Korea “Strategies for an Intellectual Property Powerhouse to Realize a Creative Economy” Overview

Background

Since 1990, many countries like United States, Japan and EU understand that intellectual properties create higher value added than tangible assets do so these countries respectively transformed their economic types to knowledge-based economy so as to boost economic growth and competitiveness. For example, Japan has legislated “Intellectual Property Basic Act” in 2002 and established “the Intellectual Property Strategy Headquarters” in 2003. United States legislated “Prioritizing Resources and Organization for Intellectual Property Act (PRO-IP Act)” in 2008. China also announced “National Intellectual Property Strategic Principles” in June, 2008.

Following the above international tendency of protecting intellectual properties, Korea government has promoted intellectual property related policies and legislated related acts since 2000, such as “Technology Transfer Promotion Act” in 2000, policy of supporting patent disputes settlements and shortened the length of patent examination procedure in 2004. Besides, on June 27, 2006, the Presidential Advisory Council on Education, Science and Technology (PACEST) announced “Strategy for Intellectual Property System Constructing Plan.” However, these policies or acts mainly focus on the protection and application of patent rights, not relate to other kinds of intellectual property rights such as trademark right, copyright etc.

Until 2008, in order to advance the ability of national competition, Lee Myung-bak government had established “Presidential Council on National Competitiveness (PCNC)”. For the vision of transforming to the intellectual property based economy, the PCNC held its 15th meeting on July 29, 2009. The meeting, held at the Blue House, was attended by the president, the Chairman, and members of the Council. One of the agenda of the meeting is strategies for an intellectual property (IP) powerhouse to realize a creative economy. Three goals of the strategies includes being IP Top 5 nations (U.S., Japan, EU, Korea and China), improving technology balance of payments deficits, and enhancing the scale of copyright industry. Next, this study will introduce details of Korea IP related strategies for our nation’s reference.

Introduction

Korea IP strategy consists of 3 aspects (creation and application, law and regulation, infrastructure) and 11 missions. And the contents of 11 missions cover the creation, protection and application of intellectual property rights (patent, copyright, trademark, plant variety etc), namely the whole life cycle of intellectual property rights. Through announcement of IP Strategies, Korea hopes to protect intellectual property rights from every aspect and makes IP as essential driving force for national economic growth.

1. Creation and Application Aspect
First, although the quantity of intellectual property rights (IPRs) of Korea is rapidly increased in recent years, the quality of intellectual property rights is not increased equally. Also, most of researchers do not receive appropriate rewards from R&D institutions, and then it might reduce further innovation. As above reasons, Korea IP strategy indicated that the government will raise “invention capital” to exploit, buy researchers’ new ideas, and make those ideas get legal protection. That is, the government will set up non-practicing entities (NPEs) with private business. The NPEs would buy intellectual properties from R&D institutions or researchers, and then license to enterprises who have need. After licensing, NPEs will share royalty which obtained from enterprises (licensees) with researchers appropriately.

Besides, in order to encourage university, public R&D institutions to set up “technology holdings”, Korea government had amended “Industry Education and Corporation of Industry, Academic and Research Promotion Act”. The amendments are loosening establishment conditions of technology holdings, such as minimum portion of investment in technology has been lowered from 50% to 30%, and broadening the scope of business of technology holdings.

2. Law and Regulation Aspect
Secondly, in aspect of law and regulation, in addition to encouraging creation of good quality of IP, Korea considers that intellectual property rights are needed to be protected legally. Therefore, the IP strategy especially pointed out that Korea would follow the example of Japan to legislate their own “Intellectual Property Basic Act”. According to Korea “Intellectual Property Basic Act”, it should establish a “Presidential Council on Intellectual Property”. The main work of this Council is planning and promoting intellectual property related policies.

There are 5 chapters and 41 articles in Korea “Intellectual Property Basic Act”. The Act like Korea IP strategy is divided into three parts, that is, “creation and application”, “protection” and “infrastructure”. In fact, the legislation of Korea “Intellectual Property Basic Act” embodies the policies of IP strategy. Further, according to Korea “Intellectual Property Basic Act”, “Presidential Council on Intellectual Property” is to integrate IP related affairs of the administrations into one action plan and promote it.

Moreover, according to Korea “Intellectual Property Basic Act”, the government should make medium-term and long-term policies and basic plans for the promotion of intellectual properties every 5 years and adjusts policies and plans periodically as well. Through framing, enacting and adjusting policies and plans, Korea expects to create a well-living environment for the development of intellectual property.

3. Infrastructure Aspect
Thirdly, even if good laws and regulations are already made and more government budget and human resource are invested, Korea is still deficient in well-prepared social infrastructure and leads to the situation that any promoting means of intellectual properties will be in vain. With regard to one of visions of Korea IP strategy,” being IP Top 5 power (U.S., Japan, EU, Korea and China)”, on the one hand, Korea domestic patent system should harmonize with international intellectual property regulations that includes loosening the conditions of application and renewal of patent and trademark.

On the other hand, the procedure of patent application conforms to the international standard, that is, the written form of USA patent application becomes similar to the forms of world IP Top 3 power (U.S., Japan and EU) and member states of Paten Law Treaty (PLT). At the same time, Korea would join “Patent Prosecution Highway (PPH)” to enable Korea enterprises to acquire protection of patent rights around the world more rapidly.

