Abstract
In recent years, the importance of security transactions over IP rights has been recognized in Taiwan, and the government has initiated to draft the Floating Charge Act. Currently the provisions and principles set forth in the Civil Code, Compulsory Enforcement Act, IP laws are applied while establishing a pledge of IP rights, since the draft of the Floating Charge Act has not passed by the parliament. In practice, creditors are generally not very interested in securing debts with IP rights, because IP rights do not represent a sufficiently liquid form of security and that valuating the secured object is a challenge.
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Notes
- 1.
- 2.
Integrated circuit layouts are protected through the Integrated Circuit Layout Protection Act introduced in 2002. The proprietor of a circuit layout right enjoys 10 years’ protection commencing from the earlier of the following: (1) the filing date of the circuit layout registration application; or (2) the date of the first commercial exploitation (Integrated Circuit Layout Protection Act, s 19).
- 3.
Plant varieties are protected by the Plant Variety and Plant Seed Act, introduced in 1988. The competent authority is the Council of Agriculture under the Executive Yuan. The term of a plant variety right for a tree or a perennial vine plant is 25 years from the date of approval. The term of a plant variety right for all other plant species is 20 years from the date of approval (Plant Variety and Plant Seed Act, s 23).
- 4.
Taiwan’s Trade Secrets Act came into effect in 1996. In 2013, Trade Secrets Act introduced the provisions for criminal sanctions against economic espionage.
- 5.
- 6.
The requirements for patent applications under Taiwan’s Patent Act are no different from those of other countries, including in the areas of eligibility of invention (Patent Act, s 21) and subject matter excluded from patent protection (Patent Act, s 24). Also, patentable inventions should meet the requirements of industrial application, novelty (Patent Act, s 22(1)), and inventive step (Patent Act, s 22(2)). Furthermore, the description of the invention should disclose sufficient information about the invention to enable persons with ordinary skill in the art to make the invention (Patent Act, s 26(2)). The patentee enjoys the exclusive right to prevent others from exploiting the invention without the patentee’s consent, including through the acts of making, offering for sale, selling, using, or importing the subject matter of the patent (Patent Act, s 58(1), (2), (3)).
- 7.
Sections 21 to 103 of the Patent Act contain provisions governing the protection and utilization of invention patents. Provisions for utility model patents are found in ss 104 to 120, and those for design patents are in ss 121 to 142.
- 8.
The provisions on invention patents are the most important part of the Patent Act, and many of these provisions apply mutatis mutandis to utility model patents and design patents (Patent Act, ss 120 and 142). From July 2004 onwards, utility model patents have been subject only to a formality examination (Patent Act, s 111(1)). In contrast, the patentability conditions and requirements for the protection of invention patents and design patents come under close scrutiny by the TIPO through substantive examinations.
- 9.
For example, the Copyright Act has been substantially revised since 1992 under the threat from Section 301 of the U.S. Trade Act.
- 10.
Shieh (2016), pp. 96–97.
- 11.
Copyright Act, s 18 states: “The protection of moral rights of an author who has died or been extinguished shall be deemed to be the same as when the author was living or in existence and shall not be infringed upon by any person; provided, the act shall not constitute an infringement where it can be considered that the author’s intent has not been contravened given the nature and degree of the act of exploitation, social changes, or other circumstances.”
- 12.
Any sign which may consist of words, devices, symbols, colours, three-dimensional shapes, motions, holograms, sounds, or any combination thereof can form a trademark (Trademark Act, s 18(1)). The distinctiveness requirement (Trademark Act, s 6(2)) and the absolute and relative grounds for refusal of registration set forth in section 30(1) of Taiwan’s Trademark Act are no different from those of other countries. The issues of whether the application for trademark protection fulfills the distinctiveness requirement and whether absolute or relative grounds for refusal of registration exist are substantively examined by the TIPO.
- 13.
Trademark Act, s 94 states: “Unless otherwise prescribed in this Chapter, the provisions of this Act in relation to a trademark shall apply mutatis mutandis to a certification mark, collective mark or collective trademark.”
