APAA Council Meeting Singapore 2008 Taiwan (ROC) Report for Patents Committee By Tony C. H. Lin

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1 APAA Council Meeting Singapore 2008 Taiwan (ROC) Report for Patents Committee By Tony C. H. Lin I. Changes in Patent Law and Practice I-A. Trademark and Patent Rights Not Enforceable After Unregistered Assignment Article 59 of the Patent Act provides that if the holder of an invention patent assigns or entrusts the patent rights, licenses them to another for practice, or makes them the subject of a pledge, such arrangements may not be asserted against a third party unless registered with the Patent Authority. The Trademark Act contains similar provisions. However, what is the precise meaning of the wording "may not be asserted against a third party unless registered"? As the wording of the legislation is unclear and abstract, no definitive answer had emerged in legal practice so far. In a 2007 civil judgment in a case involving a claim for damages for patent infringement, the Supreme Court held that the provision under Article 59 of the Patent Act that an unregistered assignment cannot be asserted against a third party, means that if a third party infringes against the patent, and the patent rights have been assigned but the assignment has not been registered, then the assignee may not assert its rights against the infringer. However, registration is not a necessary condition for an assignment to be effective, and therefore the assignment of the patent between the parties to the assignment is effective notwithstanding any failure to register the assignment, and is binding on the parties. Furthermore, it is also binding on any successor to the patent rights; in other words, a successor to the patent rights may not use the fact that the assignment was not registered as a basis for asserting that the assignment of the patent rights to the assignee is ineffective. I-B. No Extension of Payment Deadlines for Trademark Registration Fees, Patent Certificate Fees, or Patent Annuities Article 51 Paragraph 1 of the Patent Act provides that after the Patent Authority has rendered a decision to grant a patent, the applicant should pay the patent certificate fee and one year's patent annuity within three months following the date on which notice of the decision was served; if the fees are not paid within that period, the granted patent right shall have been nonexistent from the beginning. The Trademark Act contains similar provisions regarding nonpayment of trademark registration fees. In a 2007 judgment regarding a patent application, the Taipei High Administrative Court noted that the proviso to Article 17 Paragraph 1 of the Patent Act provides that if a party fails to complete a procedure within a designated time period or fails to pay fees before a deadline, the Patent Authority should nevertheless accept the procedure or payment if the party corrects the omission before the Patent Authority has rendered a decision. However, the court held that this provision, contained in (2).DOC 1-1 -

2 the chapter of the Act entitled "General Provisions", is in the nature of a general principle, and if another chapter of the Act contains a different specific provision, the specific provision should take precedence. The first part of Article 51 Paragraph 1 provides that after a decision is rendered to grant a patent in respect of an invention, the applicant should pay the certificate fee and the first year's patent annuity within three months following the date of service of the notice of the decision, and that the granted patent shall not be published until such fees have been paid. The latter part of Article 51 Paragraph 1 further provides that if the fees are not paid within the above period, no publication shall be made, and defines the legal effect of such nonpayment: that the patent right shall have been nonexistent from the beginning. Therefore the three-month period envisaged under Article 51 is an invariable statutory period. If it is exceeded, then unless conditions exist as defined by Article 17 Paragraph 2 of the Act for reinstatement, the patent right should be deemed never to have existed. I-C. Patent Examination Guidelines for Inventions Covering Chinese Herbal Medicines From early November 2007 the Intellectual Property Office (IPO) has held several public hearings to solicit comments on its draft Examination Guidelines for Inventions Covering Chinese Herbal Medicines. "Chinese herbal medicines" as referred to in the draft Guidelines include natural materials such as plants, animals, minerals, algae, and fungi, or their derivatives or combinations. Unlike inventions covering western medicines, which have chemical substances as their active ingredients, the active ingredients of Chinese herbal medicine inventions are in most cases unclear, and single active ingredients with a specific structure cannot readily be isolated or purified from them. Furthermore, the basic theories involved in Chinese Herbal Medicines differ from those of western medicines, and the characteristic modes of use of Chinese herbal medicines both singly and in combination are rarely seen in western medicines. Thus it is difficult to apply the current patent examination guidelines for western medicine inventions when examining claim(s) of a Chinese her medicine invention. For patent applications covering Chinese herbal medicine inventions, regardless of whether they relate to medical drugs, foods, beverages, cosmetics, materials for the preparation of medicines, medical devices or equipments, methods for their manufacture or processing, or their uses, they will be subject to the provisions of the proposed Guidelines. But, aspects of applications that fall within the scope of the common and general provisions of other parts of the Patent Examination Guidelines, inventions related to single compounds or their combinations, or pharmaceutical or biological inventions involving special fields, will be handled according to the relevant provisions of other sections of the Patent Examination Guidelines. We will continue to monitor developments concerning the new Guidelines and keep readers informed. (2).DOC 1-2 -