In addition, about the investigation of infringement of intellectual property rights, Korea IP strategy stated that it would strengthen control measures on nation border and broaden IP protection scope from only patent to trademark, copyright and geographical indications. Besides, Korea uses network technology to develop a 24-hour online monitoring system to track fakes and illegal copies. In addition to domestic IP protection, Korea enterprises may face IP infringement at overseas market, thus Korea government has provided supports for intellectual property rights disputes. For this sake, Korea choose overseas market such as Southeast Asia, China, and North America etc to establish “IP Desk” and “Copyright Center” for providing IP legal consultation, support of dispute-resolving expenses and information services for Korea enterprises.

Korea IP strategy partially emphasizes on the copyright trading system

As mentioned above, one of visions of Korea IP strategy is “enhancing the development of copyright industry”. It’s well-known that Korea culture industries like music, movie, TV, online game industries are vigorous in recent years. Those culture industries are closely connected to copyright, so development of copyright industry is set as priority policy of Korea.

In order to enhance the development of Korea copyright industry, a well-trading environment or platform is necessary so as to make more copyrighted works to be exploited. Therefore, Korea Copyright Commission has developed “Integrated Copyright Number (ICN)” that is identification number for digital copyrighted work. Author or copyright owners register copyright related information on “Copyright Integrated Management System (CIMS)” which manages information of copyrighted works provided by the authors or copyright owners, and CIMS would give an ICN number for the copyrighted work, so that users could through the ICN get license easily on “Copyright License Management System (CLMS)” which makes transactions between licensors and licensees. By distributing ICN to copyrighted works, not only the licensee knows whom the copyright belongs to, but the CLMS would preserve license contracts to ensure legality of the licensee’s copyright.

After copyright licensing, because of characteristic of digital and Internet, it makes illegal reproductions of copyrighted works easily and copyright owners are subject to significant damages. For this reason, Korea Ministry of Culture, Sports and Tourism (MCST) and Korea Intellectual property Office (KIPO) have respectively developed online intellectual property (copyright and trademark) monitoring system. The main purpose of these two systems is assisting copyright and trademark owners to protect their interests by collecting and analyzing infringement data, and then handing over these data to the judiciary.

Conclusion

Korea IP strategy has covered all types of intellectual properties clearly. The strategy does not emphasize only on patent, it also includes copyright, trademark etc. If Taiwan wants to transform the economic type to IP-based economy, like Korea, offering protection to other intellectual property rights should not be ignored, too. As Taiwan intends to promote cultural and creative industry and shows soft power of Taiwan around the world, the IP strategy of Taiwan should be planned more comprehensively in the future.

In addition to protecting copyrights by laws and regulations, for cultural and creative industry, trading of copyrights is equally important. The remarkable part of Korea IP strategy is the construction of copyright online trading platform. Accordingly, Taiwan should establish our own copyright online trading platform combining copyright registration and source identification system, and seriously consider the feasibility of giving registered copyright legal effects. A well-trading platform integrating registration and source identification system might decrease risks during the process of licensing the copyright.

At the same time, many infringements of copyrights are caused because of the nature of the modern network technology. In order to track illegal copies on the internet, Taiwan also should develop online monitoring system to help copyright owners to collect and preserve infringement evidences. In sum, a copyright trading system (including ICN and online intellectual property monitoring system) could reinforce soft power of Taiwan cultural and creative industry well.

※Korea “Strategies for an Intellectual Property Powerhouse to Realize a Creative Economy” Overview,STLI, https://stli.iii.org.tw/en/article-detail.aspx?no=105&tp=2&i=171&d=6094 (Date:2021/05/17)
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Yearly Update on the Progress of the TIPS Project – summary of a research report on corporate investors’ view on introducing a corporate IP disclosure framework

