Updates

Amendments to Trade Secrets Act proposed

The Taiwan Intellectual Property Office (“TIPO”) has recently held a series of public hearings on proposed amendments to Taiwan’s Trade Secrets Act (the “Act”). The amendments under discussion include provisions that would give foreign corporations standing to bring private prosecutions for trade secret misappropriation and extend trade secret protection to foreign nationals from jurisdictions that are parties to multilateral treaties. Participants in the hearings also took the opportunity to urge that a mechanism be created to redact sensitive parts of judgments and that the Act address fair competition issues in trade secret protection.

Private Prosecutions and Scope of Trade Secret Protection

Currently foreign corporations without a presence in Taiwan do not have standing to file criminal complaints or private prosecutions for trade secret misappropriation.[1] The TIPO has proposed adding a new Article 13-5 to the Trade Secrets Act that would create a statutory exception permitting such private prosecutions.

The TIPO has also proposed amending Article 15 of the Act to extend trade secret protection to jurisdictions that are members of multilateral treaties to which Taiwan is also a party. Since Taiwan is a member of the WTO, this amendment would extend trade secret protection to businesses from other WTO member jurisdictions. Article 15 currently provides that Taiwan’s protection of trade secrets extends to those jurisdictions whose laws protect Taiwanese trade secrets. The draft amendment of Article 15 clarifies that such laws need not be statutory laws. In other words, if a jurisdiction’s case law protects Taiwanese trade secrets, Taiwan trade secret protection would reciprocally protect trade secrets from that jurisdiction.

Access to Confidential Information

The Act currently permits a judge to issue a protective order restricting access to party filings during litigation. A judge can also order closed hearings to protect trade secrets. The TIPO is proposing a new Article 13-6 that would give prosecutors similar powers during the investigative proceedings that precede an indictment. This amendment has been controversial and it is unclear whether the TIPO will revise its draft of 13-6 or abandon it entirely.

Judgements and Fair Competition

In addition to the amendments proposed by the TIPO, participants in the hearings also discussed whether there should be a mechanism to allow parties to trade secret litigation to comment on judgments before they issue. Proponents of this mechanism take the view that the court should consider the views of the parties as to whether a judgment discloses confidential information before the judgment is published. Such a mechanism could ultimately lead to partial redactions of published judgments to avoid disclosures.

Others at the hearings recommended adding language to the Act prohibiting competitors from obtaining trade secrets by means of coercion, incentives, or other unfair means. A similar prohibition in the Taiwan Fair Trade Act was removed in 2015.

Future Developments

The proposed amendments to the Act reflect the continuing concerns that Taiwanese technology companies have about the adequacy of Taiwan’s trade secret protection. The TIPO will now consider the views expressed during the hearings with a view to revising the proposed amendments prior to submitting them to the Executive Yuan for approval. If approved by the Executive Yuan, a bill will be introduced to the legislature where lawmakers may make further changes before enacting or rejecting the bill.

We recommend that businesses concerned with trade secret protection in Taiwan monitor these amendments as they make their way through the legislative process. There will be further opportunities for international businesses to make their voices heard on this important issue before the law is changed.

For more information about trade secret protection and other intellectual property matters in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.


[1] A 1931 Judicial Yuan interpretation generally precludes unregistered foreign corporations from filing private prosecutions under Article 319 of Taiwan Code of Criminal Procedure unless the legislature has created a statutory exception. Judicial Yuan Interpretation 533. Taiwan Copyright, Trademark, and Patent Acts already have statutory exceptions for unregistered foreign corporations. Taiwan’s Supreme Court has however held that US companies may file private prosecutions under the Treaty of Friendship, Commerce and Navigation between the United States of America and the Republic of China.

Taiwan constitutional court issues decision on marriage equality

Taiwan’s constitutional court today issued Interpretation 748 holding that Book IV Chapter II (marriage) of the Taiwan Civil Code is unconstitutional to the extent that it does not permit same-sex couples to enter into a permanent, exclusive, and intimate relationship in violation of Articles 22 (freedom of marriage) and Article 7 (right to equality before the law) of the Taiwanese Constitution.

The court gave the Taiwan Legislature two years to amend the current Civil Code or enact a new law consistent with Interpretation 748. While the court deferred to the Legislature to decide what form equal protection for marriage freedom should take, it also set a time limit for legislative action.  If the Legislature fails to take action within the next two years, same sex couples can register their marriages under the existing Civil Code.