3 I-D. IPO Practice on Payments of Patent Fees The Intellectual Property Office (IPO) has begun work on amending its Regulations Governing Patent Fees. The main points are as follows: Fees for filing requests for substantive examination of invention patent applications will be charged according to the number of patent claims contained in each patent application. An applicant who withdraws an invention patent application within a certain period may apply for a refund of the substantive examination fee. But the fee will not be refunded if the applicant has already received notice of an examination opinion, or an examination decision. The "certain period" referred to above varies as follows: 1. If a request for substantive examination is applied for at the time of patent filing or during the procedural examination of the patent application, one year from date of completing the procedural examination. 2. If a request for substantive examination is applied for after completion of the procedural examination, one year from the date of applying for substantive examination. We will continue to follow up the progress of the amendments and keep readers updated. I-E. Applications for Patent-Related and Trademark-Related Procedures As of 16 October 2007, the Intellectual Property Office has started to accept applications filed through or fax for procedures listed below: Patent cases Trademark cases No. Procedure No. Procedure 1 Change of personal ID number or 1 business registration number Revoke agent's registration 2 Change of patentee or company 2 Request extension of deadline for submitting representative supplementary documents or information 3 Change of patentee's address 3 Change of trademark owner's address 4 Change of address of appointed recipient Change of address of appointed recipient for 4 for service of documents service of documents 5 Change of agent's address 5 Change of agent's address 6 Request issuance of duplicate receipt 6 Request issuance of duplicate receipt 7 Apply to view case files 7 Apply to view case files 8 Apply to photocopy case files 8 Apply to photocopy case files 9 Request extension of deadline for 9 Apply to make corrections submitting supplementary documents or information 10 Request interview or on-site inspection 10 Request oral hearing 11 Request return of samples 11 Request return of evidentiary items (2).DOC 1-3 -

4 I-F. IPO Practice on New Design Patent Applications To assist the public in applying for new design patents, on 22 November 2007 the Intellectual Property Office announced its Guidance Notes on Preparing Drawings and Descriptions of Drawings for New Design Patent Applications. I-G. Amendment of Patent Claims During Opposition Proceedings In its recent decision in an administrative appeal brought by DuPont, the Ministry of Economic Affairs (MOEA) revoked a decision of the Intellectual Property Office (IPO) in which the IPO had upheld an opposition action against a patent granted to DuPont. The MOEA remanded the case back to the IPO and ordered the IPO to render a decision in keeping with the law. The MOEA's appeal decision stated that if, during patent opposition proceedings, the opposed party proposes amendments to the patent claims, and in the IPO's opinion, part of the amendments can be accepted and part cannot, then the IPO should apply the principle, as expressed in Article 102 of the Administrative Procedures Act (APA), that before rendering an administrative decision that restricts or deprive of a person's rights, the administrative agency should give the affected person an opportunity to express his opinion. The MOEA further stated that according to the relevant provisions of the old Invention Patent Examination Guidelines, as issued on 10 July 2000, before rendering a decision in an opposition action, the IPO should, ex officio, explain the grounds for its decision and instruct the opposed party to once again propose amendments. Only if the party proposes no amendments before the deadline set by the IPO may the IPO render a decision unfavorable to the opposed party. During its defense against the opposition action, DuPont had put forward amendments to some of the patent claims, yet the IPO directly issued a decision upholding the opposition action and annulling DuPont's patent. The IPO stated in its decision that certain of the amendments proposed by DuPont had introduced substantive changes and could not be approved, and hence its examination of the opposition action was based on the originally-published version of all the patent claims, as never been amended. The MOEA held that in view of the legislative purpose of the Patent Act of encouraging invention, and taking into consideration the spirit of the old Invention Patent Examination Guidelines and Article 102 of the APA, the IPO, being of the opinion that only part of the amendments proposed by DuPont were unacceptable, should, before rendering its final decision, have given DuPont a further opportunity to propose amendments. Therefore the MOEA set aside the IPO's original decision. Under the current Patent Act, the opposition procedure no longer exists. With regard to patent cancellation procedures, the Patent Act merely provides that the IPO should serve on the patentee a copy of the petition submitted by the cancellation petitioner, so that the patentee may put forward a defense (Article 69 Paragraph 1), and should inform the cancellation petitioner of any amendments to the patent claims proposed (2).DOC 1-4 -

