Changes in Laws and Regulations

The Ministry of Economic Affairs promulgated the "Examination Criteria on Non-traditional Trademarks" on September 12, 2017 - Article 18 of the Trademark Act provideds that any signs with distinctiveness which can identify and distinguish the origin of the goods or services can be an object for registration and protection. Such signs are not limited to those listed in the text of said Article, to wit: words, designs, symbols, colors, three-dimensional shapes, motions, holograms, sounds, and any combination thereof sensible by visual or auditory sensation. Any other sign that may be perceived by the sense of smell, touch or taste can also be registered for trademark protection so long as it meets the distinctiveness requirement. By virtue thereof, the Ministry of Economic Affairs renamed the "Examination Criteria on the Trademarks of Three-dimensional Shapes, Colors and Sounds" to "Examination Criteria on Non-traditional Trademarks", and increased the types of signs acciptible for trademark examination to include repeating patterns, scents (odors), positions, etc. Accordingly, the TIPO will examine the following three aspects when examining untraditional marks: 1) the way of expression: design, description and specimen: 2) the distinctiveness, and 3) the non-functional nature. (Jay You, Trademark Department)

The Ministry of Finance (“MOF”) promulgated the “Directions Governing the Investigation Procedure Conducting by Competent Tax Collection Authorities” (to be effective December 28, 2017) - To ensure due process in the course of investigation by the investigators of tax collection authorities, as required by Article 10 through 12 of the Taxpayer Rights Protection Act, the MOF promulgated the “Directions Governing the Investigation Procedure Conducting by Competent Tax Collection Authorities” on September 14, 2017. The major aspects thereof include the excusing of the investigator; the right of the investigated party to make statement; the right of the investigated party to be represented by counsel; the right to remain silence or refuse investigation without the presence of counsel; the proper demeanor of the investigator, e.g., conducting investigation in a peaceful manner and prohibiting use of violence, threats or other inadequate methods; the requirement that no less than two officials be present during interview and making transcript; and the requirement that the investigation transcript be read aloud by the investigators to, or be examined in person by, the investigated party and each page thereof be signed and sealed, etc. (Marilyn Wu) 

The MOF lowered the threshold for duty exemption to NT$2,000 - The duty exemption threshold for imported goods which the Ministry of Finance set according to the Customs Act has been NT$3,000. The recent growth of online shopping, however, has resulted in unfair competition against the domestic merchants since the goods purchased on foreign websites and imported into Taiwan at prices below the exemption threshold are duty free, while domestic retail goods are subject to business tax and commodity tax. The MOF has therefore decided to lower said duty exemption threshold in a hope to obviate unfair competition against domestic businesses. The new threshold applies to imported goods other than tobacco, liquor and certain agricultural products, and will come into effect on January 1, 2018. (Albert Liao) 

The proposed Amendment to Articles 24 and 32 of the “ Regulations Governing Pre-sale Procedures for Insurance Products” sets a stronger function of the insurance product management meeting – The Financial Supervisory Commission (“FSC”) completed the procedure for announcing the proposed Amendment to Articles 24 and 32 of the “Regulations Governing Pre-sale Procedures for Insurance Products”. The plan is for the amended regulation to take effect on January 1, 2018. The proposed Amendment provides, among other things, that an insurance enterprise shall convene insurance products management meetings semi-annually to review all essential aspects of the insurance products and corresponding measures, including: the execution of assets allocation plan for life insurance products of one year or longer; the pricing reasonableness analysis of insurance products, which shall cover the adequacy of premium (rates), and any significant diviation between the submitted actuarial assumption of major life insurance products and the actual after-sale experience. If any adjustment should be deemed necessary after such review, the proposed adjustment shall be submitted to the board of directors approved after approval by the president or general manager, as the case may be. (Yen-ling Liu)

Opinions and Views in Practice / Legal News

The Ministry of Justice (“MOJ”) commented on the legality of the collection of personal information by telecommunication operator - The MOJ commented in its letter dated August 24, 2017 that it had been a practice of the telecommunication operators to collect personal information detail (name, date of birth, personal ID number, and photocopy of dual identities) from, and to turn on the actual application process for, a consumer who wants to know prior to submitting an application for a new mobile phone number what would be the amount of subsidy to be returned in the event of an early termination, before providing an answer to such customer. Such consumer would not learn of the amount of subsidy which she or he had inquired if the consumer does not disclose the personal information requested by the operator. The MOJ indicated that the scope of personal information collected by the operator in the aforementioned practice had apparently exceeded the necessary scope for inquiries and the principle of proportionality, and violated Article 5 of the Personal Information Protection Act, which provides that the disclosing party’s right and interest shall be respected in the collection, processing or use of the personal information, that the same must be handled in accordance with the principle of good faith, and that the personal information collected must be rightfully and reasonable related to the purpose of such collection. (Genson Hung)