Taiwan’s Ministry of Labor further clarifies new leave rules

Since amendments to Taiwan’s Labor Standards Act (the “LSA”) came into force in December 2016, both employees and employers have often found themselves unsure of how the changes apply in the workplace. In order to clarify how employers can in practice comply with these amendments regarding flexible rest days and avoid potential disputes with their employees, the Ministry of Labor (the “MOL”) has subsequently issued two interpretative letters. Below is a summary of these two letters, and what they mean for employers.

Make-up leave on flexible rest days

Previously under the LSA, employees who consent to work on flexible rest days could only choose to be provided with overtime payment in respect of their hours worked. The MOL has now clarified that such employees can choose either make-up/compensatory leave or overtime payment after the fact (i.e. after their overtime work has been completed). There must be some written agreement between employers and employees stating clearly the relevant standards for make-up leave, the period within which the make-up leave should be taken, and how any outstanding make-up leave is dealt with at the end of this period. Employers cannot force their employees to choose make-up leave.

This written agreement can be in the form of email correspondence, or a simple consent letter which is signed by the employee each time they complete overtime work on a flexible rest day. In the event of a dispute arising, the burden of proof falls on the employer.

Inability to work on flexible rest days/overtime

A second and related interpretative letter issued by the MOL deals with the situation where an employee agrees to work on a flexible rest day, however due to some personal reason (e.g. sickness) is either (a) unable to come to work at all, or (b) comes to work but is unable to complete the agreed hours of work. Previously, in such a situation, the employee would have to take personal or sick leave and the employer would still have to pay the full overtime pay amount in line with the recent flexible rest day overtime rules (please see our previous update here). This lead to many employment disputes, and was perceived as being unfair to employers. As such, the MOL has clarified that the employees’ consent to work on flexible rest days can be effectively rescinded where they are unable to work due to personal reasons.

In situation (a), this means that the employee will need to inform their employer of their inability to work, and the employer can negotiate with the employee to rescind the employees’ overtime obligation so that they do not need to take leave and overtime pay does not need to be provided.

In situation (b), in respect of the time when the employee is absent, the employer can negotiate with the employee to rescind the employees’ overtime obligation so that they do not need to take leave and overtime pay does not need to be provided. The employee’s overtime period can be dealt with as make-up leave. The details of how the employee’s absence from work in both situations (a) and (b) is dealt with can be mutually agreed upon in writing in a separate agreement, such as work rules, collective agreements (where there is a labor union) or employment contracts.

The MOL has further stated that only the amount of actual overtime hours worked will count towards the total amount of overtime (which cannot exceed 12 hours in one day or 46 hours in one month, under Article 32 of the LSA). This differs from the calculation of overtime payment.

Further developments

As the MOL releases further clarifications on the LSA amendments, employers must ensure that employees are made aware of the rules governing working on flexible rest days, overtime, and annual leave. This will ensure that disputes are minimized or avoided all together, and will prevent administrative penalties being levied on employers.

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

Grand Justices rule pre-approval for cosmetics advertising unconstitutional

On 6 January 2017, Taiwan’s Constitutional Court ruled that pre-approval of cosmetics advertising content by local and central health authorities is unconstitutional, as it infringes on the protection of free speech granted by the Constitution. Article 24(2) and Article 30(1), of the Statue for Control of Cosmetic Hygiene have been repealed with immediate effect.

Article 24(2) of the statute states that, ‘Before publicizing or advertising any cosmetic product, the manufacturer or dealer thereof shall first submit to the central, municipal or county/city competent health authorities for its approval all the text, pictures and/or oral statements contained therein; and shall subsequently present the approval letter or certificate to the mass communication institutions concerned for their examination’; while Article 30(1) detailed the financial penalties for not obtaining approval prior to publication.

The ruling came after DHC, a Japanese cosmetics manufacturer, was fined NT$30,000 (approximately US$935) in 2010 for failing to obtain prior approval from Taipei City’s Department of Health. DHC later applied for a constitutional ruling after an appeal and subsequent administrative litigation failed.

Two strategies for speeding up patent applications

In this article, we explore two options available to intellectual property holders in expiditing patent applications in Taiwan.

Electronic Priority Document Exchange (“PDX”)

An Electronic Priority Document Exchange (“PDX”) agreement between the Taiwan Intellectual Property Office (TIPO) and its Korean counterpart, the Korea Intellectual Property Office (KIPO), went into effect on 1 January 2016. This agreement follows a similar agreement between the TIPO and the Japan Patent Office (JPO) that came into effect in December 2013.