5 by the patentee, for the cancellation petitioner to express its opinion (Article 71 Paragraph 3). In practice, before rendering an unfavorable decision, the IPO does not always notify patentees of its opinions or instruct the patentees to put forward further amendments or a defense, as it always does at the patent prosecution stage (Article 46 Paragraph 2). Furthermore, although both past and present Patent Examination Guidelines contain similar provisions, it appears that the IPO may not have always properly followed them. Although the above administrative appeal decision relates to the opposition procedure which has now been abolished, the same legal principles should be applicable to the cancellation procedure. The MOEA's ruling should be helpful in affirming the procedural protections available to patentees. I-H. Examination Guidelines for Chinese Herbal Medicine Inventions On 18 January 2008, the Intellectual Property Office announced the Patent Examination Guidelines, Part 2: Substantive Examination of Invention Patents, Chapter 12: Inventions Related to Chinese Herbal Medicine Inventions, which took effect on date of announcement. "Chinese herbal medicines" defined in the Guidelines include natural materials such as plants, animals, minerals, algae, or fungi, or derivatives or combinations thereof, but excluding isolated chemical compounds or their combinations. "Inventions related to Chinese herbal medicines" subject to the Guidelines include not only per se inventions of Chinese herbal medicine, but also inventions pertaining to the uses of Chinese herbal medicines. If readers have any questions about the above Guidelines, please feel free to contact Lee and Li's Patent Department. I-I. Extended Response Time Periods for Patent Office Actions On 26 December 2007, the Intellectual Property Office (IPO) announced the following: As from 1 January 2008, the specified time period for foreign applicants to file responses to notices of examination opinion on the first examination or the re-examination for invention and new design patent applications was increased from 60 days to 90 days. One application for extension may be made, and, in principle, the total response time period may not exceed 180 days. For domestic applicants the response time period remains 60 days; one application for extension may be made, and, in principle, the total response period may not exceed 120 days. Transitional arrangements are as follows: In the case of a patent application filed by a foreign applicant for which an examination opinion notice was issued before 31 December 2007 and its normal specified response period expires after 1 January 2008, the IPO will automatically (2).DOC 1-5 -

6 extend the response period from 60 days to 90 days without a need to apply for such extension. In the case of a patent application filed by a foreign applicant for which an IPO decision granting an extension of the response time period was issued before 31 December 2007, and the extended response time period expires after 1 January 2008, the IPO will extend the response time period in accordance with the new guideline; provided, however, that the total response time period allowed may not exceed 180 days. In the case of a patent application filed by a foreign applicant for which the normal response time period or the extended response time period expired before 31 December 2007, and for which no response was filed within the above-mentioned extended time period, the IPO will directly render an examination decision; provided, that if the decision was not served on the applicant by 31 December 2007, the normal or extended response time period will be extended to 90 or 180 days, in accordance with the new guidelines. II. II-A. Draft Amendment of Patent Act and Regulations Amended Time Periods for Processing Patent-Related Applications On 10 January 2008, the Intellectual Property Office announced changes to the time periods for processing various types of patent-related applications, which took effect on date of announcement. The amended time periods are as follows: No. Category of Cases Average time period for first notification Processing time 1 First examination of invention patent applications 1-1 Nuclear engineering 15 months 18 months 1-2 Daily-used commodity; construction 18 months 24 months 1-3 General mechanical engineering, transportation and shaping 21 months 24 months 1-4 Telecommunication 21 months 24 months 1-5 Measurement, optical and storage device 18 months 27 months 1-6 Organic and inorganic chemistry, metallurgy, metal surface treatment and electroplating 21 months 27 months 1-7 Textiles and flexible materials, papermaking, and paper articles 21 months 27 months 1-8 Data processing 21 months 27 months 1-9 Semiconductors 21 months 27 months 1-10 Electric power, basic electrical and electromechanical 21 months components 27 months 1-11 Electronic commerce 21 months 27 months 1-12 Optoelectronic liquid crystal 21 months 30 months 1-13 Biotechnology, pharmaceuticals, agrochemicals, and 28 months food products 36 months 2 Expedited examination of invention patent applications 10 months 3 Re-examination of electro- mechanical and chemical engineering cases 32 months 36 months 4 Re-examination of mechanical engineering and daily-used 8 months 12 months (2).DOC 1-6 -