Chien-Shan Chiu Background In the era where inventions drive the economy, the ability to create, capture and protect these inventive ideas has become vital for a corporation to stay competitive and sustain profit growth. Various government policies have been implemented in order to stimulate inventions and to strengthen the ability to protect these inventions through effective use of intellectual property (“IP”) rights. For the past few years, the TIPS (Taiwan Intellectual Property Management System) project has been promoted extensively aiming to increase public awareness towards IP rights and to assist local companies to establish a systematic and comprehensive IP management system. Over the years, the TIPS project has received wide recognition and positive feedbacks, and many TIPS-implemented companies are ready for the next challenges. After an extensive research, the project proposes to follow the international trend of encouraging companies to make better and more disclosure of intangible assets that are not often shown in the traditional financial statements1 . Local companies with effective IP management system and strategy are encouraged to compile an “Intellectual Property Management Report” summarizing its business, R&D and IP management strategies as well as their accumulated IP assets. In order to compile an Intellectual Property Management Report, a company is advised to re-identify its intellectual property, re-think about its strength and weakness in every aspect and where necessary, the company may also need to re-conduct a market, technology trend or competitor’s analysis, through which it is believed that a better and more effective IP strategy will be re-formulated. Formulating a well-planned corporate strategy that takes into account various IP issues is one of the main reasons for introducing the corporate IP disclosure framework. Promoting the disclosure of IP-related information so that the management efforts, visions and true capabilities of a corporation can be fully disclosed and recognized is the second major reasons for introducing the corporate IP disclosure framework. This essay begins with a brief update on the yearly progress of the TIPS project, follows by a summary of the research report on corporate investors’ view on initiating a framework for enhancing disclosure of corporate IP-related information. The research report contains the result of a survey conducted between April and June this year (year 2009), consisting questions to uncover local investors’ view and attitudes towards corporate IP, and to identify kinds of IP-related information required when making an investment decision as well as to find out to what extend local investors would support the government’s initiative on promoting a corporate IP disclosure framework. Update on the Yearly Progress of the TIPS Project In order to facilitate the promotion of TIPS, several supplementary services have been introduced (fees and expenses are fully or partially subsidized by the government this year) : (1) Free On-Line Self-Assessment Tool; (2) On-Site Diagnostic and Consulting Service (selected companies were fully subsidized); (3) “Demonstrative” Model Companies (selected companies were partially subsidized); (4) IP Management Courses (partially subsidized); (5) On-Site Auditing (for the Conformance of TIPS requirements) and issuing of the TIPS Compliance Certification (fully subsidized) . To the end of 2009, 401enterprises have completed the on-line self-assessment questions; 93 companies have received on-site diagnostic and consultation services; 847 persons have taken the IP management courses; 64 enterprises have successfully obtained the certificates for the compliance of TIPS and more than 299 enterprises have either completed or in the middle of implementing TIPS. Summary of the Research Report on Corporate Investor s’ View on Introducing a Corporate IP Disclosure Framework Even though it is clear that the idea of encouraging corporations to disclose non-financial information has started few decades ago in Europe and are currently being vigorously promoted by many major countries, we believe that in order to facilitate smooth promotion of the new IP disclosure framework, it is important to find out the local investors’ views and attitudes towards IP and to know how investors see the role of IP can play in a local corporation. Hence a survey was conducted at the initial stage of preparing the new corporate IP disclosure framework in Taiwan. The survey was sent via both mails and emails to 357 corporations, including venture capital firms; trust, investment consulting or management firms; security corporations, financial institutions and banks. More than one set of survey questionnaires could be distributed in one corporation to be filled by investors/analysts that are specialized in investing different industrial sectors. As a result, a total of 495 set of questionnaires were distributed.. Basic Data The survey was conducted between April to June 2009. At the end of June, a total of 150 investors/analysts responded which equals to a 33% response rate. Most of the survey respondents specialized in investing in various industrial sectors which include: semi-conductor; telecommunication; electronic components; 3C products; IT; optical; biotechnology; pharmaceuticals; new energy resources; media; creative and culture and traditional manufacturing industries. Around 50% of the survey respondents have more than 5 years’ experience in investment; among them, 23% of the survey respondents have more than 10 years’ investment experience. Investors recognize the importance of IP A remarkable 94% of the survey respondents recognized that the ability to create, protect, manage and exploit IP has become an essential element for a company to stay competitive and sustain growth in today’s market environment. 