Taiwan IPR: Taiwan to Target Indirect Patent Infringement

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E.O. 12958: N/A
TAGS: ECON ETRD KIPR TW
SUBJECT: Taiwan IPR: Taiwan to Target Indirect Patent Infringement

Reftel: Taipei 580

Summary
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1. (SBU) The Taiwan Intellectual Property Office (TIPO) recently
announced preliminary plans to amend the Patent Law to protect
against indirect patent infringement. The changes would allow
patent-holders to bring suit against upstream and middle-stream
component suppliers who abet downstream production of counterfeit
goods if those goods are sold in Taiwan. Taiwan's powerful IT
industry is wary of costs and legal hassles the proposed changes
could create, and TIPO says the proposal is far from final. End
summary.


2. (U) On July 19, Wang Mei-hua, Director General of the Taiwan
Intellectual Property Office (TIPO),announced that TIPO intends to
amend Article 100 of the Patent Law to allow prosecution of
companies and individuals for indirect patent infringement. The
proposed amendment would allow a patent holder to bring suit against
a Taiwan component or parts company that knowingly supplied
legitimate components used to manufacture infringing goods sold in
Taiwan.


3. (SBU) On June 20, TIPO Patent Office Specialist Wu Shin-lin told
us TIPO is following the example of countries such as Japan,
Germany, U.K., and the U.S., each of which has laws targeting
indirect patent infringement. Wu said TIPO will draft the revised
law to protect companies that hold the patent on a component
eventually used in a downstream counterfeit product sold in Taiwan,
as well as companies whose products are used without the Taiwan
company's knowledge and permission. Wu emphasized TIPO will seek
broad input from the public and industry before finalizing the
proposed amendments. He said MOEA plans to submit the final Patent
Law amendment draft to the Executive Yuan in September or October.

TIPO DG: Media Overstates Proposal's Effect
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4. (SBU) On July 21, Director General Wang told AIT that, contrary
to media reports, an amendment would not offer patent-holders a
significant increase in protection, since plaintiffs would have to
show direct patent infringement took place in Taiwan before being
able to win an indirect infringement case. Although media reports
implied TIPO's aim is to punish Taiwan companies supplying
components for PRC-made counterfeit electronics, often called
"shanzhaiji," Wang told us because Taiwan does not allow the sale of
such PRC-made knock-offs, proving direct patent infringement took
place in Taiwan will be difficult in most cases. [Note: shanzhaiji
("mountaintop fortress machines") are PRC-made IT goods such as cell
phones and laptops that copy the appearance of popular brands, but
sell for far less because some or all of their components are
unlicensed or pirated. Because Taiwan is the world's biggest
producer of 15 IT products, including 99 percent of the world's
motherboards and 76 percent of LCD monitors and screens (reftel),
Taiwan companies operating in Taiwan or the PRC produce a
disproportionate amount of the components that go into shanzhaiji.
End note.]

Producers: Law Would be Burdensome, Costly
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5. (SBU) Despite Wang's assurances, Taiwan's IT component producers
fear the proposed law could burden companies with unnecessary costs
and legal hassles. On July 21, Su wen-tang, Taiwan Semiconductor
Manufacturing Company (TSMC) Advanced Technology Department
Director, told us the proposed amendment would not likely ensnare
many Taiwan companies, because it will be difficult in most cases to
prove that direct infringement took place in Taiwan, and that a
company knew its components would be used in an infringing product.
However, Su worries the law would force Taiwan companies to devote
extra time and resources to investigating downstream distributors
and producers, as well as to defending themselves against spurious
lawsuits.


6. (SBU) W. F. Hsu, Legal Affairs Director for MediaTek
Incorporated, echoed Su's concerns. Hsu thinks Taiwan ought to
eventually adopt the concept of indirect patent infringement in
order to harmonize the island's legal code with those of its
advanced trading partners. However, Hsu opposes doing so now
because Taiwan's still-evolving legal infrastructure for
intellectual property rights is simply "not good enough" to handle
fairly and efficiently complex indirect infringement cases.

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Comment
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7. (SBU) The proposed amendments could help U.S. companies such as
Apple by choking off or increasing the cost of Taiwan-made parts for
products such as counterfeit iPhones. The changes would also give
foreign companies another legal weapon to enforce their IPR in
Taiwan. However, given the proposed law's limited scope and
industry's wariness about the proposal, the final law will likely
not be as comprehensive as initial media reports suggest. End
comment.

WANG