- 14.
Patent Act, s 62(1) states: “The assigning, entrusting, licensing, or establishing of a pledge on a patent right by the patentee shall have no locus standi against any third party unless it is registered with the competent authority.”
- 15.
According to section 120 of the Patent Act, section 62(1) concerning the creation of a pledge on an invention patent right applies mutatis mutandis to the utility model patent.
- 16.
According to section 142 of the Patent Act, section 62(1) concerning the creation of a pledge on an invention patent right applies mutatis mutandis to the design patent.
- 17.
Copyright Act, s 39 states: “Where economic rights are the subject of a pledge, unless otherwise stipulated at the time the pledge is created, the economic rights holder may exercise the economic rights to the work.”
- 18.
Trademark Act, s 44(1) states: “A creation, change, or extinguishment of a pledge made by the proprietor of a registered trademark shall have no locus standi against any third party unless it is registered with the competent authority.”
- 19.
Integrated Circuit Layout Protection Act, s 22(1) states: “For any of the following events related to circuit layout rights, parties concerned shall jointly sign and apply for registration, accompanied by contracts or other documentary evidence, with the competent authority of circuit layout affairs; otherwise, these parties shall have no locus standi against third parties who have no notice of the following: (1) assignment; (2) license; or (3) creation, transfer, alteration or extinguishment of a pledge.”
- 20.
Plant Variety and Plant Seed Act, s 27(2) states: “The license of a plant variety right to others or the creation of a pledge on a plant variety right shall not be binding as against a bona fide third party, unless it is registered with the competent authority.”
- 21.
Civil Code, s 900 states: “A pledge of rights is a pledge and the subject of which is a transferable claim or other transferable right.”
Section 901 states: “Unless otherwise provided in this section, the provisions concerning pledges of personal property shall apply mutatis mutandis to pledges of rights.”
Section 902 states: “The creation of a pledge right shall be made in accordance with the provisions concerning the transfer of such rights, as well as with the provisions of this section.”
Section 903 states: “A pledger may not, by means of a juristic act, cause a right that is the subject of a pledge to be extinguished or modified without the consent of the pledgee.”
Section 904 states: “If the subject of a pledge is a claim, the pledge shall be created in writing (para 1). If there is any document evidencing a claim referred to in the preceding paragraph, the pledgor is obligated to deliver it (para 2).”
Section 905 states: “If a claim that is the subject of a pledge is a pecuniary claim with a maturity earlier than the maturity of the claim it secures, the pledgee may demand that the debtor lodge the payment for the pecuniary claim, and may exercise its pledge against the thing lodged (para 1). If a claim that is the subject of a pledge is a pecuniary claim with a maturity later than the maturity of the claim it secures, then at the maturity of the claim secured by the pledge, the pledgee may demand payment of the amount of the claim secured by the pledge (para 2).”
Section 906 states: “If a claim that is the subject of a pledge is a claim for payment by delivery of personal property other than money, then at the maturity of that claim, the pledgee may demand that the debtor delivers the personal property, and the pledgee will hold a pledge over the thing delivered.”
Section 906bis states: “If a claim that is the subject of a pledge is a claim for payment by the creation or transfer of rights in rem in real property, then at the maturity of that claim, the pledgee may demand that the debtor creates or transfers such rights in rem in the real property in favor of the pledgor, and the pledgee will hold a mortgage on the rights in rem in the real property (para 1). At the time of the creation or transfer of the rights in rem in the property in favor of the pledgor, the mortgage referred to in the preceding paragraph shall be registered together therewith (para 2).”
Section 906ter states: “When a pledgee has not received payment upon maturity of the claim secured by a pledge, in addition to taking measures under the preceding three articles, the pledgee may enforce its pledge in accordance with the provisions of section 893(1), or section 895.”
Section 906quarter states: “When a claim that is the subject of a pledge may be caused to reach maturity by the exercise of a certain right, the pledgee may exercise that right when the pledgee has not received satisfaction upon maturity of the claim secured by the pledge.”