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 they can then use 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.

These agreements can help applicants receive expedited review of patent applications claiming priority among these three jurisdictions. In 2015, 12,284 invention patents were filed by Japanese applicants in Taiwan, the largest number originating in a foreign jurisdiction. In the same year, there were 1,614 filings from Korean applicants, placing them third behind the United States. According to statistics from the JPO, Korea accounted for 10.8% of all patent applications made in Japan in 2013, showing that the PDX agreements between the three intellectual property offices can potentially serve a considerable number of applicants.

The Patent Prosecution Highway (“PPH”)

The Patent Prosecution Highway (“PPH”) is aimed at expediting 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 USPTO, the JPO, the KIPO and the Spanish Patent and Trademark Office (SPTO).

Under the PPH, an applicant who receives a ruling from their OFF that their application is allowable or patentable, may then request OSFs in which the patent application is pending to fast-track the examination of corresponding claims.

Cooperation through the PPH program allows OSFs to exploit the patent search and examination results of OFFs, allowing applicants to reach final dispositions more quickly and efficiently than under standard examination prosecution procedures. 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. For applicants filing numerous patents in many jurisdictions around the world concurrently, this is clearly advantageous.

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

Taiwan Personal Information Protection Act amended

Taiwan’s Legislative Yuan passed a bill amending the Personal Information Protection Act (PIPA) on 15 December 2015. The bill was the first amendment to the PIPA since it took effect in 2012.

In 2012, the Executive Yuan declined to put Articles 6 and 54 of the PIPA into force on grounds of administrative impracticability. In response, the Legislature has now amended Articles 6 and 54. In addition, the Legislature added medical records to Article 6′s list of sensitive information that in general cannot be collected, processed, or used unless one of six enumerated exceptions applies. Consent of the data subject is now a permitted exception.

According to media reports, the Ministry of Justice has suggested that it will put the amendments to PIPA including Articles 6 and 54 into force in March of this year.

2 March update: The amendments will go into effect on 15 March 2016. Read our full feature on the PIPA changes here.

National Development Council announces plans to simplify incorporation

The National Development Council and other agencies recently announced three planned measures to simplify procedures for foreign investors wishing to establish business entities in Taiwan.

1. A university may allow a startup to register its business address at a university incubator

A business in Taiwan must register the actual premises from which the business is conducted as its address. Universities however have been reluctant to allow startups to register their business addresses at university incubators because universities are in general not permitted to allow for-profit businesses to use university property.

As a solution, the NDC, the Ministry of Education and the tax authorities have reached a consensus that allowing universities to permit startups  to register their businesses addresses at university-operated incubators serves policies to encourage academic-business cooperation. Consequently, a university incubator will be permitted to allow a student startup to register its business address at the incubator instead of having to make other arrangements such as leasing off-campus premises. It appears that student startups will include startups founded by non-degree students who take courses in entrepreneurship.

2. Foreign investors may appoint agents to open bank accounts and file for tax registration

Currently, a foreign investor must come to Taiwan to open corporate bank accounts and register for taxes in person.  In many cases,the foreign investor must make two trips to Taiwan during the process. The NDC now plans to allow foreign investors to appoint an agent (typically a lawyer or an accountant) to open corporate bank accounts and file for tax registration on behalf of the foreign investor.

3. Foreign investors may appoint an agent to use the online company registration system without use of a digital certificate

The Ministry of Economic Affairs has created a one-stop website that investors can use for routine company filings including name reservation, incorporation, and business registration. To use the website, users must currently create a cumbersome digital certificate using a Chinese interface. To simplify use of the website, the Ministry of Economic Affairs has agreed that foreign investors will be permitted to authorize an agent to make routine filings on their behalf without the foreign investor’s having to obtain a digital certificate.

According to the NDC’s press release, these measures will be adopted in one month.

While all of these measure are steps in the right direction, allowing agents to open bank accounts and file for tax registration  has the most potential to simplify the process of setting up a business in Taiwan for foreign investors.

Peter Dernbach quoted in Asia IP on 3D printing

Partner Peter Dernbach was recently interviewed about 3D printing and its implications for intellectual rights holders, as well as the current state of trademark legislation in Taiwan, by Asia IP. In the May and June edition of Asia IP, Peter says that many of the industry’s key players hail from Taiwan and that Taiwan’s Premier has recently said that a plan will be developed to provide further support at the governmental level. From an intellectual property point of view, Peter notes that, “It will be important for industry groups to educate customers about potential risks in using 3D printers to produce items that look like the original goods, but may not share all of the same properties“.

