TAIWAN IPR DIALOGUE: US Raises Concerns about Compulsory

UNCLAS SECTION 01 OF 03 TAIPEI 000638

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C O R R E C T E D C O P Y (VARIOUS MINOR TEXT CHANGES)

E.O. 12958: N/A
TAGS: ECON KIPR ETRD TW
SUBJECT: TAIWAN IPR DIALOGUE: US Raises Concerns about Compulsory
Licensing


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Summary
--------------

1. In a March 6 digital video conference U.S. officials raised
concerns about proposed amendments to Taiwan's patent law which
would expand the scope of compulsory licensing. USTR likewise
raised the "potentially disturbing precedent" of the ongoing Phillips
compulsory license case, which is now under investigation by the EU.
Taiwan agreed to review U.S. concerns. End Summary.

Introduction
--------------

2. On March 6, officials from the Taiwan Intellectual Property
Office (TIPO),the Department of Health, and the Ministry of
Economic Affairs, met via digital video conference (DVC) with
officers from USTR, AIT/W, State, Commerce, and USPTO to discuss two
proposed amendments to Article 76 of Taiwan's Patent Law and get an
update on recent IPR developments in Taiwan. The U.S. team was
headed by Tom Bollyky, Director, Intellectual Property and
Innovation, USTR. In Taiwan, the discussion was led by Ms. Wang
Mei-hua, Deputy Director General of TIPO. This DVC is part of the
ongoing bilateral IPR dialogue.

Amcit Legislator Wants More Compulsory Licensing
-------------- ---

3. The first item for discussion was a proposed amendment to
Article 76 of the Patent Act. The amendment was put forward by Chen
Min-jen, a member of the Legislative Yuan from the ruling Democratic
Progressive Party. He is an American citizen who serves as an
overseas representative. The proposed amendment makes the following
significant changes to the current law:

--a compulsory license can be issued if it is found that a
patent-holder has committed unfair competition "to misuse patent
rights" (added language in quotes)

--a compulsory license can be issued after a legal judgment in the
first instance, with no need to wait for an appeal.


4. During the discussion, USTR asked why the phrase "to misuse
patent rights" appeared in the amendment language. This appears to
go beyond the existing "unfair competition" language in TRIPS. Is
this new language intending to broaden the conditions for issuing a
compulsory license beyond TRIPS, Bollyky asked? TIPO replied that
this language was inserted at the request of the legislator
proposing the amendment. They agreed to ask for clarification and
to pass along U.S. concerns.


5. USTR also expressed concern that the new language allows Taiwan
authorities to issue a compulsory license after a court of first
instance reached a determination, without the possibility of
obtaining a stay of that decision. USTR made clear that this change
could be problematic. Taken together with the addition of unclear
language that could broaden the conditions for issuance of a compulsory
license, this was "a fairly significant degradation of protections for
rights-holders in Taiwan," Bollyky stated.


6. Ms. Wang responded that she would pass along U.S. concerns and
that TIPO would point out to the legislator that the broader
language may not be TRIPS-compliant.


7. USTR also sought to determine how Taiwan addressed the TRIPS
Article 31(b) requirement to notify rights holders if a compulsory
license was issued. TIPO pointed out that paragraph 3 of Article 76
stipulated that the patentee must be notified in all instances. In
addition, judicial or independent review, as required by TRIPS 31(i)
is covered by Article 1 of the Administrative Review Act, TIPO
noted.

Phillips Case Cause for Concern
--------------

8. Bollyky noted that U.S. concerns about this legislation were
raised in context of the ongoing Phillips compulsory license case
where a local Taiwan company was issued a compulsory license to
produce recordable compact disks (CD-R). He asked TIPO for an
update on the case. In Taiwan, Phillips is pursuing appeals in

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court and with TIPO. The European Union has also initiated an
investigation of the case.


9. Ms. Wang responded that in Taiwan the case is currently moving
ahead on two tracks:

--Phillips has filed an appeal to the court decision on April 18,

2006. The case is still pending.

--Phillips has requested that TIPO invalidate the compulsory license
because Phillips alleges that the licensee is exporting much of its
production in clear violation of the terms of the license. Ms. Wang
stated that a commission of experts has been selected to review the
case, and they have already met. Commissioners sought additional
evidence from both sides which much be submitted by March 20. The
next meeting will be held in April. The commission will recommend a
course of action, and TIPO will make the final decision whether or
not to invalidate the license.


10. Bollyky pointed out that the USG was concerned that the
Phillips case was "a potentially disturbing precedent" and asked
TIPO to share their decision on the case with the USG. TIPO
promised to do so.

Compulsory Licensing of Drugs for Export
--------------

11. Separate from the amendment discussed above, TIPO has proposed
another amendment to the Patent Act in line with the implementation
of paragraph 6 of the TRIPS Agreement and Public Health. This
provision allows compulsory licenses to be issued for drugs to be
exported to countries lacking sufficient manufacturing capacity to
produce their own medicines in response to a public health
emergency.


