VZCZCXRO3200
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #0876/01 2030737
ZNR UUUUU ZZH
P 220737Z JUL 09
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 1973
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 02 TAIPEI 000876 
 
SENSITIVE 
 
STATE FOR EAP/RSP/TC, EAP/EP 
STATE PLEASE PASS USTR 
USTR FOR RAGLAND AND ALTBACH 
USDOC FOR 4430/ITA/MAC/AP/OPB/TAIWAN 
USDOC ALSO FOR ITA/MAC/OIPR 
USDOC FOR USPTO GIN, BROWNING, AND SNYDOR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR TW
SUBJECT: Taiwan IPR: Taiwan to Target Indirect Patent Infringement 
 
Reftel: Taipei 580 
 
Summary 
------- 
 
¶1. (SBU) The Taiwan Intellectual Property Office (TIPO) recently 
announced preliminary plans to amend the Patent Law to protect 
against indirect patent infringement. The changes would allow 
patent-holders to bring suit against upstream and middle-stream 
component suppliers who abet downstream production of counterfeit 
goods if those goods are sold in Taiwan.  Taiwan's powerful IT 
industry is wary of costs and legal hassles the proposed changes 
could create, and TIPO says the proposal is far from final. End 
summary. 
 
¶2. (U) On July 19, Wang Mei-hua, Director General of the Taiwan 
Intellectual Property Office (TIPO), announced that TIPO intends to 
amend Article 100 of the Patent Law to allow prosecution of 
companies and individuals for indirect patent infringement.  The 
proposed amendment would allow a patent holder to bring suit against 
a Taiwan component or parts company that knowingly supplied 
legitimate components used to manufacture infringing goods sold in 
Taiwan. 
 
¶3. (SBU) On June 20, TIPO Patent Office Specialist Wu Shin-lin told 
us TIPO is following the example of countries such as Japan, 
Germany, U.K., and the U.S., each of which has laws targeting 
indirect patent infringement. Wu said TIPO will draft the revised 
law to protect companies that hold the patent on a component 
eventually used in a downstream counterfeit product sold in Taiwan, 
as well as companies whose products are used without the Taiwan 
company's knowledge and permission.  Wu emphasized TIPO will seek 
broad input from the public and industry before finalizing the 
proposed amendments.  He said MOEA plans to submit the final Patent 
Law amendment draft to the Executive Yuan in September or October. 
 
TIPO DG: Media Overstates Proposal's Effect 
------------------------------------------- 
 
¶4. (SBU) On July 21, Director General Wang told AIT that, contrary 
to media reports, an amendment would not offer patent-holders a 
significant increase in protection, since plaintiffs would have to 
show direct patent infringement took place in Taiwan before being 
able to win an indirect infringement case. Although media reports 
implied TIPO's aim is to punish Taiwan companies supplying 
components for PRC-made counterfeit electronics, often called 
"shanzhaiji," Wang told us because Taiwan does not allow the sale of 
such PRC-made knock-offs, proving direct patent infringement took 
place in Taiwan will be difficult in most cases. [Note: shanzhaiji 
("mountaintop fortress machines") are PRC-made IT goods such as cell 
phones and laptops that copy the appearance of popular brands, but 
sell for far less because some or all of their components are 
unlicensed or pirated. Because Taiwan is the world's biggest 
producer of 15 IT products, including 99 percent of the world's 
motherboards and 76 percent of LCD monitors and screens (reftel), 
Taiwan companies operating in Taiwan or the PRC produce a 
disproportionate amount of the components that go into shanzhaiji. 
End note.] 
 
Producers: Law Would be Burdensome, Costly 
------------------------------------------ 
 
¶5. (SBU) Despite Wang's assurances, Taiwan's IT component producers 
fear the proposed law could burden companies with unnecessary costs 
and legal hassles.  On July 21, Su wen-tang, Taiwan Semiconductor 
Manufacturing Company (TSMC) Advanced Technology Department 
Director, told us the proposed amendment would not likely ensnare 
many Taiwan companies, because it will be difficult in most cases to 
prove that direct infringement took place in Taiwan, and that a 
company knew its components would be used in an infringing product. 
However, Su worries the law would force Taiwan companies to devote 
extra time and resources to investigating downstream distributors 
and producers, as well as to defending themselves against spurious 
lawsuits. 
 
¶6. (SBU) W. F. Hsu, Legal Affairs Director for MediaTek 
Incorporated, echoed Su's concerns.  Hsu thinks Taiwan ought to 
eventually adopt the concept of indirect patent infringement in 
order to harmonize the island's legal code with those of its 
advanced trading partners.  However, Hsu opposes doing so now 
because Taiwan's still-evolving legal infrastructure for 
intellectual property rights is simply "not good enough" to handle 
fairly and efficiently complex indirect infringement cases. 
 
TAIPEI 00000876  002 OF 002 
 
 
 
Comment 
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¶7. (SBU) The proposed amendments could help U.S. companies such as 
Apple by choking off or increasing the cost of Taiwan-made parts for 
products such as counterfeit iPhones.  The changes would also give 
foreign companies another legal weapon to enforce their IPR in 
Taiwan.  However, given the proposed law's limited scope and 
industry's wariness about the proposal, the final law will likely 
not be as comprehensive as initial media reports suggest. End 
comment. 
 
WANG