The contents of Tsar & Tsai Lex News are not legal opinions and shall not be taken as legal advice on any particular issue or case. If the reader has any suggestions or questions, please do not hesitate to contact us.

Tsar & Tsai Lex News is aimed at providing the readers and clients

  1. important recent changes in the laws and regulations in Taiwan,
  2. practical views and interpretations on the laws,
  3. important legal news and case developments, and
  4. information on recent activities of Tsar & Tsai Law Firm. If you have any comments or questions, please feel free to contact us (Tel: 886-2-2781-4111; e-mail: Law@TsarTsai.com.tw ).

Editors: Edgar Chen / George Shih

Legislative Yuan passed the amendments to the Securities Exchange Act The Legislative Yuan passed the amendments to the Securities Exchange Act (“SEC”) on 26 March 2019. Highlights of the amendments include: (1) “Semi-annual financial report,” a matter specified in Paragraph 1(10) of Article 14-5 that requires approval by the audit committee, is amended to “Q2 financial report certified by CPA”; (2) “shareholders of more than 10% of the company’s shares” are added to Article 28-2 of SEC as persons who may not sell their own shares during a buyback period; (3) the “10-days” declaration period under the Article 43-1 of SEC for acquirers, either individually or jointly with other persons, of more than 10% of a the total issued shares of public company is deleted, the length of the period now is authorized to competent authority’s discretion; (4) a rule is added that, the competent authority may order correction within a prescribed period, or take other necessary measures against securities firms in violation of provisions under the SEC and relevant regulations. (Alex Cheng)

Finiancial Supervisory Commission (“FSC”) amended the scope of application of the regulation that requires insurance agents and brokers to establish internal control, auditing and business solicitation systems –– On March 4, 2019, the FSC amended Article 2 of the “Regulations Governing the Implementation of Internal Control. Auditing and Business Solicitation Systems of Insurance Agent Companies and Insurance Broker Companies”.  The amended items include: (1) the revenue threshold for the requirement to establish internal control, auditing and business solicitation systems is raised from NTD 100 million to NTD 300 million; and (2) all public traded insurance agent companies and insurance broker companie are required to establish internal control, auditing and business solicitation systems. (Roy Su)

Personal information protection was added to the “Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises” (“Regulations”) – The FSC amended the Regulations on April 1, 2019 to require (1) that the internal underwriting system and procedure of insurance enterprises include the method and time limit of keeping personal information in underwritten cases as well as non-underwritten cases and the procedure for destruction thereof (Article 7 Paragraph 1(8)); and (2) that the time limit in such system and procedure regarding keeping personal information in non-underwritten cases be no more than 5 years in principle, and that the system and procedure provide that the personal information in non-underwritten cases shall be processed and used, and be deleted upon expiration of the time limit, in compliance with the Personal Information Protection Act. (Roy Su)

FSC established the “Principles Governing the Review and Issuance of Approval Letter of the application for Exchange Listing, OTC Listing and Registration as Emerging Stocks by Insurance Companies” (“Principles”) – The FSC established the Principles on March 14, 2019, providing that it would consider the following 4 criteria when determining whether to issue approval letters for insurance company to be listed on the stock exchange or OTC, or registered as an emerging stock: (1) Profitability: positive profit before tax in the most recent 5 years as calculated in accordance with the Principles. (2) Solvency: a capital adequacy ratio of 250% or higher after deducting the elements specified in the Principles in the case of an applicant of stock exchange or OTC listing, and 200% or higher in the case of an applicant for registration as emerging stock. (3) Compliance: No citation in the most recent 3 year under Article 149 Paragraph 1 of the Insurance Act (violation of laws, regulations or articles of organization, or likelihood of interfering with sound management) or Article 12 Paragraph 1(2) to 1(6) of the Financial Consumer Protection Act; no fine exceeding NTD 1 million was imposed by the competent authority for the most recent 3 years. (4) Other Criteria: no instance of bad corporate governance; investment in real property not exceeding 10% of available capital; net worth to asset (not including investment-linked insurances) ratio no less than 5.5%, or no less than the net worth to asset ratio (not including investment-linked insurances) of the industry operating insurance business of same types; and no significant employer-employee dispute. (Roy Su)

