January 2012

Changes in Law and Regulations

Leniency Program Effectuated for Cartel

Important Amendments of Company Act

Limitation on Personal Guarantee Secured for Bank Loan

Patent Act Amended in Favor of Research or Experiment Prior to Patent Expiration

Legal News and Case Development  

Primary Listing Now Allows No-Par Value Stock

New Internet Advertisement Guideline to Strengthen Consumer Protection

Panion’s Exclusive Patent License for Renal Failure Treatment Has Been Affirmed

Supreme Court Dismissed Jusung’s Patent Infringement Suit against Applied Materials and AKT

Commentary

TFTC’s New Regulation on Exemption / Reduction of Penalties Applicable to Concerted Action

Tsar & Tsai has been selected 2011 PROJECT LAW FIRM OF THE YEAR – TAIWAN by ACQUISITION INTERNATIONAL.

Tsar & Tsai acted as legal counsel of An-Shin Food Services Co., Ltd. (Mos Burger chain operator in Taiwan) for its successful IPO and listing on the GreTai Securities Market (1259-TW) on December 15, 2011. (S.K. Chen / Janice Lin / Lynn Lin)

Tsar & Tsai acted as Taiwan counsel to the largest Italian pharmaceutical company Menarini Group for its acquisition of 100% share equity in Invida Group Pte Ltd., a leading pharmaceutical commercialization services company in Asia Pacific, in December 2011. (Janice Lin/ Lynn Lin)

In connection with the primary listing of Cayman Tung Ling Co., Limited (with a global brand known as Piyo Piyo applicable to the infant’s and children’s products) (“Tung Ling”), Tsar & Tsai has acted as leading legal counsel of Tung Ling and has successfully assisted Tung Ling to complete its listing on the GreTai Securities Market (“GTSM”) from December 2, 2011. (James Cheng / Cecilia Liu / Jo-lin Huang)

Tsar & Tsai acted for Grand Cathay Securities Corporation (GCSC) as its legal counsel regarding JP Nelson Holdings' listing application to GTSM.  Tsar & Tsai has successfully assisted GCSC in said listing where the shares of JP Nelson Holdings have been traded on GTSM from December 6, 2011. (James Cheng/ Cecilia Liu)

Tsar & Tsai acted for Grand Cathay Securities Corporation (GCSC) as its legal counsel regarding Redwood Group Ltd's listing application to GTSM.  Tsar & Tsai has successfully assisted GCSC in said listing where the shares of Redwood Group Ltd have been traded on GTSM from December 13, 2011. (James Cheng/ Cecilia Liu)

In the December 2011 issue of NARUHODO Richard Chuang was interviewed about Taiwan-Japan Investment Arrangement―Dispute Resolution Mechanism for Intellectual Property Disputes.

Eugenia Chuang’s article entitled “Are you tracked online.” was published in NARUHODO December 2011 issue.

Richard Chuang and Kaori Chang attended the investment promotion forum in Kyoto, Japan on December 5-8, 2011 organized by the Council for Economic Planning and Development, Executive Yuan.   

Joyce Ho gave a speech on Trademark License Agreement at National Taiwan University of Science and Technology on December 14, 2011.

Chia-Yu Chang attended the Attorney’s Symposium co-hosted by Taiwan Bar Association and Second Tokyo Bar Association in Tokyo, Japan on December 21-23, 2011.   

James Cheng will attend the Asia Financial Forum hosted by Hong Kong Trade Development Council on January 16-17, 2012.

Eugenia Chuang will participate as panelist at the Outsourcing Versus Restructuring-Challenges in International Business Structures program held by AIJA in SRILANKA on February 8-10, 2012. 

Edgar Chen will attend Inter-Pacific Bar Association 22^nd Annual Meeting and Conference in New Delhi, India from February 29, 2012 to March 3, 2012.

