Since the establishment and commencement of the ROC Intellectual Property (IP) Court on 1 July 2008, IP litigation in Taiwan has been supervised by a professional court, under the IP Case Adjudication Act. However, many systemic flaws and loopholes have also been discovered. Following a lengthy process of revision, the new Trademark Act took effect on 1 July 2012. The new Patent Act, meanwhile, came into effect on 1 January 2013 – and the revision of the Trade Secrets Act is close to completion. As such, we provide some observations on relevant litigation involving patents, trademarks and trade secrets in recent years, and summarise the essential legislative changes.
Burden of proof determines results of civil litigations brought by patent owners
Firstly, it should be stressed that, when the IP Court tries a case involving a non-ROC company, there is no apparent bias against the non-ROC company, nor towards an ROC company. In fact, both non-ROC companies and ROC companies face the same ‘burden of proof’ challenge in civil litigations.
As ROC does not adopt the system of ‘discovery’, all evidence should, in principle, be submitted by the plaintiff in a civil litigation. Lawsuit claims may be rejected if the plaintiff fails to do so. Although the plaintiff may still acquire relevant evidence by petitioning the IP Court for evidence preservation, such petitions are usually rejected because the IP Court tends to consider them ‘unnecessary’. According to the IP Court’s own statistics, from July 2008 to October 2012 there were 214 petitions for evidence preservation in total, but only 21.5 of them were granted by the IP Court (the odd 0.5 means partly granted and partly rejected). That suggests a success rate of only around 10%. Due to the obstacle imposed by the ‘burden of proof’ requirement, the judgments rendered by the IP Court concerning civil patent infringement litigations have been typically adverse to patent owners.
Technical examination officers key players in patent litigation
There are currently 11 judges in the IP Court (including its president), only two of whom have science and engineering backgrounds. The other judges have expertise in law only. To cope with ROC judges’ lack of training in areas other than the legal profession, technical examination officers are appointed to the IP Court. They serve to assist judges in reviews of technical issues in patent suits. Currently, most technical examination officers are permanently or temporarily transferred from the ROC IP Office.
After technical examination officers started to assist judges of the IP Court in reviewing patent suits, it became apparent that most judges were leaving all the technical issues in the cases they review to technical examination officers – whether or not those officers are familiar with the technical subject matter at the heart of the litigation – and do not commission independent professional institutions to conduct patent-infringement assessments. Technical examination officers also have the authority to i) adopt the position of expert witnesses to be summoned and questioned, or ii) provide written expert opinions that can be attached to evidence submitted by both parties.
Most importantly, under ROC law, the reports provided to judges by technical examination officers cannot be made public. Therefore, unless a judge discloses his discretional evaluation of the evidence submitted, or a technical examination officer reveals his opinions in the process of questioning, both parties may see a technical examination officer’s rationale only after the judgment is rendered. As a result, whether in an administrative invalidation case that involves only the validity of a patent, or a civil infringement case that involves questions of validity and infringement, the technical examination officer is the only person in a position to determine the technical outcome of the litigation.
IP Court most important instance for patent lawsuits
Under ROC law, the IP Court is responsible for reviewing patent infringement cases in the first and the second instances, and invalidation cases in the first instance. Since the Supreme Court (the final instance for civil litigations) and the Supreme Administrative Court (the final instance for administrative litigations) are not equipped with technical examination officers, the judges in those two courts need to make their own assessments when the appellants claim that the original judgments erroneously applied relevant ROC laws and regulations involving the interpretation of claim construction.
As noted above, though, most ROC judges have only legal backgrounds. As such, civil and administrative courts in the final instances tend to adopt the opinions of technical examination officers of courts in the lower instances, which in turn leads to an extremely low remand rate of the IP Court’s judgments. That trend suggests that the IP Court has become the most critical battlefield for patent litigation, as it is extraordinarily difficult for either party in a patent case to overturn a judgment rendered by the IP Court.
Rate of granting preliminary injunctions relatively low
Prior to officially filing a lawsuit, a patent owner often requests the IP Court to order the alleged infringer to cease their infringing activity by petitioning the court for a preliminary injunction, in order to avoid the expansion of damages. Under ROC law, when determining whether a petition for preliminary injunction should be granted, the IP Court adopts the same standard as prescribed under US law – the so-called ‘four-factors’ test (that the plaintiff is likely to succeed on the merits of the case; that the plaintiff is likely to suffer irreparable harm in the absence of preliminary relief; that the balance of equities tips in the plaintiff’s favour; and that an injunction is in the public interest).
However, the IP Court takes a rather conservative attitude in making its determinations. According to its own statistics, there were 45 petitions for preliminary injunctions in total from July 2008 to October 2012, but only 7.5 of them were granted by the IP Court (again, the odd 0.5 means partly granted and partly rejected). That’s a success rate of only around 16%.