88% of the survey respondents believe that companies with more or better IP assets are more likely to generate profits and 91% believe that such companies are more likely to survive in this ever-increasing competitive environment. Yet, 94% of the survey respondents agreed that not only a company should actively create IP assets, but the ability to exploit and thus extract value from the accumulated IP assets is what makes a company stand out among the others. Taking a step further, the survey result reveals that the respondent investors believe a company with effective and well-planned IP strategy is likely to: – Enhance its market competitiveness (84%); – Raise its overall corporate value (71%); – Maintain its market position (55%); – Increase its profitability (32%); – Affect its share price (30%); – Assist investors in evaluating such company’s managerial ability and performance (29%) as well as evaluating its future growth potential (28%). IP-related information influences investors’ investment decisions Given that most investors see the ability to create, manage and exploit IP assets as well as having a well-planned IP strategy are crucial for the survival of a company, 82% of the survey respondents indicate that IP-related information has been considered when making an investment decision. Furthermore, 85% of the survey respondents think that they will place greater emphasis on IP in assessing companies in the future. Indicators that used to assess/evaluate a company Most often used IP-related indicators identified by the survey respondents when making investment decisions are: – Core technology and its market competitiveness (77%) – Research ability (experience and achievement) (73%) – IP protection and management measures (41%) – IP strategy (align with overall corporate strategy and market/technology characteristics) (40%) – Ability to fully utilize self-owned IP assets (38%) – R&D expenditure and investment (35%) – No. of IP assets (35%) – Time taken for competing products to enter into the market (33%) – Cost of maintaining IP assets (19%) Ratio of intangible assets as to the overall corporate value (19%) : 20% of the survey respondents indicated that they have turned down investment in the past for inadequate IP awareness of the target companies. List of local companies with good and effective IP strategy The survey respondents were asked to name local Taiwanese companies which in their mind have most effective and sound IP strategy. Taiwan Semiconductor Manufacturing Company (TSMC), Foxconn, United Microelectrc (UMC), HTC, Acer are the top 5 most named companies given by the survey respondents. Having good quality of patents (such as essential or new technology patents); detailed and complete patent map; sound IP strategy; brand and professional IP/legal department are cited as the reasons that impress these investors. Inadequacy of public available IP-related information While most investors acknowledge the importance of IP and take into account various IP-related indicators when making investment decisions, 76% of the survey respondents expressed that currently, the amount of IP-related information disclosed by companies are not sufficient for them to make an informed investment decision. When a question asking the survey respondents to identify the channels by which they obtained their desired IP-related information, the results were quite spread out. 45% of the survey respondents relied on asking the top managers directly; 43% relied on annual report; media and news (35%); website (34%); industrial journals (25%); competitors (15%) and other private channels (15%). It appears that various sources were used but no particular source provides sufficient information. Indeed, a remarkable 91% of the survey respondents believe that if there are more channels provided for corporations to disclose their internal IP information, more accurate assessment of the corporate value can be made. Support government’s initiative of promoting IP reporting framework Further, 73% of the survey respondents expressed their willingness to support the government’ s initiative of encouraging local companies to disclose their IP-related information. In relation to the initiation and promotion of the corporate IP disclosure framework, 64% of the survey respondents responded that it would be better to adopt a voluntarily disclosure policy and decide whether to switch to mandatory disclosure later; 22% think that only a voluntarily disclosure policy should be adopted followed by 14% of the survey respondents who believe that the government should adopt a mandatory disclosure policy from the start. When the survey respondents were asked to provide suggestions to facilitate the promotion of the corporate IP disclosure framework, the following suggestions were picked by the survey respondents: – Provide valuation tools to assist investors in assessing and analyzing IP related information (40%); – a central platform to collect and display all the complied IP management reports (21%); – lists of compulsory items to be disclosed in the report (21%); and – regulate the frequency of updating the contents of the report (15%). Conclusion Based on the results of the survey, we can conclude that the local investors’ view and attitude towards IP are similar to those in overseas. Majority of the investors (> 90%) see IP as valuable tools that could assist companies to create profits and sustain growth in today’s competitive market. While most of the investors (82%) have taken into account relevant IP information when making investment decisions, 76% of the survey respondents expressed that the amount of corporate IP-related information disclosed by companies are insufficient for them to make informed investment decisions. This is an important message that local companies should pay particular attention. It is hoped that through the introduction of the corporate IP disclosure framework, more adequate corporate IP information will be disclosed to assist investors in making better and accurate investment decisions. Consequently, a company’s true capabilities, managerial efforts and the intangible assets created upon can thus be fully appreciated and reflected on its market value. 1 Various national and institutional initiatives addressing the disclosure of corporate intellectual assets are currently being promoted vigorously at the international level such as Japan’s “IA based Management Report, (METI)”; Denmark’s “Intellectual Capital Statement (MSTI)”; European Union’s “Guidelines on Intangibles, MERITUM project”; U.S.’s “EBR 2.0 (Enhance Business Reporting Consortium)”; and The World Intellectual Capital/Assets Initiative (WICI) is currently working on developing a voluntary global framework for measuring and reporting corporate performance.