Leniency Program Effectuated for Cartel ― According to the amended Fair Trade Act which effectuated on November 23, 2011, to encourage reporting of cartels by cartelists, conditional immunity from prosecution is offered to members of a cartel who inform the Commission of the cartel conduct with evidence.  The new amendment also increases the penalty for cartels and monopolies, which is now up to 10% of the revenue in the preceding fiscal year of the violating enterprise.(Tim Chou/ Connie Huang)

Important Amendments of Company Act－The Legislative Yuan passed the Amendment to the Company Act on December 13 and 14, 2011.  The major amendments include: (1) de facto company officers will be subject to responsibilities under the Company Act; (2) election of directors and supervisors must be conducted based on accumulated voting regime; (3) delegates of government or institutional shareholders shall not act as directors and supervisors at the same time; (4) e-voting will be mandatory for shareholders meetings of large scale companies; and (5) excess capital reserve and legal reserve may be distributed to shareholders in cash. (Eugenia Chuang)

Limitation on Personal Guarantee Secured for Bank Loan― Pursuant to the Banking Act amended on November 9, 2011, banks shall refrain from requesting any joint and several personal guarantee for securing the repayment of self-use residential loans or consumer loans.  The Amended Act also prohibits banks from requesting personal guarantee when the collateral is sufficient to guarantee the loan payment.  The duration of personal guarantee for the above described loan shall not exceed 15 years. (Tim Chou)

Patent Act Amended in Favor of Research or Experiment Prior to Patent Expiration－The President Office announced the amendments to the Patent Act on December 21, 2011, where its effective implementation date will be further announced by the Executive Yuan.  The major amendments include the following:

1. Patent rights do not extend to non-public and non-commercial actions and do not extend to research, experiment or other necessary actions made for obtaining drug regulatory approvals in Taiwan or abroad;

2. In the invalidation actions, the TIPO shall respectively examine the patentability and render its validation or invalidation decision on each of the claims as challenged by the petitioner.  The TIPO has discretion to deploy evidences not cited by the petitioner to examine the challenged claims.  The TIPO may also combine the multi-invalidation actions if they are made against the same patent;

3. Claim for monetary compensation can only be made against intentional or negligent infringing acts;

4. Fair royalty payment is identified as an approach to determine damages of patent infringement;

5. Application for design patent is open to partial design, derivative design, computer generated icons and graphical user interface. (Allen Lin)

Primary Listing Now Allows No-Par Value Stock－ The Financial Supervisory Commission promulgated a ruling on December 6, 2011 to allow the foreign company who applies for listing on the Taiwan Stock Exchange or the OTC or for listing on the emerging board can issue their shares without stock par value or without being subject to the stock par value at NT$10.  (Yvonne Liu)

New Internet Advertisement Guideline to Strengthen Consumer Protection―The Fair Trade Commission announced the Guideline on Internet Advertisement on December 30, 2011, which requires advertiser to ensure the accuracy of the advertisement, to update the context and correct the error in a timely manner, and to fully disclose the conditions that would affect the consumer’s decision in engaging in transactions.  The Guideline also stipulates that recommenders or social network users will be subject to liabilities under Article 21 of the Fair Trade Law for making false statement on the commodities or services promoted by the advertisers. (Connie Huang)   

Panion’s Exclusive Patent License for Renal Failure Treatment Has Been Affirmed―Tsar & Tsai successfully obtained a declaratory judgment for Panion & BF Laboratory Ltd. from the first instance of the Intellectual Property Court.  The Court affirmed the existence of the exclusive license relationship between Panion and Professor Cheng-Hsin Hsu under the patent license agreement executed between the parties concerning patents for treatment of renal failure.   The Court also dismissed all counterclaims filed by Professor Hsu. ( Jennifer Lin, Jeanne Wang, Judie Sun and Ray Hsu of Tsar & Tsai represented Panion & BF Laboratory Ltd. in this case)

Supreme Court Dismissed Jusung’s Patent Infringement Suit against Applied Materials and AKT –The Supreme Court rendered a final ruling on December 1, 2011 to dismiss an appeal of Jusung Engineering Co., Ltd. against Applied Materials, Inc. and AKT America, Inc. in a patent infringement litigation.  The Supreme Court ruled that Jusung’s separable chamber patent was not infringed by Applied Materials and AKT because said patent is found to be invalid. (Jennifer Lin, Edgar Chen and Vincent Lin of Tsar & Tsai represented Applied Materials, Inc. and AKT America, Inc. in this case)

