Newsletter
Legislative Yuan Passes Third Reading of Border Measures for Patent Protection
The draft amendment of the Patent Act underwent a third reading and was passed by the Legislative Yuan on January 3, 2014. This latest draft amendment adds four new articles, including Paragraphs 1 through 4 of Article 97, which address "patent border protective measures". The Legislative Yuan also passed an ancillary resolution requiring the Executive Yuan to complete relevant implementation regulations within 2 months of the third reading and passing of the draft amendment so as to officially put the revised Patent Act into effect. The latest draft amendment incorporates patent border protective measures into the existing Patent Act. In the future, if a patentee suspects that imported items are infringing his/her patent right, he/she may, as with the Trademark Act and Copyright Act currently in effect in Taiwan, provide security bond to the Customs Administration for seizure of such items for the protection of his/her patent. The draft amendment also effectuates relevant provisions with respect to border measures for intellectual property rights under the "Agreement on Trade-Related Aspects of Intellectual Property Rights" (TRIPS).
The draft amendment covers three major issues, namely, the procedures for implementing a seizure, how a seizure is lifted, and compensation for damages:
l Procedure for Implementing a Seizure
(1) A patentee must submit an application in writing to the Customs Administration in order for a seizure to be carried out. The applicant shall present the facts related to the infringement as well as provide a security bond to the Customs Administration that is equivalent to the price of the imported items after payment of tariffs or comparable value. This procedure is necessary to ensure that the applicant and the party whose goods are to be seized ("the importer") are on an equal standing in terms of their rights. While the procedure grants the patentee a right to apply for seizure, it also gives protection to the importer against potential business losses as a result of such seizure.
(2) After an application for the seizure of goods is accepted, the Customs Administration shall notify the applicant. In the event that the application conforms to regulations and a seizure is exercised, the Customs Administration shall subsequently notify in writing both the applicant and the importer.
(3) Both parties may inspect seized items provided that the confidentiality of trade secrets and other sensitive information relating to the seized items remains protected at all times. This allowance for inspection is necessary to facilitate understanding of the status of the seized items by both the applicant and importer so that each party may claim its rights with respect to the seized items.
With respect to demurrage owed for storage of seized items, warehousing charges, and loading and unloading charges, if the applicant obtains a court judgment which affirms infringement of his/her patent, the importer shall be required to bear all such expenses and charges. Conversely, if the seizure is lifted for reasons attributable to the applicant, the applicant shall bear all such expenses and charges.
l Procedure for Lifting a Seizure
The Customs Administration may lift a seizure of goods as a result of any of the situations specified below: (1) The applicant has not instituted legal proceedings within twelve (12) days from the date the Customs Administration issues its notification of accepting an application for seizure (Note: the Customs Administration may, at its own discretion, extend this period to a maximum of 24 days); (2) The court has ruled against the applicant with respect to the seized items; (3) The applicant voluntarily applies for the seizure to be lifted; or (4) The importer furnishes counter-security bond.
The aforementioned counter-security bond shall mean an amount equal to twice that of the security bond furnished by the applicant or comparable security. This provision is established to secure the patentee's rights and interests with respect to claiming damages from the patent infringement, as the damage award may significantly exceed the value of seized items in the event that judgment is given against the importer. It would be unfair to the patentee if the items were released from seizure and the importer did not provide comparable security.
l Compensatory Damages
If the court determines that the seized items do not infringe a patent, the applicant shall compensate the importer with respect to damages suffered as a result of seizure or provision of counter-security bond.
Before the draft amendment, the Customs Administration exercised patent border measures in accordance with its Operational Directions for Customs Authorities in Implementing Measures for Protecting the Rights and Interests of Patents, Trademarks, and Copyrights ("the Directions"). However, under these Directions, the patentee was required to first obtain the Court's preliminary injunction order as well as provide the Customs Administration with many specific details — such as the time and location of the import/export of the goods concerned, relevant vessel name and voyage number, and even the import/export customs' declaration number — before the Customs Administration could take action. This sort of information is almost impossible to access through regular public channels. Thus, while the Customs Administration previously had patent border measures on the books, the measures had little effect. The aforementioned amendment of the Patent Act, however, gives the patentee the right to directly apply to the Customs Administration for seizure of suspected infringing goods, a practice consistent with that of countries such as the U.S., Japan, China, and Korea. However, doubts remain as to how the Customs Administration will be able to judge goods to be infringing goods if the applicant is unable to furnish specific import information, as well as how the Administration will be able to handle technology-related disputes. The new system must undergo a subsequent period of observation and evaluation before its actual effectiveness can be fully determined.