Legislative Yuan passed the amendment to the Banking Act – The Legislative Yuan recently passed the amendment of the Banking Act.  In addition to authorizing the competent authority to promulgate rules regarding the conflict of interest of bank’s responsible person, the amendment also provides that competent authority may restrict the bank’s investment, or may order or prohibit the bank to dispose of transfer certain assets, or may order the bank to close its branch or department and to suspend the duty of its manager or employee for a period of time. In a case of serious violation, the maximum penalty is raised from NTD 10 million to NTD 50 million.  On the other hand, if a case of mild violation, the competent authority may waive the penalty or order the violating bank to take appropriate corrective measure before waiving penalty.  Additionally, in order to reinforce anti-money laundering and crack down information terrorism, the amendment also adds a new provision to authorize the government or its authorized institutions to exchange information, promote technical cooperation, assist in investigations, or enter into cooperation treaties or agreements with foreign governments, institutions or international organizations based on the principle of reciprocity and confidentiaility. (C.H.Chen)

Ministry of Labor (“MOL”) amended the Directions Governing Day (Night) Duty of Workers and announced the abolishment thereof from 2022 – On April 11, 2019, the MOL amended the “Directions Governing Day (Night) Duty of Workers” (“Directions”), suggesting that the rate of hourly allowance should not be lower than the amount equal to the monthly basic payment divided by 240.  Simultaneously, the MOL announced that the Directions will be abolished beginning January 1, 2022, and overtime payment provisions under the Labor Standard Act will govern the payment for day (night) duty work therefrom. (Elvin Peng)

Amendment to the “Guidelines on Hearings for Patent Invalidation Cases” – The Intellectual Property Office promulgated the amended “Guidelines on Hearings for Patent Invalidation Cases s” on April 2, 2019.  The gist of the amendment is as follows: (1) The application for hearing may be made by either party involved in an invalidation case without the consent of the other party. (2) If either party believes that there exist a reason of recusal for the examiner, such party shall submit an application with supporting arguments within 10 days from the receipt of the notice of hearing.  (3) During an invalidation hearing, the parties may only provide their comments or arguments and may not rasie a new means of attack or defense. (Genson Hung)

The Act Governing Relations between the People of Taiwan and Mainland China (“Act”) was amended to raise the amount of maximum fines against illegal investments by Mainland China enterprises – The Legislative Yuan amended Article 93-1 of the Act on April 9, 2019.  The new amendment provides that, if a Mainland China enterprise makes investments in Taiwan without approval, the maximum fine upon such violation is raised from NTD 600,000 to NTD 25,000,000.  If the content of the application for approval is incorrect or incomplete, or the enterprise evades, obstruct, or refuse the investigation from the competent authority, the maximum fine for such violations is raised from NTD 300,000 to NTD 2,500,000. (Dennis Chen)

Ministry of Labor issued a letter explaining the payment on the election day for workers subject to Article 84-1 of Labor Standard Act – On March 4, 2019, the MOL issued an administrative interpretation to indicate that when a worker subject to Article 84-1 of the Labor Standard Act works on the election day, he/she should be paid doubled wage based on his/her actual working hours and hourly wage if the election day is an agreed normal working day.  In addition, the employer may not hinder the worker’s right to vote. (Elvin Peng)

When an oversea subsidiary relocates, its Taiwanese parent company would not be required to calculate investment revenues for payment of business income tax if certain particular circumstances exist – The Ministry of Finance issued circular Tai-Tsai-Shui-Zi No. 10704699570 on March 29, 2019, stating that when a Taiwanese company’s oversea subsidiary relocates to another overseas country or district, the Taiwanese parent need not calculate investment revenues for payment of business income tax when all of the following 4 conditions are met: (1) the parent company’s shareholding proportion of the subsidiary is unchanged and the structure and shareholding proportion of the parent company’s indirect investment in other overseas countries or districts through the subsidiary are also unchanged; (2) both of the jurisdiction from which the subsidiary moves out and the jurisdiction to which the subsidiary moves to recognize that the subsidiary continues to exist as the same juristic person; (3) the subsidiary is not required to be dissolved and wound up by the jurisdiction from which it moves out; and (4) the subsidiary’s undistributed profits prior to the relocation remain unchanged after the relocation. (Roy Su)

Board of directors (“BOD”) of a public traded company has exclusive right to decide the issuance of cash dvidends or bonus if the articles of organization of the company asauthorized BOD to do so by supermajority resolution – The Ministry of Economic Affairs issued an administrative interpretation on March 12, 2019, stating that the BOD of a public traded company has exclusive right to decide the issuance of cash dvidends or bonus if the articles of organization of the company has expressly authorized BOD to do so by supermajority resolution pursuant to Article 240 (5) of the Company Act.  There will be no distribution of cash dividends for a fiscal year If the BOD does not resolved to distribute cash dividends for the year.  The shareholders meeting may only resolve to distribute stock dividends in accordance with Paragraph 1 of Article 240. (Alex Cheng)

The Intellectual Property Court actively exercises international jurisdiction

Genson Hung, esq. / Jeanne Wang, esq.