7 No. Category of Cases Average time period for first notification Processing time commodity cases 5 Compulsory licensing of invention patents 24 months 6 Cancellation of compulsory licenses 18 months 7 Determining compensations for compulsory licenses 6 months 8 Applications for patent term extension 12 months 9 New utility model patent applications 4 months 6 months 10 New utility model technical reports 12 months 11 New utility model technical reports (when patented subject matters are being practiced commercially by a party other than the patentee) 6 months 12 First examination of new design patent applications (including 10 months associated new design applications) 12 months 13 Re-examination of new design patent applications (including associated new design applications) 6 months 10 months 14 Cancellation actions 15 months 15 Expedited examination of cancellation actions 6 months 16 Amendments and corrections to patent specification, claims, or drawings of granted patents 6 months 17 Recordation of changes of granted patents (assignment, licensing, pledge creation, trust creation, etc.) 20 days 18 Recordation of all kinds of changes after grant of patent 20 days 19 Issuance of English-version of patent certificates 20 days 20 Issuance of patent agent certificates (expedited service) 1 day 21 Issuance of patent agent certificates (ordinary service) 20 days 22 Issuance of priority documents (expedited service) 1 day 23 Issuance of priority documents (ordinary services) 20 days The above time periods run from the date on which the relevant application documents are received, but do not include the time periods allowed after an applicant is instructed to propose amendments, to respond to an examination opinion, or to put forward a defense, or allowed for delays arising for other legitimate reasons. II-B. IPO Drafting Amendments to Patent Act The Patent Act was last amended in Since then the Intellectual Property Office has been considering various issues for further amendment of the Act, including the following: Expansion of patent protection to animal and plant inventions, with provisions to expressly regulate the extent of rights, exhaustion of rights, non-profit use by individuals, exemptions from liability for farmers, compulsory licensing, and cross-licensing. In consideration of the relevant WTO rules, new provisions will be added to allow compulsory licenses of patents under conditions of national emergency, other circumstances of extreme urgency, or for non-profit purposes to safeguard public interests, for the production of needed pharmaceutical products. (2).DOC 1-7 -

8 Amendments to the provisions governing exemption for research and experimentation, to make it clear that the effect of a patent does not extend to personal activities for non-commercial purposes. The IPO has proposed reforms to new design patent system, including changing the name of "new design patent" (phonetic translation: "xin shiyang zhuanli" to "design patent" (phonetic translation: "sheji zhuanli"); allowing protection for (1) design related to a part of an object, (2) computer icon designs, (3) graphical user interface designs, and (4) design covering a set of articles, etc An overhaul of new utility model patent scheme. The IPO may also be authorized to revoke new utility model patents through ex officio actions. The IPO also plans to relax certain procedural requirements, and provide remedies for late payments of patent annuities. The IPO is also reviewing whether to introduce new rules governing patent infringement, including contributory/indirect infringement. We will closely monitor the progress of the amendment process and keep our readers informed. II-C. IPO Considers Revising Conditions for Compulsory Licensing of Patents Among the proposed amendments to the Patent Act that the Intellectual Property Office (IPO) is in the course of preparing, the IPO intends to introduce three conditions for it to terminate a compulsory license, whether on the application of the patentee or acting ex officio. Article 76 Paragraph 7 and Article 77 of the Patent Act as currently in force provide for the termination of a compulsory license only if the reasons for granting the license cease to exist, or if the licensee has acted contrary to the purpose of the license. But the current Act defines no criteria or procedures for termination, and provides no clear monitoring mechanism, so that disputes are likely to arise. The proposed three new conditions are modeled on Articles 89 and 90 of the Japanese Patent Law. They are : (1) if changes have occurred in the facts that were the basis for a compulsory license being granted (e.g., a state of national emergency has ceased to exist); (2) if the grantee of the compulsory license has not practiced the patent appropriately in accordance with the content of the granted license (e.g., it has manufacturing patented items to supply the demands of a foreign market); and (3) if the grantee of the compulsory licensee has failed to pay compensation in the amount assessed. In any of the above circumstances, the Patent Authority may terminate the compulsory license at the petition of the patentee, or acting ex officio. (2).DOC 1-8 -

