Taiwan Finally Enters the WTO

The World Trade Organization (WTO) approved Taiwan's accession on November 11, 2002 one day after Mainland China. In preparation for entry into WTO, the Legislative Yuan recently ratified several revisions and amendments of several major laws to conform to the rules of the World Trade Organization (WTO). This represents a victory after a sixteen year lobbying effort.

Taiwan Releases Amendments to Copyright Law

On October 25, 2001, the Legislative Yuan ratified proposed revisions to Taiwan's Copyright Law. The revisions are minor, but correct a few items needed to bring Taiwan into complete conformity with WTO standards. The principle revisions are:

The authority governing copyright affairs is transferred from the Ministry of Interior to the Ministry of Economic Affairs (MOEA), which also has jurisdiction over Taiwan's Intellectual Property Office (TIPO).

In order to comply with WTO standards, copyright protection for authors of computer programs is extended to life of the author plus fifty years, rather than the 50-year term previously provided. The new term will apply to all works created after November 14, 2001.

The Amended Law provides that if a copyright license is notarized by a notary public, the licensee's rights shall not be affected due to the transfer or further licensing of the rights by the copyright owner. This strengthens the position of licensees, and not coincidentally, more Taiwan companies are licensees than licensors. It also establishes the status of exclusive licensee. Within the scope of a license, an exclusive licensee may exercise all economic rights of the copyright owner, including assignment or sublicense to an exclusive sub-licensee without prior consent from the copyright owner. He can also join copyright intermediary associations as the economic rights holder. The copyright owner relinquishes all economic rights upon granting an exclusive license.

The Amendment also eliminates the power of the Copyright Review and Mediation Committee ("CMRC") to set royalty rates, and instead allows free market forces to determine them. The CRMC was empowered to do so under the 1992 Copyright Law revisions, but has generally failed to do so. Copyright intermediary associations and licensees will need to determine royalty rates through negotiations.

In addition, in order to comply with WIPO copyright protection standards, TIPO has proposed new draft amendments to the Copyright Law. There are thirty-four proposed draft amendments. These amendments are now under the review of the Administrative Yuan.

Taiwan Patent Law Revised

On October 4, 2001, Taiwan's Legislative Yuan passed the revision of its Patent Law. The new law was published on October 24, 2001 and took effect immediately. The Law provides for a domestic priority system and preliminary publication of invention. It also eliminates the criminal penalties for patent infringement, but increases civil penalties. Some major revisions include:

The Law simplifies the requirement that all parties must sign all documents in a joint application. Any applicant can sign most documents during the application proceeding, although the signature of all applicants is still required to complete the application.

The Law now provides for publication of applications after 18 months from the application date. Once an opposition has been dismissed, no one may make a fresh petition based on the same facts and evidence. This revision is to protect a patentee from malicious disputes. The revised Law also allows a patent applicant filing a new application based on an earlier one to claim priority to the earlier filed application to the extent of earlier specifications. The Law also eliminates the criminal penalties for patent infringement, but increases the civil penalties from two times damages to three times damages proven.

The provision stating that micro organisms and new plant varieties will be protected one year after Taiwan implements TRIPs is still in place, and presumably such protection will begin to be granted by TIPO in November 2002.

In addition, TIPO has proposed seventy-two draft amendments to the Enforcement Rules of the Patent Law. These proposed amendments are now under public hearings held by TIPO.

Taiwan Legislative Yuan Approves Draft Optical Media Management Law

The Legislative Yuan approved the Optical Media Management Law on October 31, 2001. The 30 article Law is intended to strengthen management of optical media and codify many prior administrative regulations. The Law sets the Ministry of Economic Affairs (MOEA) as the agency to administer the Law. The Law strengthens supervision of optical media manufacturing, imprinting of source identification code ("SID codes") and control of manufacturing equipment. The Law requires all enterprises that manufacture optical media must first obtain special permission from the MOEA. SID codes are required in order to engage in the manufacture of pre-recorded laser disks, Read-Only Memory optical media, digital video disks, read-only digital video disks, laser video disks, mini optical media, audio compact disks, other types of optical media designated by the MOEA and the masters of these products. The manufacturers of these products must imprint their assigned SID codes on products they produce.