Semiconductor Components Industries, LLC (“SCI”) filed a lawsuit with the Intellectual Property Court (“IP Court”) alleging that the “InnoSwitch Series,” “InnoSwitch3 Series” and “SC Series” chip products (“the Products”) sold by Power Integrations, Inc. (“PI U.S.”) and its affiliate Power Integrations Netherlands B.V.’s Taiwan Branch (“PI Taiwan”) infringed SCI’s Taiwan Patent Nos. I323551, I389435 and I493847 (collectively “the Patents”).  The IP Court rendered the first-instance judgment (Year 2018 Min-Zhuan-Su-Zi No. 22) on April 8, 2019 to dismiss SCI’s suit and deny the motion for provisional enforcement, holding that the Products did not infringe on any of the Patents.

In addition to denying the infringement of the Products and the validity of the Patents, the Defendants also raised the issue of the IP Court’s jurisdiction over this case.  Plaintiff alleged that PI U.S. provided information such as datasheets and distributors on the official website of PI group, and that such action was an “invitation to make an offer” and should constitut an “offer for sell” under the Patent Act.  In addition, Plaintiff alleged that the sale of the Products by PI U.S. through the aforesaid website should constitut the “act of sale” under the Patent Act.  Therefore, Plaintiff provided prima facie evidence for supporting its allegation of Defendant’s infringement.  Defendant contended that PI U.S. did not sell the Products directly or indirectly via any distributors in Taiwan; that the group website only indicated that PI group had distributors in Taiwan; that these distributors were not PI U.S.’s distributors; and that there is no transaction or any legal relationship between the distributors and Defendant.  Defendant pointed out that the information on said websit could only enable persons who intend to purchase the Products to purchase from the Taiwanese distributors listed on the website, that these purchasers did not purchase from PI U.S., and that the final sales agreement thereof would not be made with PI U.S.  According to the Defendant, the court should not conclud that PI U.S. either sold or offered for sale in Taiwan solely because of the existence of such a website.  As for Plaintiff’s contention that customers could purchase the Products via the website, the Defendant argue that the webpage referred to by Plaintiff was just a “request for sample” webpage.  Since the website did not charge any fees for the sample and only required the buyer to pay the shipping and handling cost, the provision of samples should not be an act of selling the Products.  If the court exercises international jurisdiction, it is unfair to Defendant and violates the principle of good faith in litigation, and violates the legal principle that judgments should be justified and prompt.  Thus, Defendant contended that Plaintiff did not provide prima facie evidence for Defendant’s infringement in Taiwan, and the court should have no international jurisdiction over this case.

The IP Court held that it did have international jurisdiction over this case.  The Court stated in the judgment that given the lack of overall provisions of international jurisdiction currently, the jurisdictional provisions of the ROC Code of Civil Procedure or international norms could be used as the “legal principle” of international jurisdiction.  In this case, Defendant provided datasheets of the Products in the language of traditional Chinese on Defendant’s official website for Taiwanese customers.  Plaintiff also purchased the Products from the distributors listed on the website, and the Products were shipped to Taiwan.  According to the objective facts presented by Plaintiff, the alleged infringement took place in Taiwan terretory.  Although Defendant argued that PI U.S. did not sell the Products, the website did describe the product specifications and provided information for pruchase.  Based on the objective evidence and facts submitted by Plaintiff, Defendant and its global distributors of direct shipments acted jointly in infringement.  Thus, the trial of this case by Taiwan courts does not violate the special circumstances of expecting fairness between the parties and the proper and prompt judgment.  According to Paragraph 1, Article 15 of Taiwan Code of Civil Procedure, the Taiwan courts should have jurisdiction.

In this case, although the Court held that it has international jurisdiction, the only basis of jurisdiction is that “Plaintiff has provided prima facie evidence for Defendant’s infringement.”  The Court should have adjudicated whether the facts provided by Plaintiff are with merits.  The court should further examine whether Defendant PI U.S. should be considered committing an infringement by selling or offering for sale by virtue of the group website’s design.  However, since the court held that the Products did not infringe on the Patents, the judgment did not further discuss whether the facts of this case could demonstrate that there existed any sale or offer for sale for purpose of the Patent Act or that the Defendant should be deemed to have committed joint infringement.