9 II-D. Proposed Changes to Patent Compulsory Licensing Regime When the Patent Act was amended in 2004, new provisions based on Article 31 of the WTO TRIPS Agreement were introduced into to define legal grounds for the grant of a compulsory licensing of patent, procedural requirements for compulsory licensing applications, and conditions for the cancellation or revocation of a compulsory licensing grant. A third party may apply to the Intellectual Property Office (IPO) for the grant of a compulsory patent licensing under any of the following conditions: in a situation of national emergency, in a situation to promote the public interest, where the party applying for compulsory licensing has been tried but unable to obtain a licensing grant through reasonable negotiation, in the situation to seek remedy against unfair competition acts, and in cases of reinventions etc. In two high-profile cases that of the CD-R optical media patents owned by Philips, and that of a patent for manufacturing Tamiflu drug to treat bird fly deceases, as owned by Gilead Sciences and exclusively licensed to Hoffmann La Roche the IPO granted compulsory licensing to GigaStorage Corp. and to the ROC Department of Health under Article 76 Paragraph 1 of the Patent Act on the grounds, respectively, that "the applicant remained unable to obtain a licensing grant based on reasonable commercial terms after a considerable period of time," and "in response to a situation of national emergency." Both decisions attracted widespread and intense attention both domestically and internationally. Neither case is the subject of further legal disputes because in the first, the applicant withdrew its compulsory licensing application, and in the second, the patentee did not pursue administrative remedies. However, in view of the controversies raised by these two cases, the IPO deemed it necessary to amend the compulsory licensing provisions of the Patent Act achieve greater clarity. On 8 July 2008, the IPO convened a meeting attended by representatives from industries, government agencies concerned and academia, to discuss related issues. The main discussion points and recommendations of the meeting are outlined below: Should the Chinese term of "compulsory license" be changed? In order to make the terminology used in the legislations consistent and appropriate, it is recommended that the current term "texu shishi" ("practice under special permit") should be changed to "qiangzhi shouquan" ("compulsory licensing"). Is it appropriate for "failure to obtain licensing grant based on reasonable commercial terms proposed for a considerable period of time" to be retained as a ground for compulsory patent licensing? It is recommended that "failure to obtain licensing grant based on reasonable commercial terms proposed for a considerable period of time" be made a procedural criterion for seeking compulsory licensing, subject to the substantive criteria of "no-profit-making use for public interest" factor and "reinvention" factor. (2).DOC 1-9 -

10 Under the current Act, where a patentee has committed acts restraining competition or acts of unfair competition as "irrevocably confirmed" by a local court or the Fair Trade Commission, it is allowed to seek compulsory licensing. Is the "irrevocably confirmed" condition as stated above appropriate? The meeting recommended that the references in the current Act as to "irrevocably confirmed" and "unfair competition" should be deleted, and, based on UK legislation, new test of "unfairly hindering national industrial and commercial development" be introduced. Under the current system, powers to grant compulsory licensing rest with the IPO, which should remain unchanged; provided, that the IPO should only issue an affirmative decision after a FTC decision clearly states its opinion that there is a need for compulsory licensing. Should there be separate procedures for compulsory licensing based on "government use" and that based on other grounds? The meeting proposed that the time period for a patentee to file a defense against an application for compulsory licensing should be specified by the IPO. Where a compulsory licensing is sought in response to a national emergency or other emergency situation, the IPO may grant a compulsory licensing on the basis of an emergency decree, or based on a notification issued by the government agency needing to use the patent concerned. Should the "compensation for compulsory licensing" be set simultaneously when issuing a grant of a compulsory licensing? Currently, after the compulsory licensing is granted, the amount of compensation payable to the patentee should be decided by the IPO if there is no agreement reached. The meeting recommended that Article 76 Paragraph 5 of the Act be amended to require the amount of compensation be decided at the same time as a grant of compulsory licensing. Is it necessary to for the IPO to revoke a compulsory licensing ex officio or upon a request, and is there a need for having a monitoring mechanism after the grant of a compulsory licensing? The meeting recommended that specific provisions be introduced into the Act authorizing the IPO to revoke the grant of compulsory licensing at a request by the patentee where (1) changes arise with respect to the fact warranting the grant of compulsory licensing, (2) the licensee of the compulsory licensing does not properly practice the licensed patent in accordance with the content of the licensing, or (3) the licensee of the compulsory licensing does not pay the compensation as needed. If a compulsory licensing is granted on the basis of a notification from a government agency requiring the use of a patent, and if the agency concerned believes that due to a subsequent change of the circumstances, the emergency situation no longer exists, or the compulsory licensing grant is revocated or annulled through administrative remedies, the agency concerned should notify the IPO to revoke or annul the compulsory licensing. Should the current Patent Act provisions related to reinventions be amended? (2).DOC