The Law also states that equipment used to manufacture optical media products may not be imported or exported without a permit issued by the MOEA. The Law grants the MOEA the right to, at any time, dispatch personnel to enter optical media or master manufacturing sites and related sites for inspection. The MOEA may order the production of related information. The site's responsible person and employees may not evade inspection obligations nor hinder or refuse access of inspectors to the site. The penalty for evading MOEA investigation is a fine of NT$ 1,500,000 and NT$3,000,000 (approximately US $44,000 to US $88,000).

The Law also sets serious criminal penalties and administrative sanctions, including imprisonment, confiscation and financial penalties, for violations. Persons who manufacture optical media without a permit are subject to prison terms of one year to three years. Persons who manufacture optical media products at sites other than those recorded in permits are subject to prison terms of two years or less. Persons who do not obtain required source identification codes, fail to imprint products with source identification codes, engage in false labeling, or allow third parties to use their source identification codes are subject to prison terms of two years or less. Manufacturing equipment, optical media products, and semi-finished products connected to the illegal manufacture of optical media products are subject to seizure. The attempted export of optical media products without required SID codes shall be subject to anti-smuggling penalties and confiscation provisions enforced by Customs. The Law sets a six-month grace period for enterprises engaged in producing optical media products prior to the enforcement of the Law.

New Company Law to Take Effect in Taiwan

The Legislative Yuan approved an amended Company law at the end of October 2001. The latest revision is one of the most dramatic in the past 70 years of the Company Law, with 235 of 443 articles amended. The Legislature removed outdated restrictions and nominal supervision of business management, allowing companies greater flexibility in raising capital, strengthening shareholder protection, and encouraging business consolidations. The revised Law eliminates most criminal penalties for corporate action. The revised Law will simplify methods of raising capital, reorganizing, and will provide tax incentives for mergers. These revisions are intended to offer private-sector tools to cope with the recent economic downturn, and also to provide incentives for further growth. The major revisions include:

It has created investment incentives, by allowing companies to impose a discount on the face value of shares when selling stock. This measure will help qualified companies whose stock price has been less than face value to raise money to endure the crisis. It allows solicitation of corporate bonds by companies that are not listed on the public stock exchanges. They still may not publicly solicit investors, but thus may raise capital by issuing corporate bonds from specific individuals, as long as the number of individuals is fewer than 35. These rules will benefit an estimated 600,000 corporations, especially biotech companies and venture capital firms that are not qualified to list their shares on Taiwan's stock market.

The revisions also introduce the concept of creditors' rights as being valuable capital. In addition to cash, technological know-how, and goodwill, creditor rights can now be used in share exchanges. Therefore when a company with growth potential encounters financial difficulties, it can negotiate with lenders to substitute share certificates for debts.

The new law also improves regulations for company reorganization. Merger expenses can be carried forward and offset for five fiscal years. The consolidated company may enjoy some tax benefits such as the exemption from stamp tax. The statutory minimum shareholder approval for a business merger, spin-off or dissolution, has been reduced to two-thirds of shareholders, from the original three-fourths.

To protect investors, the new law stipulates that company executives are obliged to compensate shareholders for negligence. In addition, the percentage of shareholder support needed by board supervisors to take legal action against board directors was lowered from 5 percent to 3 percent. Government agencies will also set deadlines for board elections to prevent individuals from impeding an election in the event of a dispute over company control.

Other major revisions include: streamlining the corporate registration process, and allowing wholly owned subsidiaries instead of the previously required minimum of seven shareholders. Companies will have greater freedom to set management policies, and will be allowed to lend money to other companies or business operations in amounts equally up to 40 percent of a company's asset net value. A company will be allowed to hold its own shares as Treasury Stock for three years, eliminating the need to arrange for third parties to hold shares in trusts pending the issue of employee stock option plans.

Merger and Acquisition Law

The Legislative Yuan passed the Merger & Acquisition Law on January 15, 2002. This is the first uniform M&A Law in Taiwan. The Law simplifies the procedures for merger and acquisition. It provides a Short-Form Merger System. If a company plans to merge with a subsidiary of which it holds more than 90% ownership, the decision can be made by the Board of Directors, and the Shareholders' Meeting is no longer required. The Law also provides various options for merger and acquisition, including statutory merger, purchase of shares, main businesses and assets, share exchange or conversion and division. In addition, the Law provides detailed rules regarding employment, tax and other aspects involved in mergers and acquisitions.