Recently, the IP Court has apparently become more willing to exercise international jurisdiction.  For example, in the IP Court’s judgment 2018-Min-Zhu-Kang-Zi No. 1, where the defendant contended that it did not sell the products infringing on the plaintiff’s copyright, the alleged infringing product was purchased by customers from the website called Buyee, which was irrelevant to the defendant.  Although the defendant’s subsidiary operated a website, said website did not deliver goods to Taiwan.  However, the IP Court held in that case that the defendant sold relevant products on the Internet and sold to Taiwan via the Buyee website since the website of said subsidiary showed the defendant’s English name.  The Court further held in that case that even if the defendant’s arguments were valid, the defendant and its subsidiary should be deemed to conduct joint infringement because the subsidiary operating the website was the defendant’s wholly-owned subsidiary, and thus that Taiwanese courts should have international jurisdiction.  If the IP Court continues to follow the direction in the above-mentioned Buyee website case and actively exercises international jurisdiction, foreign companies should seriously be aware of the risk of infringement lawsuits in Taiwan since the Internet has no boundaries.

[Firm News]

  • For serving as Taiwan counsel for the syndicate banks in the Formosa I Offshore Windpower project, Tsar and Tsai was awarded “APAC Offshore Wind Deal of the Year 2018” by the Singapore IJ Global Awards in addition to receiving the “Deals of the year 2018,” awarded by the Asian-mana Counsel.
  • Tsar and Tsai is selected by the Global Business Insight Awards 2019 as the Leading Competition Law Firm of the year 2019 – Taiwan.
  • Tsar and Tsai is selected by Benchmark Litigation Asia – Pacific 2019 as a Top Tier Firm in fields of “Commercial and Transcations” and “Intellectual Property.”
  • Tsar and Tsai has assisted Kongsberg Gruppen ASA in the successful acquisition of Rolls-Royce Commercial Marine, a transaction of approximately USD 525,000,000. (Janice Lin, Esq./Alex Cheng, Esq.)
  • Led by Matt Liu, Esq., Head of the Competition Law Committee of the Taipei Bar Association (“TBA”) and a partner at Tsar & Tsai, a representative team of the TBA visited the Taiwan Fair Trade Commission (“TFTC”) on April 25, 2019 to meet with the Chief Commissioner Mei Ying Huang, during which ideas were exchanged in relation to several administrative and enforcement issues. The TFTC responded positively to all issues. Both the TFTC and the TBA agreed to hold similar meetings in the future as a channel of communication between the regulator and counsels.
  • Semiconductor Components Industries, LLC (“SCI”) filed a legal action against Power Integrations, Inc. (“PI US”) and its affiliate, the Taiwan Branch of Power Intergrations Netheriands B.V. (“Taiwan Branch of PI Netherlands”) with the Intellectual Property Court (“IP Court”), alleging that defendants’ products infringed 3 Taiwanese patents of SCI, to wit: Nos. I323551, I389435 and I493847.  By a judgment rendered on April 8, 2019, the IP Court dismissed SCI’s complaint and denied the motion for preliminary injunction, holding that the products in question did not fall within the claims of any of the 3 patents. Tsar and Tsai represented the defendants PI US and the Taiwan Branch of PI Netherlands. (Albert Liao, Esq./Gensen Hung, Esq./Thomas Liu/Ray Hsu, Esq./Jeanne Wang, Esq./Jennifer Lin, Esq. )
  • Tsar and Tsai is selected by the Chambers Global 2019 as a Band 1 firm of Taiwan in Corporate/M&A and Intellectual Property.
  • Tsar and Tsai is selected by the 2019 Global Business Insight Awards as the Foreign Investment Law Firm of the year 2019 – Taiwan.
  • Tsar and Tsai is selected by the WTR (World Trademark Review) as one of the 2019 Taiwan Top Firms, and Joyce Ho, Esq. is selected as one of the Taiwan recommended experts.
  • Edgar Chen, Esq. is selected by the Asialaw and Benchmark Litigation Dispute Resolution Awards 2018 as the Disputes Star of the year winner – Taiwan.
  • Tsar & Tsai and the Taiwan Mergers & Acquisitions and Private Equity Counsel (“MAPECT”) co-hosted the Conference on “Impacts of the New Company Act on M&A” (13:30-17:00, Thu. 21 March) at Tsar & Tsai.  Janice Lin, Esq. delivered the opening address and spoke on the topic of “The New Company Act and Shareholder Activism, with Focus on the Right of Proposal/Nomination of Minority Shareholders”, and James Cheng, Esq. was the panellist.
  • Janice Lin, Esq. spoke in the MAPECT “Programme for M&A Professionals, Term 1, 2019” on the topic “Laws and Regulations on Corporate M&A.”
  • Steven Yen, Esq. was invited as lecturer in the “Training Course on the Principles for Financial Service Industries to Treat Clients Fairly” held by First Securities on March 29, 2019.
  • Yvonne Liu, Esq. attended the “Lex Mundi Litigation, Arbitration and Dispute Resolution Practice Group Asia Pacific Regional Meeting” held by Lex Mundi on April 11 to 13, 2019 in Kyoto, and spoke on the topic “Cross Border Disputes in Asia – Taiwan.”
  • Joyce Ho, Esq. was invited by the AIT as speaker in the “2019 International Seminar on Digital Piracy and Trade Secrets”, co-held by the Taiwan Ministry of Justice and the U.S Department of Justice on April 12, 2019.
  • Lillian Chu, Esq. attended the “ICC Program of Institute for the Development of Arbitration” held by the ICC in Ho Chi Minh City from April 20 to 22, 2019 and spoke on “Terms of Refenence in ICC Arbitration”.
  • Vincent Wang, Esq. served as the Vice President of the Competition Law Committee of the Inter-Pacific Bar Association, and delivered an address in the IPBA 29th Annual Meeting & Conference in Singapore on “Enforcement Trends Against Vertical Restriction in Taiwan.”
  • Vincent Wang, Esq. was inveited as Panellist in the 2019 Lex Mundi Antitrust, Competition and Trade Asia-Pacific Practice Group Meeting to discuss on “When Talking and Sharing Ideas, Projections, Sales Volumes and Best Practices Results in a Cartel Finding – Beware What You Say or HEAR!”

