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RUEHBJ/AMEMBASSY BEIJING 6499
RUEHHK/AMCONSUL HONG KONG 7741
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RUEHGH/AMCONSUL SHANGHAI 0899

UNCLAS SECTION 01 OF 03 TAIPEI 000638 
 
SIPDIS 
 
STATE PASS TO AIT/W 
STATE ALSO FOR EAP/RSP/TC and EB/TPP/MTA/IPC 
STATE PASS to USTR for BOLLYKY and ALTBACH 
USDOC for 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON 
USDOC for USPTO Gin and Browning and Snydor 
 
SIPDIS 
 
C O R R E C T E D  C O P Y (VARIOUS MINOR TEXT CHANGES) 
 
E.O. 12958: N/A 
TAGS: ECON KIPR ETRD TW
SUBJECT: TAIWAN IPR DIALOGUE:  US Raises Concerns about Compulsory 
Licensing 
 
 
TAIPEI 00000638  001.2 OF 003 
 
 
Summary 
------- 
¶1.  In a March 6 digital video conference U.S. officials raised 
concerns about proposed amendments to Taiwan's patent law which 
would expand the scope of compulsory licensing.  USTR likewise 
raised the "potentially disturbing precedent" of the ongoing Phillips 
compulsory license case, which is now under investigation by the EU. 
Taiwan agreed to review U.S. concerns.  End Summary. 
 
Introduction 
------------ 
¶2.  On March 6, officials from the Taiwan Intellectual Property 
Office (TIPO), the Department of Health, and the Ministry of 
Economic Affairs, met via digital video conference (DVC) with 
officers from USTR, AIT/W, State, Commerce, and USPTO to discuss two 
proposed amendments to Article 76 of Taiwan's Patent Law and get an 
update on recent IPR developments in Taiwan.  The U.S. team was 
headed by Tom Bollyky, Director, Intellectual Property and 
Innovation, USTR.  In Taiwan, the discussion was led by Ms. Wang 
Mei-hua, Deputy Director General of TIPO.  This DVC is part of the 
ongoing bilateral IPR dialogue. 
 
Amcit Legislator Wants More Compulsory Licensing 
--------------------------------------------- --- 
¶3.  The first item for discussion was a proposed amendment to 
Article 76 of the Patent Act.  The amendment was put forward by Chen 
Min-jen, a member of the Legislative Yuan from the ruling Democratic 
Progressive Party.  He is an American citizen who serves as an 
overseas representative.  The proposed amendment makes the following 
significant changes to the current law: 
 
--a compulsory license can be issued if it is found that a 
patent-holder has committed unfair competition "to misuse patent 
rights" (added language in quotes) 
 
--a compulsory license can be issued after a legal judgment in the 
first instance, with no need to wait for an appeal. 
 
¶4.  During the discussion, USTR asked why the phrase "to misuse 
patent rights" appeared in the amendment language.  This appears to 
go beyond the existing "unfair competition" language in TRIPS.  Is 
this new language intending to broaden the conditions for issuing a 
compulsory license beyond TRIPS, Bollyky asked?  TIPO replied that 
this language was inserted at the request of the legislator 
proposing the amendment.  They agreed to ask for clarification and 
to pass along U.S. concerns. 
 
¶5.  USTR also expressed concern that the new language allows Taiwan 
authorities to issue a compulsory license after a court of first 
instance reached a determination, without the possibility of 
obtaining a stay of that decision.  USTR made clear that this change 
could be problematic.  Taken together with the addition of unclear 
language that could broaden the conditions for issuance of a compulsory 
license, this was "a fairly significant degradation of protections for 
rights-holders in Taiwan," Bollyky stated. 
 
¶6.  Ms. Wang responded that she would pass along U.S. concerns and 
that TIPO would point out to the legislator that the broader 
language may not be TRIPS-compliant. 
 
¶7.  USTR also sought to determine how Taiwan addressed the TRIPS 
Article 31(b) requirement to notify rights holders if a compulsory 
license was issued.  TIPO pointed out that paragraph 3 of Article 76 
stipulated that the patentee must be notified in all instances.  In 
addition, judicial or independent review, as required by TRIPS 31(i) 
is covered by Article 1 of the Administrative Review Act, TIPO 
noted. 
 
Phillips Case Cause for Concern 
------------------------------- 
¶8.  Bollyky noted that U.S. concerns about this legislation were 
raised in context of the ongoing Phillips compulsory license case 
where a local Taiwan company was issued a compulsory license to 
produce recordable compact disks (CD-R).  He asked TIPO for an 
update on the case.  In Taiwan, Phillips is pursuing appeals in 
 
TAIPEI 00000638  002.2 OF 003 
 
 
court and with TIPO.  The European Union has also initiated an 
investigation of the case. 
 
¶9.  Ms. Wang responded that in Taiwan the case is currently moving 
ahead on two tracks: 
 
--Phillips has filed an appeal to the court decision on April 18, 
¶2006.  The case is still pending. 
 
--Phillips has requested that TIPO invalidate the compulsory license 
because Phillips alleges that the licensee is exporting much of its 
production in clear violation of the terms of the license.  Ms. Wang 
stated that a commission of experts has been selected to review the 
case, and they have already met.  Commissioners sought additional 
evidence from both sides which much be submitted by March 20.  The 
next meeting will be held in April.  The commission will recommend a 
course of action, and TIPO will make the final decision whether or 
not to invalidate the license. 
 
¶10.  Bollyky pointed out that the USG was concerned that the 
Phillips case was "a potentially disturbing precedent" and asked 
TIPO to share their decision on the case with the USG.  TIPO 
promised to do so. 
 