Section 906quinquies states: “When a debtor makes a lodgment or a payment in accordance with section 905(1), section 906, or section 906bis, the pledgee shall notify the pledgor but need not obtain the consent of the pledgor.”
Section 907 states: “If the subject of a pledge is a claim, and its debtor has been notified of the creation of the pledge, that debtor, when making any payment either to the pledgor or the pledgee, shall first obtain the consent of the other of those parties. In the absence of such consent the debtor shall lodge the thing given as payment.”
Section 907bis states: “If the subject of a pledge is a claim, and its debtor, after having been notified of the creation of the pledge, obtains any claim against the pledgor, that debtor may not assert offset of that claim against the claim that is the subject of the pledge.”
Section 908 states: “If the subject of a pledge is securities for which no rights holder is named, the creation of the pledge becomes effective by the delivery of the securities to the pledgee. If the subject is any other type of securities, endorsement is also required to be made (para 1). The endorsement referred to in the preceding paragraph may include a notation as to the purpose for which the pledge is created (para 2).”
Section 909 states: “If the subject of a pledge is securities for which no rights holder is named, a negotiable instrument, or any other securities transferred by endorsement, the pledgee may collect payments receivable on such securities even if the claim secured thereby has not matured. If to do so it is necessary to cause the securities to reach maturity, the pledgee shall also have the right to bring about the maturity by giving notice or by other means. And the debtor may make payments only to the pledgee (para 1). The provisions of section 905, paragraph 1, or section 906 apply to payments collected pursuant to the preceding paragraph (para 2). The provisions of section 906ter and section 906quarter apply mutatis mutandis to pledges the subject of which is securities (para 3).”
Section 910 states: “If the subject of a pledge is securities, the effect of the pledge further extends to attached interest coupons, fixed-payment securities, or any other attached securities, provided they have been delivered to the pledgee (para 1). Unless otherwise stipulated, if attached securities are issued after the creation of the pledge, the pledgee may demand their delivery from the issuer or the pledgor (para 2).”
- 22.
Copyright Act, s 79(4) states: “Assignment or placement in trust of plate rights shall not be effective against third parties unless it has been registered.”
- 23.
Patent Act, s 6(2) states: “The right to apply for a patent shall not be taken as the subject of a pledge.”
- 24.
Plant Variety and Plant Seed Act, s 7(1) states: “The right to apply for a plant variety right shall not be taken as the subject of a pledge.”
- 25.
Patent Act, s 6(1) states: “The right to apply for a patent or the patent right is both assignable and inheritable.”
- 26.
Tract Secrets Act, s 6(1) states: “Trade secret may be assigned in whole or in part, or jointly owned.”
- 27.
Tract Secrets Act, s 8 states: “Trade secret shall not be used as the subject matter of a pledge or compulsory enforcement.”
- 28.
Trademark Act, s 92 states: “The right of a certification mark, collective mark or collective trademark shall not be transferred, licensed, or be the subject of a pledge, unless such transfer or license is unlikely to damage the interests of consumers or contravene fair competition and has been accepted by the competent authority.”
- 29.
Protection Act for the Traditional Intellectual Creations of Indigenous Peoples, s 11 states: “The exclusive right to use intellectual creations shall not be assigned or be the subject matter of a pledge or compulsory enforcement.”
- 30.
Civil Code, s 153 states: “When the parties have reciprocally declared their concordant intent, either expressly or impliedly, a contract shall be constituted (para 1). If the parties agree on all the essential elements of the contract but have expressed no intent as to the non-essential elements, the contract shall be presumed to be constituted. In the absence of an agreement on the above-mentioned non-essential elements, the court shall decide them according to the nature of the affair (para 2).”
- 31.
Patent Act, s 64 states: “Where a patent right is jointly owned, except for exploitation by each of the joint owners, it shall not be assigned, entrusted, licensed, pledged, or abandoned without the consent of all the joint owner(s).”