The Taiwan Intellectual Property Awareness and Management Survey

The “National Intellectual Property Strategy Program” was announced by the Taiwan government in November 2011 in an effort to promote and raise the intellectual property capability of Taiwanese firms. As policy adviser to the Ministry of Economic Affairs in drafting the “National Intellectual Property Strategy Program,” the Science and Technology Institute under the Institute for Information Industry (STLI) conducted a survey in 2012 in order to gain a broad overview of the level of IP awareness and IP management and use among Taiwanese firms. The survey was distributed to 1,384 firms that are listed either on the Taiwan Stock Exchange or the Gre Tai Securities Markets. 281 companies responded to the survey, achieving a survey response rate of almost 20%. The content of the survey was divided into three parts: IP knowledge and understanding, current IP management within the companies and IP issues that companies face. The Importance of IP to Businesses Intellectual property has become a commonplace asset owned by firms. The growing significance of intellectual property to companies in general is undeniable, and firms are recognizing this as well. An overwhelming 93% of the respondents claim to own some form of intellectual property. The most common type of intellectual property owned by companies is trademarks, followed by patents and trade secret. Many companies are also actively seeking to obtain more intellectual property. Over 68% of the respondents indicated that they have submitted applications for formal intellectual property rights in the past two years. 84% of the respondents agreed with the statement that they believe intellectual property can bring added value for the firm. In addition, over 78% of the respondents also believe that intellectual property helps enhancing the company’s market position. It is clear that the majority of Taiwan firms already consider intellectual property to be a vital asset for their business and that building up and expanding their IP portfolio has become a top priority. This is also reflected in the annual spending that firms allocate for intellectual property. The survey respondents were asked whether a specific budget is allocated toward spending related to intellectual property every year, and the majority of the respondents, almost 70%, responded in the positive. Particularly, the respondents pointed out that they commit the most resources to obtaining and maintaining intellectual property rights every year. 10% of the respondents even indicated that they spent over NT$5 million annually on obtaining and maintaining intellectual property rights. The respondents were also asked about spending on inventor incentive, IP personnel, IP disputes and litigations and staff IP training. The results showed that companies commit the least spending on providing IP training for staff, with more than half of the respondents noting that they spend less than NT$500,000 on IP training each year and only 14% of the respondents noted that they will increase spending on IP training the following year. Weakness in Generating Value from IP As noted above, Taiwan firms are actively seeking to obtain more intellectual property and building up their IP assets. With almost 70% of the respondents noting that they have applied for intellectual property rights in the last two years shows that companies are generating quite a lot intellectual property, but whether all the intellectual property generated is being exploited and creating commercial and economic benefits remains doubtful. Most of the firms, almost 86% of the respondents, acquired their intellectual property through their own research and development (R&D). In contrast, the proportion of firms using other means of acquiring intellectual property is quite low, with only 17% of the respondents acquiring intellectual property through acquisition and 28% through licensing, while 41% percent of the respondents acquired their intellectual property by joint research or contracted research with others. With R&D being the major source of intellectual property for firms, firms are clearly putting in a lot of investment into acquiring intellectual property. However, the returns on these investments may not be proportionate. When asked whether the firm license out their intellectual property, only 13.5% of the respondents claimed to be doing so. This suggests that most Taiwanese firms are not using their intellectual property to generate revenue and commercial value. Instead, intellectual property is still mostly regarded and used as merely a defensive tool against infringement. Companies in Taiwan are also facing increasing risks of being involved in IP-related disputes and litigations. More than 30% of the respondents have already been involved in some kind of IP-related disputes and litigations in the past. The most common type of litigations faced by Taiwanese companies are patent infringement, followed by trademarks infringement, piracy and counterfeit, and disputes with (former) employees. Furthermore, more than 50% of the firms that have been involved in IP litigations noted that patent infringement and trademarks infringement pose the most detriment to the company’s business operations in general. It is evident that intellectual property has become a competitive weapon in businesses, and IP disputes and litigations are inevitable threats that most firms must face in today’s business world. Hence, it is essential for firms to have the necessary strategies and protection in place in order to minimize the risks created by potential legal disputes. With this in mind, it is worrisome to observe that most firms have not incorporated intellectual property into the company risk management program. Nearly 86.1% of the respondents claim to have some kind of risk management program in place within the company, but when asked what is included in the risk management program. Only 40.7% of the firms with risk management programs said that intellectual property is included, which is considerably lower than other types of risks generally seen in risk management programs. With IP disputes and litigations becoming an increasing threat that may bring negative impact for businesses, Taiwanese firms need to incorporate and strengthen IP risk management within the company. IP still not widely considered as business strategy With intellectual property being an important asset, firms should also have the necessary infrastructure and resources to manage IP accordingly and integrate IP into the company’s overall business operations. However, more than 50% of the respondents do not have designated personnel or department that is specifically responsible for managing the company’s intellectual property. Nearly 33% of the respondents indicated that the responsibility for managing IP is shared by other departments within the firm. When further asked about the tasks of the designated personnel or department that is responsible for IP, it is observed that the designated personnel/department mostly undertake routine tasks such as filing for patent applications and trademark registrations and maintaining relevant databases. Tasks such as patent mapping and competitive landscape analysis are the least performed tasks. The proportion of designated personnel/department for IP that are involved in the company’s business and research strategic decision making process is also quite low. This suggests that despite the importance of IP to firms, many Taiwanese firms still have not integrated IP into their overall research and business strategies and utilize their intellectual property as a strategic tool in their business operations. Low Levels of IP Awareness and Training within Firms In order to gauge the level of IP knowledge and understanding in Taiwanese firms, the survey also contained 10 very basic questions on intellectual property. Surprisingly, the respondents that answered all the questions correctly were less than 4%. The proportion of respondents that correctly answered 5 or less questions did not even reach 50%. This means that Taiwanese firms still lack fundamental IP knowledge and understanding in general. This is also reflected in the response to the question whether the company has an overall IP policy in place, which also serves as an indication of the level awareness and concern with intellectual property within the firm. An IP policy that is distributed to company staff means that IP awareness is promoted within the company. However, almost 40% of the respondents claimed that there is no overall IP policy within the company, and nearly 30% of the respondents noted that even if there is an IP policy, it is not made widely known to company staff. This reveals that many Taiwanese companies still need to undertake more IP awareness promotion within the firm. More IP awareness promotion is also justified by the results to the question as to whether the company provides IP training for company staff. The results showed that almost 44% of the respondents do not provide any form of training in IP to company staff at all. This also corresponds to the result noted earlier that most respondents commit the least funding to providing IP training each year. Providing regular IP training to staff is certainly still not the norm for most Taiwanese firms. Issues facing businesses and their policy needs Taiwanese firms still faces many difficulties and challenges in their intellectual property management and hope that the government could provide them with the assistance and resources needed to help them enhance their intellectual property capacity and capability. Some of the major difficulties that the respondents pointed out in the survey include the lack of IP experts and professionals. It is difficult for firms to find and hire people with adequate professional IP skills, as the education and training currently provided by universities and professional schools do not seem to meet the actual IP needs of companies. Another major difficulty faced by Taiwanese firms is the lack of information and knowledge regarding international technical standards and standard setting organizations. A significant portion of the respondents expressed the wish for the government to help them gain entry and participation in international standard setting organizations. Among the other difficulties, the regulatory complexity and lack of clarity with the ownership of intellectual property arising from government-contracted research, which poses as barrier for firms in obtaining licenses for use and exploitation, is also an issue that the majority of the respondents hope the government could improve. In addition to the difficulties mentioned above that Taiwanese firms hope the government would help them encounter, the respondents were also asked specifically what other resources and assistance they would like to seek from the government. 69.4% of the respondents hope that the government could provide more training courses and seminars on IP. Many respondents are also seeking a common platform that can unify all resources that could help enhance IP management. Expert assistance and consultation on obtaining intellectual property rights and providing information on international IP protection and litigation are also resources that Taiwanese firms desire. More than 50% of the respondents also indicated that they would like to receive assistance in establishing IP management system within their firms. Conclusion The results of the survey provided insight into the level of IP management among companies in Taiwan. Although the importance of intellectual property for businesses is undeniable and widely recognized by firms, the results of the survey revealed that there is still much room for improvement and for Taiwanese firms to put in more efforts into strengthening and enhancing their IP capabilities. In general, Taiwanese firms have not incorporated their intellectual property into their management strategies and derived adequate value. Intellectual property remains mostly a defensive tool against infringement. Furthermore, there is still need for greater promotion of IP awareness among firms and within firms. With these IP management difficulties and deficiencies in mind, it should be noted that the respondents of this survey are all listed companies that are already of a certain size and scale and should have greater resources in their disposal to commit to their IP management. It would be reasonable to assume that small and medium firms, with significantly less resources, would face even more difficulties and challenges. Using this survey results as reference, the “National Intellectual Property Strategy Survey” would seek to help Taiwanese companies address these IP issues and provide adequate assistance and resources in overcoming the challenges Taiwanese companies face with their IP management. It is also hoped that this survey would be carried out regularly in the future, and that the survey results from 2012 would serve as a baseline for future surveys that will assist in observing the progress Taiwanese businesses are making in IP management and provide a whole picture of the level of IP awareness and management within Taiwanese firms.