TFTC’s New Regulation on Exemption or Reduction of Penalties Applicable to Concerted Action

Connie Huang / Matt Liu

On November 23, 2011, the addition of Article 35-1 and the amendment to Article 41 of the Taiwan Fair Trade Act (“TFTA”) came into effect.  According to Article 35-1, subject to the prior consent of the Taiwan Fair Trade Commission (“TFTC”), the fine imposed on a cartelist will be exempted or reduced if the cartelist files a notification or informs a concrete illegal conduct in which it has taken part with supporting evidence and assists investigation before the TFTC knows or investigates said illegal conduct.  The same applies to a cartelist who informs a concrete illegal conduct in which it has taken part with supporting evidence and assists the investigation during the TFTC’s investigation of said illegal conduct.  According to Article 41, if a concerted action is deemed by the TFTC as a serious violation, the TFTC may impose a fine on a violating enterprise up to 10% of its total sales revenue in the previous fiscal year.

In connection with the implementation of Article 35-1, the TFTC recently announced the draft Implementation Regulation on Exemption or Reduction of Penalties imposed for Concerted Action (“Draft Regulation”).  According to Article 7 and Article 8 of the Draft Regulation, the conditions of exemption or reduction of fines imposed by the TFTC are as follows:

1. The fine imposed by the TFTC on the enterprise first applying for leniency before the TFTC knows or investigates the cartel, obtains the TFTC’s conditional consent, and satisfies all the conditions set by the TFTC shall be exempted.  The same applies to the enterprise first applying for leniency, obtains the TFTC’s conditional consent, and satisfies all the conditions set by the TFTC during the TFTC’s investigation where no one applies for leniency before the TFTC knows or investigates the cartel.

2. The fines imposed on the enterprises applying for leniency during the investigation, obtain the TFTC’s conditional consent and satisfy all the conditions set by the TFTC shall be reduced as follows: (1) The first applicant: 30%-50%. (2) The second applicant: 20%-30%. (3) The third applicant: 10%-20%. (4) The fourth applicant: 10% or less.

According to the experience of other countries, it is vital to the successful implementation of a leniency program that whether the regulator can satisfactorily protect the confidentiality of the statements and documents submitted by a leniency applicant, preventing the same from being used by plaintiffs of follow-on damage claims against the leniency applicant.  The degree of protection of confidentiality of information submitted by a leniency applicant will affect the cartelists’ willingness to apply for leniency.  Article 20 of the Draft Regulation provides that the identity of a leniency applicant shall be kept confidential unless obtaining the applicant’s prior consent, and the interview records, originals of documents or any other document which may show the identity of the applicant shall be kept in a separate file, and unless the law provides otherwise, the same shall not be disclosed to any agency, organization or individual other than a public prosecutor’s office or a court.  According to the wording of Article 20, it does not preclude the possibility that the TFTC may disclose an applicant’s interview records and documents to a civil court and subsequently used by a downstream enterprise in a follow-on damage claim against the applicant.  If this is the case, whether the goal of the leniency program can be achieved will be in great doubt.  The TFTC should make it crystal clear in Article 20 that an applicant’s interview records and documents shall not be disclosed by the TFTC to a court to serve as evidence in a follow-on damage claim against the applicant.

The leniency program is an effective weapon of antitrust regulators around the world to crack down cartel.  After the Regulation comes into effect, the TFTC’s enforcement actions against international cartel are expected to be much more aggressive.  In light of this trend, to lower the potential risk of violation, enterprises are advised to establish their internal antitrust compliance programs and avoid exchanging sensitive information (e.g. selling price, sales volume, rebate, customer information, and source and cost of raw material) with competitors.  Further, to protect the interests of an enterprise and its relevant personnel, enterprises being investigated by the TFTC shall consult their external counsels and formulate comprehensive legal strategies to deal with the TFTC investigation procedure and potential follow-on damage claims instituted by downstream enterprises.