- 32.
Patent Act, s 65(1) states: “Where a patent right is jointly owned, no joint owner may assign, entrust or establish a pledge on his/her own share without the consent of all the other joint owner(s).”
- 33.
Copyright Act, s 40bis(1) states: “Joint economic rights in a work shall not be exercised except with the consent of all the joint economic rights holders; no economic rights holder shall transfer its share to another person or establish a pledge of its share in favor of a third party without the consent of all other joint economic rights holders. A joint economic rights holder shall not refuse consent without a legitimate reason.”
- 34.
Trademark Act, s 46(1) states: “Any license, sub-license, transfer, abandonment of, or creation of pledge on the right in a jointly owned trademark or any transfer of or creation of pledge on the share in a jointly owned trademark shall have the consent of all joint proprietors, unless such right or share is transferred by succession, compulsory enforcement, a judgment of the court or operation of other law.”
- 35.
Integrated Circular Layout Protection Act, s 21(1), (2) states: “For circuit layout rights jointly owned by two or more parties, any assignment, grant of license or creation of pledge of the circuit layout rights shall have the unanimous consent of all joint owners (para 1). Without the consent of all joint owners of circuit layout rights, no single joint owner shall assign, license or create a pledge in the joint owner’s share of the ownership; no joint owner shall refuse consent without proper reasons (para 2).”
- 36.
Plant Variety and Plant Seed Act, s 28 states: “Without the consent of the holders of two-thirds or more of the interested shares in a plant variety right, no joint owner shall assign his or her own share, license others to exercise such share, or create a pledge on such share; provided, however, that if the parties have agreed otherwise, the terms of such agreement shall govern.”
- 37.
Patent Act, s 138(1) states: “A derivative design patent right shall be assigned, entrusted, inherited, licensed or pledged along with its original design patent.”
- 38.
See the explanation under Sect. 5.
- 39.
Patent Act, s 62(1) states: “The assigning, entrusting, licensing, or establishing of a pledge on a patent right by the patentee shall have no locus standi against any third party unless it is recorded with the Specific Patent Agency.”
- 40.
Trademark Act, s 44(1) states: “A creation, change, or extinguishment of a pledge made by the proprietor of a registered trademark shall have no locus standi against any third party unless it is entered in the Register by the Registrar Office.”
- 41.
Patent Act, s 62(4) states: “Where a patentee establishes multiple pledges on the same patent for the purpose of securing multiple creditors’ rights, the ranks of these pledges shall be determined according to the order of their registration.”
- 42.
Trademark Act, 44 (2) states: “Where a proprietor creates multiple pledges on his/her trademark right for the purpose of securing multiple creditors’ rights, the ranks of these pledges shall be decided by the order of the entry in the Register.”
- 43.
Even though there is no similar provision in the Integrated Circular Layout Protection Act or the Plant Variety and Plant Seed Act, the same principle should be applied mutatis mutandis.
- 44.
At the time of writing, USD 1 is almost equal to TWD 30.
- 45.
- 46.
- 47.
- 48.
Patent Act, s 6(3) states: “In the case of taking a patent right as the subject of a pledge, the pledgee shall not be allowed to exercise the patent right, unless it is otherwise provided for in an agreement.”
- 49.
Copyright Act, s 39 states: “Where economic rights are the subject of a pledge, unless otherwise stipulated at the time the pledge is created, the economic rights holder may exercise the economic rights to the work.”
- 50.
Trademark Act, s 44(3) states: “A pledgee in respect of right in a registered trademark shall not use such trademark unless otherwise licensed by the proprietor thereof.”
- 51.
Integrated Circular Layout Protection Act, s 23 states: “For a creation of a pledge in circuit layout rights, the pledgee shall not make use of the circuit layout unless otherwise provided by a contract.”
- 52.
Plant Variety and Plant Seed Act, s 7(2) states: “If the plant variety right is used as the subject of a pledge, the pledgee shall not exercise such plant variety right, unless an agreement between the parties otherwise specifies.”