[Seminars]

  • Marilyn Wu, Esq. attended a conference in Taipei co-heldd by the Taipei Bar Association and the Taiwan Criminal Defense Attorny Association on the legality of the search of law firms.
  • Matt Liu, Esq. and Vincent Wang, Esq. attended the “Antitrust Law 2019 Spring Meeting” held by the American Bar Association (ABA) in Washington DC from March 26-29, 2019.
  • Cherry Chen, Esq. attended the “Industry and Commerce: Analysis of the Optimisation Plan of Income Tax” seminar, held by the Associatin of Industry and Commerce on March 26, 2019.
  • Howard Lee attended the “2019 Conference on IP Practice in Taiwan, China and the U.S.” held by National Taiwan University in Taipei on March 28, 2019.
  • Elvin Peng, Esq. attended the “Corporate and Securities Series Conference- Protection of Minority Shareholders in Cash-out Mergers- Judicial Interpretation No. 770.”
  • Sophia Yeh, Esq. and Sean Fan, Esq., attended the “Orrick’s Annual Global Innovation Conference: Practical Guidance in IP, Antitrust, Trade, and Business for Taiwanese Companies” held by Orrick, Herrington & Sutcliffe in Taipei on April 10, 2019.
  • George Chen attended a conference on design patent litigation case analysis held by (and in) the Intellectual Property Office, Ministry of Economic Affairs, on April 16, 2019.
  • Edgar Chen attended the “Lecture on Latest Trends and Developments of U.S. Patent Law- Current Patents to PTAB” held by the School of Law of National Chiao Tung University in Taipei on April 18, 2019.
  • Vincent Lin, Esq., Vincent Wang, Esq. and Alex Yin, Esq. attended the 2019 Lex Mundi Antitrust, Competition and Trade Asia-Pacific Practice Group Meeting and the 2019 Singapore /Inter-Pacific Bar Association meeting in Singapore from April 23-27, 2019.
  • Edgar Chen, Esq. attended the conference on “Disclosure in International Arbitration: The Tension between Efficiency and Justice” held by the Chinese Arbitration Association on April 24, 2019.
  • Sylvia Hong attended the 2019 Conference of Practical Exchanges on Business IP Management co-held by the Taiwan Patent Attorneys Association and the Intellectual Property Office, Ministry of Economic Affairs in Hsinchu on April 24, 2019.
  • Judie Sun, Esq. attended a inter-disciplinary programme on “IP Litigation and Dispute Resolution” held by the Ministry of Economic Affairs at the Taipei Innovation City Convention Center on April 26, 2019