Amendments to the Trademark Law

The amendments to Articles 77-1 and 79 of the Trademark Law took effect in May 2002. The amendments were made to clarify the applicable rules for opposition, invalidation and cancellation cases during the transition from the old Trademark Law (1993) to the amended Trademark Law (1998). The amendments clarify that opposition cases shall be governed by the rules applicable at the time of opposition, invalidation cases shall be governed by the rules applicable at the time of trademark registration, and cancellation cases shall be governed by the rules applicable at the time of cancellation. Thus, relevant rules under the old Trademark Law will continue to apply to certain cases.

Taiwan released Draft Amendment of the Trademark Law

In order to be consistent with mainstream international legislation, Taiwan is proceeding to amend its Trademark Law again. The draft Amendment was submitted to the Legislative Yuan last May, however it is still uncertain when the Amendment will be passed. The draft contains 40 new articles, eliminating 16 existing articles. The major revisions include the following:

  1. Sound and 3D shapes may be registered as trademark;
  2. It will no longer be required that the trademark must be used to identify the applicant's products and that the applicant must have intent to use;
  3. The definition of "trademark use" is amended to take into account developments in E-commerce and the Internet.
  4. A trademark application may now designate more than one class of goods or services, thus saving application fees for trademark owners;
  5. Trademarks will be registered upon approval, and oppositions will be accepted after registration.
  6. The Associate Trademark system is abolished, and gradually so will the Defensive Trademark system.

Draft Amendment to Taiwan Patent Law

On January 3, 2003, Taiwan's Legislative Yuan passed another draft Amendment to the Patent Law. The new law abolishes criminal sanctions for new utility model and new design patents; and it restructures the examination system for new utility model patents to make the application process more efficient. The new law also abolishes the opposition procedure, allowing applicants to secure their patent right immediately following the approval of the application by patent authorities. Potential opponents may still file an action for invalidation of an approved patent, but there would no longer be two chances to cancel the patent. The new law also would add a provision stipulating that an "offering for sale" is within the scope of a patent, so as to comply with Article 28 of the TRIPs Agreement; and it would also add a provision allowing patent authorities to examine petitions first in infringement litigation.

Early Disclosure of Invention Patents Effective October 26, 2002

Pursuant to new regulations in the Patent Law, the "early disclosure of invention patents" system went into effect on October 26, 2002. All invention patent applications will be published in the Invention Disclosure Gazette 18 months after the date of filing, except those that involve national defense secrets or other secrets affecting national security, those that are detrimental to public order or good morals, or those that are withdrawn within 15 months of the filing date. After its publication, any person may file an application to review or to make a hand, photographic or xerographic copy of the specifications or drawings.

New Enforcement Rules to the Patent Law

In order to be consistent with the amended Patent Law, the Enforcement Rules of Patent Law were amended accordingly and took effect on November 8, 2002, about one year after the amendments to the Patent Law. The main features of the new Rules are as follows:

  1. Applicants do not need to submit personal identification or juridical person certification unless specifically requested to do so by the TIPO;
  2. Applicants do not need to submit Chinese translations or abstracts of certification documents unless deemed necessary by TIPO;
  3. A party may submit a photocopy of a certification document, along with an affidavit attesting to the copy's authenticity;
  4. The forms for presenting claims, drawings explanations and diagrams for new design patent applications will be simplified;
  5. The patent application does not have to be signed by the applicant, and it may be signed by the patent agent.

Taiwan released Draft Amendments to the Copyright Law

In order to further comply with TRIPs, promote the development of E-Commerce and protect copyrights in a digital environment, the Intellectual Property Office of Taiwan has drafted new Amendments to the Copyright Law. The amendments were submitted to the Legislative Yuan for examination in August 2002. The amendments consist of revisions to 30 articles, 8 new articles, and deletion of 1 article. The major amendments include adding the rights of "public transmission" and "public display" to protect copyrights in digital works, setting forth new provisions regarding technological methods to protect copyrights and copyright management information, revising provisions regarding "Reasonable Use" to reflect use in digital form and raising the maximum amount of penalty for infringement from NT$450,000 to NT$1million (approximately US$29,000).

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