- 53.
Patent Act, s 69(1) states: “A patentee shall not abandon the patent right, or apply for a post-grant amendment as stated in subparagraph 1 or 2, paragraph 1 of section 67 without the consent from the licensee(s) or pledgee(s).”
- 54.
Patent Act, s 140 states: “A design patentee shall not abandon the design patent right without consent from the licensee(s) or pledgee(s).”
- 55.
Trademark Act, s 45 states: “The proprietor of a registered trademark may abandon the trademark right. However, if a license or a pledge has entered and registered with the competent authority, the proprietor shall get the consent of the licensee(s) or the pledgee(s) (para 1). The abandonment referred to in the preceding paragraph shall be made in writing to the competent authority (para 2).”
- 56.
Integrated Circular Layout Protection Act, s 26(1) states: “The proprietor of circuit layout rights shall not abandon the circuit layout rights without obtaining the consent of the licensee(s) or the pledgee(s).”
- 57.
Plant Variety and Plant Seed Act, s 29 states: “The proprietor of a plant variety right shall not abandon the right without the consent of the licensee(s) or the pledgee(s).”
- 58.
Patent Act, s 69(1) states: “A patentee shall not abandon the patent right, or apply for a post-grant amendment as stated in subparagraph 1 or 2, paragraph 1 of section 67 without the consent from the licensee(s) or pledgee(s).”
Section 67(1) states: “The patentee filing a request for amending the description, claim(s) or drawing(s) of a granted invention patent shall only conduct the following: (i) to delete claim(s), (ii) to narrow down the scope of claim(s), (iii) to correct errors or translation errors, and (iv) to clarify ambiguous statement(s).”
- 59.
Civil Code, s 884 states: “A pledge of personal property is a preferential right of a creditor to receive satisfaction of a claim from the proceeds from sale of personal property the possession of which has been transferred by a debtor or a third party as security for the claim.”
According to section 901, the provisions concerning pledges of personal property shall apply mutatis mutandis to pledges of rights, including pledges of IP rights.
- 60.
Patent Act, s 62(4) states: “Where a patentee establishes multiple pledges on the same patent for the purpose of securing multiple creditors’ rights, the ranks of these pledges shall be determined according to the order of their registration.”
- 61.
Trademark Act, 44 (2) states: “Where a proprietor creates multiple pledges on his/her trademark right for the purpose of securing multiple creditors’ rights, the ranks of these pledges shall be determined according to the order of their registration.”
- 62.
Even though there is no similar provision in the Integrated Circular Layout Protection Act as well as the Plant Variety and Plant Seed Act, the same principle should be applied mutatis mutandis.
- 63.
Civil Code, s 893(1) states: “A pledgee who has not received payment upon maturity of the claim may sell the object pledged by auction and receive payment from the proceeds of the sale.”
As mentioned above, the provisions concerning the pledge of personal property apply mutatis mutandis to the pledge of rights.
- 64.
TIPO (2017), The Security Transactions over the IP in Taiwan (power point), January 20, 2017 (unpublished); TIPO (2019), TIPO’s statistics (unpublished).
References
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List of Laws
Civil Code, English version is available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=B0000001
Compulsory Enforcement Act, English version is available at https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=B0010004
Copyright Act, English version is available at http://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?PCode=J0070017
Insolvency Act, Chinese version is available at http://law.moj.gov.tw/LawClass/LawAll.aspx?PCode=B0010006
Integrated Circular Layout Protection Act, English version is available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0070027
Patent Act, English version is available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0070007
Plant Variety and Plant Seed Act, English version is available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=M0030024
Trade Secrets Act, English version is available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0080028
Trademark Act, English version is available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0070001
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Lee, SH. (2020). Security Rights in Intellectual Property in Taiwan, Republic of China. In: Kieninger, EM. (eds) Security Rights in Intellectual Property. Ius Comparatum - Global Studies in Comparative Law, vol 45. Springer, Cham. https://doi.org/10.1007/978-3-030-44191-3_26
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