Antitrust Issue of Reasonable Royalty and Prohibition of Excessive Pricing in Taiwan

Antitrust Issue of Reasonable Royalty and Prohibition of Excessive Pricing in Taiwan A proposed antitrust framework to determine a reasonable royalty I. INTRODUCTION   “Can, and should antitrust laws and authorities step in market prices?” - It has long been a controversial antitrust issue, especially when an antitrust case is involved with allegedly unlawful monopolization (or called abuse of monopoly in some countries), Intellectual Property (IP) rights (IPRs), reasonable royalties, and the complex and fast-changing technologies behind. It thus constitutes the tricky and challenging antitrust issue of reasonable royalty - “if a monopolistic firm is charging reasonable royalties or abusing its monopoly power?” Since the goals and regimes of antitrust are very different between Asia, the United States (the U.S.), and Europe, there are consequently various ways to deal with such issue. A. China and its Per-Se Violation of Excessive Pricing   Several countries in East Asia aim to protect fair competition and social public interests via antitrust laws, including some other non-competition-based goals.[1] China, Japan, Korea and Taiwan’s goals of antitrust all include protection of fair competition. China also articulates its goals to maintain public interests and promote socialist market economy. Japan also aims to promote the employment rate and the level of national income which are not competition-based goals. Furthermore, South Korea expresses its antitrust goal to achieve balanced economic development which is somehow tricky to judge. As a result of the concepts of fairness and non-competition interests, the antitrust issue of reasonable royalty can possibly lead to the determination of unfairly high prices and thus constitutes an unlawful per se violation of excessive pricing in East Asia.   Take China as an example, China explicitly articulates the prohibition of charging unfairly high prices as a firm in dominant position.[2] Moreover, China has further stepped in determining “appropriate royalties” supposedly charged by licensors and has demanded foreign firms in China to charge lower royalty rates.[3] In Huawei v. InterDigital Technology Corporation (IDC), the court ruled that IDC charged Chinese firms unfairly high royalties and further held that the royalty rates of the Standard Essential Patents (SEPs) charged by IDC shall not exceed 0.019%. In the Qualcomm case in China, National Development and Reform Commission of China ruled that Qualcomm was charging unfairly high prices and demanded it to lower its royalty base.   Additionally, China’s Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights published by the Ministry of Commerce of the People's Republic of China (MOFCOM) in March of 2017 were passed in the end of 2018.[4] While already waiting to be formally executed, these Guidelines had received comments regarding reasonable royalties – especially the antitrust violation of licensing IPRs at unfairly high prices with 5 listed factors to consider whether there is abuse of dominant position.[5] By pointing out the dangers of regulating price following with potential harms to competition, one of the comments encourages the Guidelines to have the relevant factors in terms of determining unfairly high prices, such as the prices of comparable licenses instead of any other irrelevant indicators. B. European Commission (EC)[6] and its Per-Se Violation of Excessive Pricing   While embracing free market economy and achieving social and political goals at the same time, EC prohibits unfairly high prices as unlawful per se by articulating “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions” as abuse of market dominance.[7] The test to it started from the case United Brands (1978) which stipulates the difference between cost and price.[8]   As the time came to the late 2000s, EC once said that “it takes no position on what a reasonable royalty is” in 2013 but later stated its option to act directly against excessive prices in 2016.[9] In 2017, the Copyright and Communication Consulting Agency/Latvian Authors Association (the AKKA/LAA case) was brought to the court for charging excessive fees for its exclusive right to license.[10] According to Article 267(a) of the Treaty on the Functioning of the European Union, the Court of Justice of the European Union (CJEU) shall have jurisdiction to give preliminary rulings concerning the interpretation of the Treaties. Given the questions referred to the CJEU in the AKKA/LAA case, the concept of excessive pricing therefore had the chance to be clarified further. [11] Three important principles established in this case are: (1) comparing the price at issue between the prices charged by other appropriate and sufficient comparators; (2) there is no threshold of what a royalty rate must be regarded as appreciably high, but a difference between rates must be both significant and persistent to be appreciable; (3) an analysis of fairness justification provided by the alleged dominant firm must be conducted.[12] The AKKA/LAA case reestablished and reaffirmed EC’s resolve to enforce prohibition of excessive pricing.   As for the recent times, the Danish Competition Council found that the Swedish pharmaceutical distributor - CD Pharma had abused its dominant position by charging excessive prices for Syntocinon, ruling the price increase of 2000% unjustified.[13] The appeal against this decision is now pending. Many more excessive pricing cases are still ongoing within EU jurisdictions. C. The U.S. and its Hands-Off Approach towards Pricing   U.S., on the other hand, never did and does not prohibit monopoly or excessive pricing, and has been warning the great dangers and potential harms to competition resulting from regulating price.[14] The long-established principle of not regulating price, however, was shaken by U.S. Federal Trade Commission (FTC)’s complaint against Qualcomm for conducting unfair methods of competition in 2017.[15]   U.S. FTC filed a complaint against Qualcomm in 2017, alleging Qualcomm violating the Federal Trade Commission Act.According to the complaint, customers accepted elevated royalties that a court would not determine fair and reasonable due to Qualcomm’s unlawful maintenance of monopoly. However, the complaint fails to explain what a reasonable royalty is and why Qualcomm charges more than it is supposed to be charging.