Securities and Futures Burea of the FSC will soon allow insurance brokerage firms, insurance agencies and the banks concurrently engaging in operating insurance agency or insurance brokerage business to apply for online sales of insurance products 

The qualified applicants shall meet the following conditions:

1. Must have already established and implemented internal control, audit system and business solicitation system and procedure pursuant to the applicable laws and regulations;

2. Must not have been subject to major sanction or cumulative fines of more than NT$ 1 million by the competent authority during the most recent one year period, or the cited violation has been specifically rectified and such rectification has beem confirmed by the competent authorities;

3. Must have engaged a CPA to sudit annual financial reported; and

4. Must have obtained certification of international standard of Information Security Management System (ISMS) (ISO 27001) and established a network flow cleaning system of distributed denial-of-service attack (DDoS). (Yen-ling Liu)

Comment on the Case of the Fair Trade Commission (“FTC”)

Fining Qualcomm Incorporated (“Qualcomm”)

After two years and eight months of ex officio investigation, the FTC made a resolution on October 11, 2017, finding that Qualcomm had a monopolistic position in the CDMA, WCDMA and LTE mobile communications standard baseband chip market, and used the following unfair competition conducts to prevent competition and stabilized its commercial transaction model: (1) refusing to license its Standard Essential Patents (“SEPs”) to other chipmakers and further requesting them to sign an agreement with unfair provisions, (2) adopting a “no license, no chips” policy for cell phone manufacturers, and (3) signing an exclusive rebate with specific businesses. The aforesaid conducts jeopardized the fair competition order of the baseband chip market and violated Subparagraph 1 of Article 9 of the Fair Trade Act. Accordingly, the FTC imposed a fine of NT$23.4 billion on Qualcomm. 

In order to eliminate unfair competition in the market and promote decent competition in the domestic mobile communications industry, the FTC also demanded Qualcomm to: (1) cease applicability of the anti-competion provisions in the already signed contracts with competitors in chipmakers, cell phone manufacturers, and relevant businesses, (2) notify rival chipmakers and cell phone manufacturers within a time period that they could negotiate relevant patent license agreements in accordance with the principles of good faith and reciprocity, and (3) report to the FTC the status of aforementioned negotiations.

Qualcomm's long-running global patent licensing model is not only in violation of Taiwan’s Fair Trade Act as determined by the FTC, but also in violation of China Anti-Monopoly Law as determined by China’s National Development and Reform Commission (“NDRC”) in February of 2015. The NDRC found that the following conducts of Qualcomm constituted abuse of its monopolistic position in the CDMA, WCDMA and LTE mobile communications SEPs market and the baseband chip market: collecting unfairly high licensing fees, tying non-SEPs in wireless communications without justification, and forcing manufacturers to accept its “no license, no chips” policy. Accordingly, the NDRC imposed a fine of RMB$6.088 billion (about NT$30.5 billion) on Qualcomm. Furthermore, in December of 2016, the Korea Fair Trade Commission (“KFTC”) also found that Qualcomm violated its Fair, Reasonable and Non-discriminatory ("FRAND") obligations by refusing to license SEPs to its rival chipmakers, forcing cell phone manufacturers to sign unfair license agreements as a condition of supplying chips, only providing whole-package patent licensing, forcing cell phone manufacturers to accept unilaterally authorized license agreements, and demanding for free cross-license. The aforesaid conducts of Qualcomm was determined to have abused its market position and constituted unfair competition conducts, and violated Korea Monopoly Regulation and Fair Trade Act. The KFTC imposed a fine of US$850 million (about NT$27.8 billion) on Qualcomm. In addition to the fine, the KFTC also demanded Qualcomm to negotiate in good faith with rival chipmakers and cell phone manufacturers to enter into FRAND license agreements, and to regularly report to the KFTC the status of negotiations.

In view of the above, Qualcomm's global patent licensing model in the field of mobile communications has been found to be illegal after being investigated by multinational competition law authorities. We can see that the goal of the FTC’s decision is to demand Qualcomm to renegotiate relevant patent license agreements with rival chipmakers and cell phone manufacturers to fundamentally stop Qualcomm’s unfair competition conducts through amendment to the license agreements, so as to promote fair competition in relevant industries. Therefore, the FTC’s decision indeed has a significant impact on domestic relevant industries such as cell phone chip suppliers, cell phone brands and cell phone manufacturers. This case is the first decision made by the FTC regarding SEPs license. The decision conforms to the law enforcement trend of international competition authorities, and provides relief for other domestic manufacturers suffering a similar unfair treatment.