11 The meeting recommended that if the holder of an earlier-filed patent does not agree to grant an authorization, the holder of the later-filed invention patent or new utility model patent or the holder of the process patent may apply for compulsory licensing in accordance with the provisions of Article 76 Paragraphs 3 to 6 of the Act; provided, that such compulsory licensing should be available only if the content of the later-filed invention, new utility model, or process patent involves important technical improvement with considerable economic significance as compared with the earlier-filed invention patent or new utility model patent. In addition, the holder of the earlier-filed patent, as well as the holder of the later-filed patent invention patent or new utility model patent or the holder of the later-filed process patent may agree to reach a cross-licensing arrangement. Further, the right to practice a patent under compulsory licensing may not be assigned, entrusted, inherited, licensed, or pledged, except where such right is assigned, entrusted, inherited, licensed, or pledged together with the later-filed invention patent, utility model patent, or process patent. The IPO will refer to these recommendations when drafting its proposed amendments to the Act. We will continue to follow the progress of the amendments and keep readers updated. III. Practice of the Intellectual Property (IP) Court The Intellectual Property Court began operation on 1 July According to newspaper reports, in July the Court accepted 97 cases, comprising 48 administrative suits, 25 criminal suits, 19 first-instance civil suits, and five second-instance civil suits. A spokesperson of the IP Court stated that the above breakdown of cases may reflect the following factors: Cases that may be handled by the IP Court include appeals brought by persons dissatisfied with the outcome of an administrative appeal or with the first-instance trial verdict in a criminal prosecution. In such cases, an appeal must be filed within two months after an administrative appeal decision, or within 10 days after a criminal judgment. Thus, there is a time factor involved, and after the IP Court has been in operation for a longer time period, the number of such cases can be expected to increase markedly. Civil suits that may be heard by the IP Court include both first- and second-instance proceedings. Parties to first-instance litigation can decide for themselves when to file litigation, and some parties may still be watching the operation of the new system before deciding whether to file litigation with the IP Court. IV. Court Related Information IV-A. Supreme Court Guidance on Bonds for Litigation Costs The Code of Civil Procedure provides that the cost of litigation should be borne by the losing party. Where each of the parties wins part of the case, the court should decide how the costs are to be apportioned after considering the circumstances. If (2).DOC

12 the plaintiff has no residence, office, or place of business in Taiwan, the court should, if so petitioned by the defendant, order the plaintiff to deposit a bond to cover the litigation costs. There are also provisions empowering the court to demand further bond amounts if during litigation the situation arises that a bond is insufficient or of uncertain value. But the above provisions do not apply if the plaintiff has sufficient assets in Taiwan to defray the litigation costs. In current practice, if a plaintiff is a foreigner without any presence or sufficient assets in Taiwan, the court, if so petitioned by the defendant, usually orders the plaintiff to pay into court a bond for the litigation costs at the time of filing the litigation. Because at the time of filing the plaintiff has already paid the court costs for first-instance proceedings, the amount of the bond is usually calculated as the court costs for second- and third-instance proceedings, plus a reasonable amount in lawyers' remuneration for third-instance proceedings. Thus providing a bond to cover litigation costs generally places a burden on foreign plaintiffs. In a 2007 ruling, the Supreme Court gave a new interpretation in this regard. The district court in the case ordered the foreign plaintiff to provide a bond to cover the litigation costs. The plaintiff appealed against this ruling to the high court on the grounds that it had assets in Taiwan in the form of 50 patents and 372 trademark registrations (granted and pending). But the Taiwan High Court held that these intangible assets were not suitable to be used as a bond for litigation costs, on the grounds that their value was difficult to assess; that their value would be affected by the period of time for which they were granted and would diminish year by year; that it was difficult to calculate the sale value of such rights; and that sales revenue arising from the commercialization of a patent was not the value of the patent itself. However, the Supreme Court held that assets for purposes of determining whether a foreign plaintiff should be ordered to post a bond were not restricted to tangible assets. Patent and trademark rights lawfully acquired in Taiwan were capable of being utilized by means of assignment, licensing to others for practice, or pledge. If the plaintiff did indeed hold many patent rights and trademark rights, the fact that the value of such rights was difficult to assess did not mean that they were valueless. If their value were sufficient to cover the defendant's litigation costs, then the court should not order the plaintiff to provide a bond to cover such litigation costs. By dismissing the plaintiff's appeal without having properly considered and clarified these issues, the Taiwan High Court had failed to apply the law correctly. Accordingly, the Supreme Court reversed the ruling, and remanded the matter back to the Taiwan High Court for reconsideration. IV-B. Leading Led Company Wins Patent Infringement Suit In 2006 Nichia Corporation of Japan, a leading player in the worldwide light-emitting diode (LED) industry, brought an action against the major Taiwanese LED module manufacturer Everlight Electronics Co., Ltd., for infringement of Nichia's design patent. The Panchiao District Court recently delivered a judgment in Nichia's favor, and ordered Everlight and its legal representative to pay damages of NT$80 million to Nichia. The court also dismissed the countersuit filed against Nichia by Everlight. (2).DOC