Compulsory Licensing of Drugs for Export 
---------------------------------------- 
¶11.  Separate from the amendment discussed above, TIPO has proposed 
another amendment to the Patent Act in line with the implementation 
of paragraph 6 of the TRIPS Agreement and Public Health.  This 
provision allows compulsory licenses to be issued for drugs to be 
exported to countries lacking sufficient manufacturing capacity to 
produce their own medicines in response to a public health 
emergency. 
 
¶12.  USTR asked a number of questions regarding this legislation, 
carefully  noting that the USG does not discourage Taiwan's use of 
its Doha flexibilities. 
 
¶13.  Bollyky noted that the amendment as written does not require 
prior negotiation with the rights-holder if a compulsory license has 
already been issued in the importing country.  TIPO responded that 
their language was based on wording in Canadian and EU law, but 
would take another look.  Bollyky offered to forward a copy of the 
Canadian legislation to TIPO via AIT as a potential model for handling 
this issue. 
 
¶14.  The TRIPS General Council decision implementing paragraph 6 
requires the importing country, if a WTO member, to make certain 
formal notifications to the TRIPS Council and certifications to the 
exporting country (in this case Taiwan). The draft amendment 
incorporates these requirements for WTO members.  In the 
current draft of the amendment, however, not all notifications and 
certifications are necessary for non-WTO members. Bollyky asked Taiwan 
if there was a reason why the amendment does not require non-WTO member 
to make the equivalent notifications and certifications as WTO members 
in Taiwan.  Again Taiwan agreed to look into the issue. 
 
¶15.  USTR also suggested TIPO make explicit provisions for judicial 
review, which TRIPS calls for.  TIPO pushed back, arguing that such 
an independent review is spelled out under the Administrative Act, 
so there is no need to incorporate it into the current Patent Law 
amendment. 
 
¶16.  On remuneration, the draft amendment makes specific reference 
to the United Nations Human Development Index for the importing 
country as one of the factors used in determining appropriate 
compensation.  USTR noted that this goes beyond what TRIPS 
contemplates and asked TIPO for its views on the significance of the 
departure. TIPO stated that the index was for reference only and was 
also incorporated into the Canadian law. 
 
¶17.  Although the current amendment requires a holder of an 
authorization of a compulsory license to disclose certain 
information "online," USTR suggested that the amendment specify on what 
websites the information would need to be posted. 
TIPO noted that although TRIPS provided various options, TIPO 
intended that the information be posted on the company's website. 
They offered to look into the matter. 
 
¶18.  Concluding the discussion on this amendment, Bollyky inquired 
about the amendment specifically waiving data exclusivity 
requirements for these compulsory licensing cases.  Again, TIPO 
stated that they had based their language on Canadian law. 
 
TAIPEI 00000638  003.2 OF 003 
 
 
 
Timing the for IPR Legislation 
------------------------------ 
¶19.  Wang stated that TIPO anticipated a hearing in the Legislative 
Yuan in late March for the amendment of Article 76.  If a number of 
divergent views are presented, additional hearings might be called. 
She was unsure what might be eventually modified or when it might 
come up for a vote.  For the "paragraph 6" amendment, TIPO would 
continue its internal review.  Timing for bringing the bill forward 
is still unclear, but she promised to keep AIT and the USG 
apprised of any developments on both amendments. 
 
¶20.  Regarding other IPR-related legislation, TIPO noted that 
legislation regulating peer-to-peer (P2P) file sharing should pass 
this session without controversy.  Interparty negotiations on the 
bill had been settled on December 22, but the legislation stalled 
with other bills in the pre-recess gridlock.  ISP liability 
legislation is still in draft.  A new draft with more detailed 
provisions has been written.  TIPO is hosting a seminar on March 27 
featuring U.S. experts on copyright law and ISP issues in order to 
build consensus and move the issue forward.  TIPO promised to pass a 
copy of the draft to USTR and to keep us posted on developments. 
 
Parallel Imports and Help with Education Ministry 
--------------------------------------------- ---- 
¶21.  At the close of the meeting, TIPO Secretary General Margaret 
Chen raised two additional issues.  She requested that the U.S. help 
TIPO in their dealings with the Ministry of Education (MOE).  "TIPO 
has worked as hard as you," she stated, referring to her efforts to 
engage the MOE.  She asked for USG assistance to help the MOE 
computer center build capacity to deal with IPR issues.  She 
specifically suggested that the USPTO or USTR work with TIPO to 
organize a seminar and invite a U.S. speaker. 
 
¶22.  As she has at prior meetings, Chen also raised the issue of 
relaxation of parallel imports and decriminalization of rental 
rights for optical media.  She stated that Blockbuster Taiwan (Note: 
which was acquired last year by a local Taiwan company) has 
submitted a new proposal to deal with what she characterized as a 
monopoly on the local distribution of Hollywood features.  Bollyky 
reiterated the negative response from U.S. industry, noting their 
concerns of an increase of counterfeit disks, pre-release 
theatricals, cheap disks from China, and an overall erosion of 
protections for rights-holders should restrictions on parallel 
imports be relaxed.  Bollyky did agree, however, to read TIPO's 
communication on the matter. 
 
Comment: 
-------- 
¶23.  The meeting was constructive, friendly, and TIPO clearly 
understood the U.S.'s specific concerns about the proposed 
legislation.  Although they did not make any commitments to alter 
the legislation, TIPO promised to take our concerns to the drafter 
of the first proposal, to carefully consider our concerns about the 
second, and to keep us posted on the progress.  Post expects TIPO 
will take on board USG concerns regarding the bill they are drafting 
regarding Doha paragraph 6.  The bill from the legislator, however, 
is a different matter.  While we hope that he will revise his 
legislation, he has no obligation to follow TIPO's suggestions.  AIT 
will continue to monitor the issue closely. 
 
YOUNG