[16] Furthermore, the dissenting statement of this case states that the theory adopted by FTC required proof of Qualcomm charging unfairly high royalties where there was failure of proving reasonable royalty baseline in the case.[17] In January of 2019, this case finally kicked off in a California courtroom and the outcome of it will definitely have tremendous impacts on every stakeholder. Later in May 2019, the United States District Court for the Northern District of California found that Qualcomm violated the FTC Act. The case is still ongoing. D. Taiwan and its Unclear Attitude towards the Antitrust Issue of Reasonable Royalty   So, where does Taiwan stand between prohibition of excessive pricing and the hands-off approach in the U.S.? In Taiwan, improperly setting, maintaining, or changing the price for goods or the remuneration for services as a monopolistic enterprise has long been unlawful per se since Taiwan’s Fair Trade Act (FTA) was enacted in 1991.[18] This unlawful per se violation is in fact Taiwan’s prohibition of excessive pricing. However, the attitudes of Taiwan Fair Trade Commission (TFTC) and the courts in Taiwan towards the antitrust issue of reasonable royalty can be switching. They have avoided the issue, left the issue for private contracting, resorted to Patent Act, and determined royalties for the involving parties.   Antitrust cases involving the issue of reasonable royalty can be a matter of billion-dollar fines, tremendous costs of litigation, negative impacts on innovation and competition, and harms to consumers. Such important issue can no longer be neglected by Taiwan anymore. By focusing on the antitrust issue of reasonable royalty in Taiwan, this paper will begin with the past attitude and the current antitrust framework of reasonable royalty in Taiwan. Further, because Taiwan has been looking up to the U.S. and its patent law in terms of calculating reasonable royalty in patent infringement cases; this paper will then turn to the reasonable royalty approach in Taiwan and the U.S. respectively. Even though this paper does not support prohibition of excessive pricing, we hope the antitrust issue of reasonable royalty in any excessive pricing case in Taiwan will be properly and carefully dealt with. Therefore, based on the proposed methodologies in a 2016 paper[19], the core of this paper will be proposing a framework for Taiwan in order to give clearer directions on how to face the antitrust issue of reasonable royalty along with the potential violation of Article 9 of FTA. II. THE PAST ATTITUDE AND THE CURRENT ANTITRUST FRAMEWORK OF REASONABLE ROYALTY IN TAIWAN A. The RCA, Catrick, and Microsoft case - 1995 ~ 2003   TFTC’s attitude towards the antitrust issue of reasonable royalty had long been unclear. In TFTC v. Radio of Corporation of America (RCA)(1995), RCA settled with TFTC for the accusation of charging improper royalties.[20]In TFTC v. Microsoft (2002-2003), Microsoft settled with TFTC after 10 months being accused of conducting excessive pricing. [21] However, the details of both settlements were never published. In the Catrick case (1998), a U.S. firm named Catrick was accused of improperly charging royalties.[22] TFTC attempted to resort to Patent Act but Patent Act at that time was silent on calculation of royalties. To play safe, TFTC did not interpret FTA or determine a reasonable royalty. Instead, TFTC left the issue to be solved under the principle of freedom of contract and closed the investigation.[23] B. The CD-R Patent Pool Case – 2001~2015 1. Summary of the case   Even being given 15 years of time, the antitrust issue of reasonable royalty still remained unsolved in the CD-R Patent Pool case (2001-2015). Upon the investigation from 1999, TFTC found that Philips Electronics NV (Philips) and other two companies had violated Article 10 of FTA with their unlawful concerted action and abuse of dominance in 2001.[24] Here is the background: The CD-R manufactures in Taiwan accounted for 80% of the global CD-R manufacturing output when the time the CD-R technologies were a worldwide industrial revolution. The price of CD-R was originally at around $60 per piece in 1990. It later went down to $0.20 per piece in 2000. However, the three enterprises in the case kept refusing to change the formula for calculating the license fee. Thus, the pricing issue here was that if the three monopolistic enterprises improperly maintained the formula for calculating the CD-R license fee by joint licensing and refusing to change the license fee even though the market conditions had changed drastically at that time.[25]   After a series of appeals and retrials, TFTC again ruled that Philips violated Section 2 of Article 10 of FTA by abusing its dominant position and improperly maintaining the price for its jointly licensed technologies in 2015.[26] To everyone’s disappointment, TFTC again left the determination of reasonable royalty unsolved. 2. Fights over reasonable royalty between courts and TFTC   The tricky thing is, administrative courts, TFTC, Intellectual Property Court of Taiwan (IP Court of Taiwan) held totally different positions in the CD-R case in terms of the antitrust pricing issue: a. Taipei High Administrative Court (2003) [27] The court reasoned that the license fees should be determined by competition and cost structure on principle. As a result, the determinants to reasonable royalties would be supply and demand in the market. b. TFTC Decision No.095045 (2006) [28] TFTC did not hold that the defendants’ pricing practice in violation of FTA. However, it stated its position in stepping in royalties - “Business value of patents varies due to maturity of technologies and market development. Therefore, patent holders should consider prices of final products, value of patents, and contributions made by licensees while determining reasonable royalties… It is inappropriate for the antitrust authority in Taiwan to step in royalties unless there is indication of illegal monopolization or cartel. “ c. Intellectual Property Court