In a further section titled Trademark Survey 2015,  Peter notes that while Taiwan’s Trademark Act was last amended in 2012, some new administrative measures have recently been proposed. “The TIPO (Taiwan Intellectual Property Office) plans to make some administrative changes to further protect trademark owners’ rights. In March 2014, they announced that in order to protect rights, they would shorten the administrative remedial process by setting up a dedicated unit within the TIPO to handle objections, hear disputes and speed up the process from objection to ruling”.

Peter adds that the biggest challenge for trademark owners is the sale on counterfeits online. Meeting that challenge will require greater cooperation between Internet service providers, the IP police and parties which handle the financial transactions for those sites engaging in the sale and distribution of counterfeits. You can read the full article on 3D printing here.

Headstart Taiwan: Required documents to hire foreign employees

Taiwan’s Workforce Development Agency has released a list of documents it will accept from employers to show they qualify under the new Headstart Taiwan program to hire foreign employees without being subject to minimum experience or capital/revenue requirements. To qualify, companies that are registered less than five years must meet one of the following criteria and provide documentation in order to qualify:

1. Received NT$2 million or more in venture capital
Required documents:

  • Venture Capital Enterprise (Update) Registration Form  (or evidence of lawful incorporation) or,
  • Statement of Shareholders’ Capital Contributions in Cash, issued by the competent authority for company registration within 2 months of application date (XX Venture Capital Inc. should appear in the Shareholder Roster) or,
  • Foreign investment approval from the competent authority or its agent (the approved lines of business should include venture capital investments)

2. Registered on the Go Incubation Board for Startup and Acceleration Firms (GISA) with the Taipei Exchange
Required documents:

  • Approval to list on the Go Incubation Board for Startup and Acceleration Firms (GISA), issued by the Taipei Exchange

3. Granted an invention patent in Taiwan, or had a patent assigned or licensed to exploit by a Taiwanese invention patent holder that is registered with the Taiwan Intellectual Property Office (TIPO)
Required documents:

  • Taiwan Invention Patent Certificate or,
  • Approval letter to record invention patent assignment or license issued by the Taiwan Intellectual Property Office, Ministry of Economic Affairs

4. Joined an incubator
Required documents:

  • Lease agreement with qualifying incubator programs (for a list of qualifying incubators click here)

5. Won awards in recognized entrepreneurial or design competitions
Required documents:

  • Certificate from qualifying entrepreneurial or design competitions (for a list of qualifying competitions click here)

In addition to meeting one of the above criteria, all qualified Headstart Taiwan employers must also provide either a Company Registration Certificate or a Business Registration Transcript when applying for employee work permits.

Employees and managers are treated differently for work permit purposes. An ordinary foreign-invested business can obtain a single work permit for a foreign national manager if the business has at least NT$500,000 in capital at registration and NT$3 million in revenue after its first year of operation. These capital/revenue requirements are lower than those for foreign employees (NT$5 million/NT$10 million). Taiwan’s National Development Council has announced that Taiwan will grant up to 2,000 entrepreneur visas starting in July 2015. While the requirements for obtaining and extending an entrepreneur visa have not been announced, the program is intended to allow startups to have multiple foreign managers or executives in addition to foreign national employees.

1st quarter trends in IP released

Taiwan’s Intellectual Property Office (TIPO) has released IP registration figures and trends for the first quarter of 2015.

A total of 17,221 new patent applications were made, an increase over the first quarter of 2014 of 11.88%. There were a total of 3,967 invention patent applications originating in Taiwan and 6,558 originating abroad, a decrease of 12% year on year. The top foreign patent applicants were Intel (173 applications), Toshiba (158) and Tokyo Electron Taiwan (120). The TIPO also notes that while overall applications by Hon Hai Precision Industry Co. (the single largest patent applicant in the country) have decreased, Hon Hai’s applications for Internet of Things and cloud technologies have increased.

In addition, the TIPO received 17,379 trademark applications, and while applications originating in Taiwan decreased by 3.23%, foreign applications increased by 6.62% over the same period last year. The largest number of foreign applications came from the United States (888), China (847) and Japan (801). Applications from China increased 50.71% over the same period last year, a trend the TIPO notes has continued for the last four quarters.

The full report is available on the TIPO’s website in Chinese here.

 

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