammy or BRIT Award,

(c) Nominated for or received international television award such as Emmy, BAFTA, or Seoul Drama Award, or

(d) Special approval by the Ministry of Culture.

12. What is a Category I Film Award?

The Category I Film awards are:

(a) Cannes International Film Festival,

(b) Venice International Film Festival,

(c) Berlin International Film Festival, or

(d) Academy Awards.

13. What are the basic qualifications for crafts?

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

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

(c) Special approval by the Ministry of Culture.

14. What crafts competitions or organizations are recognized?

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

(a) Faenza Prize (competition award),

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

(c) International Ceramics Competition Mino, Japan.

15. What are the basic qualifications for cultural administration?

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

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

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

(d) Special approval by the Ministry of Culture.

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

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

17. What international arts and culture NGOs qualify?

See the list of UNESCO partnership NGOs here.

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

You can apply under the catch-all “Special approval by the Ministry of Culture” in each of six categories of special professionals in culture and the arts. This is to cover professionals in these fields who have other qualifications. Indicate on your application that you want the reviewing agencies to consult with the Ministry of Culture. See Question 27.

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

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

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

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

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

(c) Ability to sponsor parents and grandparents for visits of up to one year.

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

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

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

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

As of 5 October 2018, 22 Employment Gold Cards have been issued to special professionals in the field of Arts and Culture.

23. How do I apply?

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

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

Please see the various documentary requirements here.

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

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

26. How long does the application process take?

The application review period is 30 days although this can be extended if more documents are required. In practice, it currently takes most applicants 2-3 months.

27. Who will review my application?

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

28. Can I renew my Employment Gold Card?

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

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

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

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

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

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

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

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

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

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

(b) Ms. You Rui-zhu (游瑞珠): (02)2388-9393 #2403

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

(a) Mr. Zhang Wei-zhao  (張維釗): (02)2380-1720

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

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

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

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

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

 

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