12. USTR asked a number of questions regarding this legislation,
carefully noting that the USG does not discourage Taiwan's use of
its Doha flexibilities.


13. Bollyky noted that the amendment as written does not require
prior negotiation with the rights-holder if a compulsory license has
already been issued in the importing country. TIPO responded that
their language was based on wording in Canadian and EU law, but
would take another look. Bollyky offered to forward a copy of the
Canadian legislation to TIPO via AIT as a potential model for handling
this issue.


14. The TRIPS General Council decision implementing paragraph 6
requires the importing country, if a WTO member, to make certain
formal notifications to the TRIPS Council and certifications to the
exporting country (in this case Taiwan). The draft amendment
incorporates these requirements for WTO members. In the
current draft of the amendment, however, not all notifications and
certifications are necessary for non-WTO members. Bollyky asked Taiwan
if there was a reason why the amendment does not require non-WTO member
to make the equivalent notifications and certifications as WTO members
in Taiwan. Again Taiwan agreed to look into the issue.


15. USTR also suggested TIPO make explicit provisions for judicial
review, which TRIPS calls for. TIPO pushed back, arguing that such
an independent review is spelled out under the Administrative Act,
so there is no need to incorporate it into the current Patent Law
amendment.


16. On remuneration, the draft amendment makes specific reference
to the United Nations Human Development Index for the importing
country as one of the factors used in determining appropriate
compensation. USTR noted that this goes beyond what TRIPS
contemplates and asked TIPO for its views on the significance of the
departure. TIPO stated that the index was for reference only and was
also incorporated into the Canadian law.


17. Although the current amendment requires a holder of an
authorization of a compulsory license to disclose certain
information "online," USTR suggested that the amendment specify on what
websites the information would need to be posted.
TIPO noted that although TRIPS provided various options, TIPO
intended that the information be posted on the company's website.
They offered to look into the matter.


18. Concluding the discussion on this amendment, Bollyky inquired
about the amendment specifically waiving data exclusivity
requirements for these compulsory licensing cases. Again, TIPO
stated that they had based their language on Canadian law.

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Timing the for IPR Legislation
--------------

19. Wang stated that TIPO anticipated a hearing in the Legislative
Yuan in late March for the amendment of Article 76. If a number of
divergent views are presented, additional hearings might be called.
She was unsure what might be eventually modified or when it might
come up for a vote. For the "paragraph 6" amendment, TIPO would
continue its internal review. Timing for bringing the bill forward
is still unclear, but she promised to keep AIT and the USG
apprised of any developments on both amendments.


20. Regarding other IPR-related legislation, TIPO noted that
legislation regulating peer-to-peer (P2P) file sharing should pass
this session without controversy. Interparty negotiations on the
bill had been settled on December 22, but the legislation stalled
with other bills in the pre-recess gridlock. ISP liability
legislation is still in draft. A new draft with more detailed
provisions has been written. TIPO is hosting a seminar on March 27
featuring U.S. experts on copyright law and ISP issues in order to
build consensus and move the issue forward. TIPO promised to pass a
copy of the draft to USTR and to keep us posted on developments.

Parallel Imports and Help with Education Ministry
-------------- --------------

21. At the close of the meeting, TIPO Secretary General Margaret
Chen raised two additional issues. She requested that the U.S. help
TIPO in their dealings with the Ministry of Education (MOE). "TIPO
has worked as hard as you," she stated, referring to her efforts to
engage the MOE. She asked for USG assistance to help the MOE
computer center build capacity to deal with IPR issues. She
specifically suggested that the USPTO or USTR work with TIPO to
organize a seminar and invite a U.S. speaker.


22. As she has at prior meetings, Chen also raised the issue of
relaxation of parallel imports and decriminalization of rental
rights for optical media. She stated that Blockbuster Taiwan (Note:
which was acquired last year by a local Taiwan company) has
submitted a new proposal to deal with what she characterized as a
monopoly on the local distribution of Hollywood features. Bollyky
reiterated the negative response from U.S. industry, noting their
concerns of an increase of counterfeit disks, pre-release
theatricals, cheap disks from China, and an overall erosion of
protections for rights-holders should restrictions on parallel
imports be relaxed. Bollyky did agree, however, to read TIPO's
communication on the matter.

Comment:
--------------

23. The meeting was constructive, friendly, and TIPO clearly
understood the U.S.'s specific concerns about the proposed
legislation. Although they did not make any commitments to alter
the legislation, TIPO promised to take our concerns to the drafter
of the first proposal, to carefully consider our concerns about the
second, and to keep us posted on the progress. Post expects TIPO
will take on board USG concerns regarding the bill they are drafting
regarding Doha paragraph 6. The bill from the legislator, however,
is a different matter. While we hope that he will revise his
legislation, he has no obligation to follow TIPO's suggestions. AIT
will continue to monitor the issue closely.

YOUNG