13 In its judgment, the court stated that when assessing whether an item falls within the scope of a design patent, an infringement assessor should simulate the mode of consumption in the marketplace, stand on the position of consumers having ordinary knowledge and capability of perception regarding the field to which the subject of the patented design belong, and make a judgment on whether the items under assessment are identical or similar to the patented design, on the basis of such consumers' viewpoint in the selection and purchase of goods. With regard to the LED products concerned in the case, "ordinary consumers" should be taken to mean the purchasing personnel of mobile phone manufacturers, not the general consumers. Everlight's three allegedly infringing LED products, insofar as they were distinguishable to the naked eye and had visual appeal, were substantially identical to the novel characteristics of Nichia's patented design. The small differences that existed between them were indistinguishable to the naked eye, or were of prior-art design, or embodied simple and obvious modifications to prior-art designs. Thus they did not affect the fact of similarity between the products and the subject matter of Nichia's design patent. Accordingly, the court held that the products did fall within the scope protected by Nichia's patent. This judgment provides important guidance for litigation over infringement of design patents, which has been rare in Taiwan. By imposing a high level of damages on a local company, the judgment would also alert Taiwanese high-tech companies to be more careful when developing products, and thus encourage enterprises to devote more resources to R&D and product strategies. IV-C. Agent's Negligence in Trademark and Patent Applications According to a 2005 judgment of the Taipei High Administrative Court, negligence on the part of an agent in patent-related matters is to be regarded as negligence on the part of the applicant. Such negligence cannot be considered to be a reason not attributable to the applicant, and therefore the applicant may not petition for reinstatement under Article 17 Paragraph 2 of the Patent Act. The Taipei High Administrative Court stated that if, due to an operational oversight, an agent handling a patent application misses the deadline for paying the patent certificate fee and first year's annuity, with the legal consequence that the patent right becomes nonexistent ab initio, then within the scope of the authority granted to the agent any negligence of the agent is to be regarded as the negligence of the applicant itself. In the case before the court, by the applicant's own admission the statutory time limit for payment of fees was exceeded due to the negligence of the applicant's agent. This should be deemed as the applicant's own failure to pay the certificate fee within the statutory time limit, with the effect that the patent right was nonexistent ab initio. It was not due to natural disaster or reasons not attributable to applicant, and accordingly there was no basis for allowing the applicant to pay the unpaid fees and for reinstating the status quo ante under Article 17 Paragraph 2 of the Patent Act. The above view of the court should also be applicable to trademark application cases. IV-D. Unregistered Patent Licensee May Not Issue Cease and Desist (2).DOC

14 Letter In a decision dated 16 July 2008, the Fair Trade Commission (FTC) stated that a patent licensee might not issue a cease and desist letter to a third party if the license has not been registered. Article 84 Paragraph 2 of the Patent Act provides that if an invention patent is infringed, an exclusive licensee of the patent rights may seek damages in compensation for its losses, and may seek the termination of the infringement, or where there is a likelihood of infringement, it may seek to prevent infringement. However, Article 59 of the Act provides that a patent licensing arrangement that has not been registered with the Patent Authority may not be asserted against a third party. Opinions have been sharply divided in practice as to the meaning of the wording "may not be asserted against a third party," and whether it implies that an unregistered licensee may not enforce its rights. In its decision in response to a filed complaint, the FTC held that unless the registration of the patent licensing arrangement has been completed, an exclusive patent licensee cannot lawfully enforce its rights against a third party, and if under such circumstances it were to issue a cease and desist letter to a third party asserting that its patent rights were being infringed, this would violate Article 24 of the Fair Trade Act. V. Patent Application Statistics V-A. Invention Patent Examination Statistics for First Half of 2007 The Intellectual Property Office recently published statistics on invention patent examination for the time period from January to June 2007, including the numbers of pre-rejection notifications, examination opinion notifications issued at first examination, and the numbers of patent applications rejected or allowed at first examination, as follows: The proportion of invention patent applications allowed at the first examination stage decreased markedly to 28% (from 60% in 2005 and 56% in 2006). Of the 8325 cases concluded, 72% (5975) were issued with pre-rejection notifications or with examination opinion notifications. This represents an increase of 32% over 2005 (40%) and 28% over 2006 (44%). Of the cases in which pre-rejection notifications or examination opinion notifications were issued, those that were subsequently rejected accounted for 25% of all the cases concluded, while those subsequently allowed accounted for 47%. This shows an increase over both 2005 (16% and 24%) and 2006 (17% and 27%). Statistics for the first half of 2007: (2).DOC