The new Patent Act abolishes punitive penalties of up to three times the amount of financial damage suffered by patent owners
It also enhances the burden upon patent owners to prove the level of compensation they should receive. When a patent owner files a patent infringement lawsuit and claims damages, the amount of compensation is chiefly calculated in a manner designed to ‘remedy the damage of the patent owner’. But the Patent Act also allows the patent owner to calculate the compensation amount based on ‘the profit earned by the infringer as a result of patent infringement’. The new Patent Act, effective from 1 January this year, also makes reference to laws of the US and Japan, and clearly prescribes that the compensation sum may be calculated as the equivalent amount of royalties that could be collected from exploiting the patent through licensing.
Nonetheless, a patent owner shall still bear the burden of proof with respect to the claimed compensation amount. Under the pre-2013 system, if an infringer fails to prove the costs and necessary expenditure they have incurred, the patent owner may claim all the infringer’s income of selling the goods as the compensation amount. This has been the most common way of calculating the compensation amount proposed by patent owners. However, the 1 January Patent Act deleted such provisions, requiring a patent owner to prove the exact interests gained by the infringer through the infringement activities. Furthermore, the pre-2013 Patent Act conferred upon a patent owner the right to claim a compensation sum of up to three times the amount of financial damage suffered, in cases of wilful infringement – but that right was abolished under the new Patent Act. While the IP Court seldom granted compensation equal to three times the financial damages suffered, under the new Patent Act a patent owner will not even have the opportunity to claim punitive damages.
Trademarks may serve as weapons in attempts to invalidate others’ registrations only if they have actually been used
In the past, when an ROC company applied for trademark registration, it would typically state that the trademarks would be used on numerous goods in a variety of categories, in order to enlarge the protection scope. If other companies then used confusingly similar marks, the ROC company could apply for invalidations of those marks based upon its registered holdings, thereby excluding competitors’ registrations. Inevitably, there was an unreasonable phenomenon in which trademark owners used marks that never went to market in order to achieve invalidations. As a result, the new Trademark Act, effective from 1 July 2012, required the owner of a trademark that had been registered for three years or more to submit evidence of the mark’s use during the three years prior to the launch of invalidation proceedings, as a test for whether the mark was admissible.
The use of another company’s trademark-of-foreign-language in an ROC company’s English-language name also constitutes infringement
Corporate registrations in ROC are mainly made in Chinese, and the legal status of companies’ English names is unclear due to the lack of precise regulations. As such, some ROC companies intentionally use words that are the same as – or similar to – renowned trademarks-of-foreign-language in their English names, thereby causing non-ROC companies that deal with them to mistakenly believe that their products or services come from the same sources. For example, Intel Corporation has been litigating one such issue with an ROC import and export outfit for many years. The new Trademark Act defines the English name of an ROC company as the ‘name that identifies a business entity’, and because of that, using others’ trademarks-of-foreign-language in the English names of ROC companies constitutes an infringement of trademark rights.
3. TRADE SECRETS
The new Trade Secrets Act will augment the types of criminal actions that the infringement of trade secrets will incur
Under the current ROC Trade Secrets Act, criminal liabilities against the infringement of trade secrets cover only ‘disclosure’, without extending to ‘illegal acquirement’ or ‘illegal use’ of trade secrets. But it has become clear that such regulations are not comprehensive enough for trade-secrets protection, and fail to impose appropriate penalties on infringers who steal or use the trade secrets of their competitors. The ROC legislative department is about to finish revising the Trade Secrets Act, and the new Act will incorporate all of the above criminal activities into the scope of penalties.
The Act will also impose an aggravated penalty on the intention to use trade secrets extraterritorially
In recent years, certain top managers or R&D personnel in some ROC technology companies have, after leaving office, joined those companies’ competitors in Mainland China, Hong Kong, Macau or other foreign countries, where they have subsequently disclosed the trade secrets of the companies they left. In light of that trend, the new Trade Secrets Act will impose an aggravated penalty specifically on persons who disclose, illegally acquire or illegally use trade secrets of ROC companies ‘with the intention to use the trade secrets extraterritorially’.
The penalty against general infringement of trade secrets is ‘imprisonment for not more than five years, plus a fine between NTD50,000 to NTD10,000,000’. The penalty against the infringement of trade secrets with the intention to use those secrets extraterritorially will be elevated to ‘imprisonment between six months and five years, plus a fine between NTD500,000 to NTD50,000,000’. In addition to the persons actually committing such crimes, the juridical entities – eg, companies/organisations – to which they belong may also be subject to the relevant fines.
Po-Chien Chan is a senior associate at the Taipei office of Jones Day, where he has developed expertise in patent, trademark and copyright issues and disputes against government authorities