15 Cases concluded Cases for which pre-rejection notifications or examination opinion notifications were issued (72% of concluded cases) Cases subsequently rejected 2105 (25% of concluded cases) Cases subsequently allowed 3870 (47% of concluded cases) Cases allowed at first examination stage 2350 (28% of concluded cases) V-B Patent Application Statistics The Intellectual Property Office (IPO) announced statistics on the distribution among different technical fields of patent applications filed in 2007, as follows: Technical field Corresponding IPC subclasses 2007 Domestic Foreign applicants Subtotal applicants Inventions Utility models Inventions Utility models 2, , ,893 Instruments 1 (optical) G01-G03 (except G01N33) Semiconductor devices H01L 2, , ,512 Basic electronic circuitry; H03, H04 1, , ,854 electric communication Data processing G06F (except 17/60) 1, ,697 Generation, transmission H02, H05 1, ,657 and conversion of electric power; electric heating Instruments 3 G09-G12 1, ,261 (semiconductor applications) Basic electrical and electromechanical elements H01, (except H01L) 987 1, ,101 Forming B21-B32, (except B31) 848 1, ,481 Transportation B60-B , ,916 Healthcare and leisure A61-A63, (except 648 1, ,159 A61K, A61P, A61Q) Instruments 2 G04-G08, (except (measurement) G06F, G06Q) Lighting; heating F21-F ,446 Daily use items A41-A , ,550 Building E01-E ,350 Engineering in general F15-F ,047 Electronic commerce G06F17/60, G06Q Separation and mixing B01-B Engines and pumps F01-F Inorganic chemistry, C01-C05, C wastewater treatment Printing B41-B Metallurgy, surface treatment of metals, electroplating C21-C23, C25 (except C22K) (2).DOC

16 Technical field Biotechnology Dyestuffs, petroleum, animal and vegetable oils and fats Macromolecular compounds Pharmaceutical preparations Corresponding IPC subclasses A01H, A01K67, A0IN, A61K35/66-35/76, 38, 39, 47/42, 48, 49/14, 49/16, 51/08, 51/10, A61P, C07K, C12, G01N33, A01P, C40B 2007 Domestic Foreign applicants Subtotal applicants Inventions Utility models Inventions Utility models C09-C C A61K (except 35/66-35/76, 38, 39, 47/42, 48, 49/14, 49/16, 51/08, 51/10), A61Q Foodstuffs; tobacco A21-A Textiles and flexible D01-D materials not otherwise classified Agriculture; forestry; A01 (except A01H, animal husbandry; fishing A01K67, A0IN, A01P) Microstructural B81-B technology; nanotechnology Organic chemistry C07 (except C07K, C07M) Nuclear engineering G Weapons; blasting F41-F42, C Papermaking; making D21, B paper articles Mining E Sugar industry; leather C13-C Due to the time required for processing the "patent classification" work, there are more than 27,000 patent applications filed in 2007 which were not classified at the time when the above statistics were compiled, and are not included in the above table. The IPO stated that the number of patent applications filed continue to grow in 2007, reaching 81,820 as compared with 80,988 in According to the International Patent Classification, the top 10 technical fields for invention patent applications filed by domestic applicants are: instruments (optical); semiconductor devices; basic electronic circuitry and electric communication; electric power (generation, transmission, conversion, and electric heating); instruments (semiconductor applications); basic electrical and electromechanical elements; forming; transportation; and healthcare and leisure. Optical instruments, semiconductor devices, and basic electronic circuitry and electric communication remained the top invention fields, as they have been for the past years. (2).DOC