Appeal Case No.14 (2008) [29] IP Court of Taiwan incorporated the concept of fairness in its decision by saying – “courts could only adjust the royalty rates in consideration of fairness towards both parties and other relevant factors in the contract.” Further, the court also said that it was not within TFTC’s jurisdiction to determine the reasonableness of the license fee charged by Philips. d. TFTC Decision No. 098156 (2009)[30] By revealing the prices of CD-R output, shipment of CD-R, change of market conditions within 10 years, and the 60 times higher royalty revenues earned by Philips, Sony and Taiyo Yuden, TFTC found that the profits earned by the three defendants were beyond expectation and estimation. In conclusion, TFTC again held in its 2009 decision that the three defendants violated FTA by not giving opportunities to negotiate over the CD-R license fee upon the easily perceived market changes. e. Supreme Court of Taiwan, Case No.883 (2012) [31] After the long fights between courts and TFTC for 10 years, Sony and Taiyo Yuden had stopped fighting and their cases were affirmed in 2011. As for Philips, they enjoyed a huge turning point in 2012 because the Supreme Court of Taiwan abolished IP Court of Taiwan’s 2008 verdict and ruled that the governing laws of the contracts between the involving parties were Dutch laws. f. TFTC Decision No. 104027 (2015)[32] TFTC did not get defeated and reached another decision against Philips in 2015. In the reasoning, TFTC first clarified that market prices should be determined by competition and cost structure. Then it claimed to still have the role to rule that Philips had been improperly maintaining the license fee of CD-R through abuse of dominance, refusals to renegotiate and earning excessive profits. To everyone’s disappointment, TFTC still left the determination of reasonable royalty unsolved. C. TFTC v. Qualcomm Incorporated (Qualcomm) (2015 - 2018)[33]   In 2017, TFTC ruled that Qualcomm violated Article 9(1) of FTA[34] by refusing to license, imposing no license no chips policy, and conducting exclusive dealing. As for the pricing issue in this case, it was argued if the license fees charged by Qualcomm were unreasonably high and if the fees should be based on value of patents instead of net prices of manufactured phones. TFTC did point out the pricing issue in its reasoning but did not say much further. Instead, TFTC commented in the decision that Qualcomm had been enjoying excessive profits and stated that license fee was a matter of freedom of contract and negotiation.[35] After a series of fights between TFTC and Qualcomm, both parties agreed to settle in August 2018.[36] The Administrative Decision No. 106094 issued by TFTC was vacated with the replacement of the settlement[37] which Qualcomm agreed to invest hundreds of millions in Taiwan and on other matters.[38] D. The Current Antitrust Framework of Reasonable Royalty in Taiwan   The current antitrust framework of reasonable royalty in Taiwan in this paper is based on the latest version of Fair Trade Act of Taiwan which was amended in 2017 and the latest version of IP Guidelines of Taiwan which was amended in 2016.[39] There are three main steps in the current antitrust framework to deal with the reasonable royalty issue that suspiciously violates FTA in Taiwan. 1. Proper conducts pursuant to Intellectual Property Laws in Taiwan   First, and most importantly, Article 45 of FTA excludes the application of FTA to all “proper conducts” pursuant to all IP Laws in Taiwan where TFTC does not give quite clear explanation of.[40] The reason behind such exclusion stated in the legislative rationale of Article 45 of FTA is problematic - “Copyrights, Trademarks, and Patents are monopoly rights endowed by IP laws. Therefore, FTA shall not apply to them by nature.” [41] 2. Guidelines on Technology Licensing Arrangements (IP Guidelines of Taiwan)   Secondly, TFTC shall turn to review if IP Guidelines of Taiwan apply to any licensing practice in the case when it sees Article 45 of FTA not applicable.[42] IP Guidelines of Taiwan articulates a correct and fundamental principle while reviewing a technology licensing agreement – “TFTC does not presume market power resulted from owning a patent or know-how.”[43] Further, IP Guidelines of Taiwan do not articulate reasonable royalty or excessive pricing. Instead, the Guidelines make clear of the allowed and prohibited calculation methods for royalties. By recognizing the ease of calculation as efficiency, IP Guidelines of Taiwan basically allows the end product approach and the net sales approach to be applied in a technology licensing agreement as long as the licensed technology was indeed used by the licensee.[44] Notwithstanding, TFTC still has the power to find an antitrust violation upon finding of improper matters even if a licensor complies with Section C of Article 5 of IP Guidelines of Taiwan. [45] 3. Prohibited monopolistic conducts   When neither Article 45 of FTA nor IP Guidelines of Taiwan applies to the case, the last step TFTC shall take towards reasonable royalty issue is to review if Section 2 of Article 9 of FTA applies - ” Monopolistic enterprises shall not engage in improperly setting, maintaining or changing the price for goods or the remuneration for services.” [46] Basically, it is the prohibition of excessive pricing in Taiwan. To be noticed, Article 9 of FTA can only be applied when there is one or more monopolistic enterprises involved. 4. Some issues under the current antitrust framework of reasonable royalty in Taiwan a. Proper conducts pursuant to all IP laws in Taiwan. Article 45 of FTA excludes the application of FTA to what so called “proper IP conducts.” Such exclusion is based on the idea that IPRs are monopoly rights – which is problematic.[47] The fact is - IPRs are exclusive rights instead of monopoly rights. IPRs do not necessarily confer monopoly power or induce more anticompetitive behaviors than other types of property. Moreover, exercising an IPR can be engaging in improper market conducts that lessens competition. In other words, what should be kept in mind is that a proper IP conduct may still possibly constitute an antitrust violation. b. The maybe-violation in IP Guidelines of Taiwan. IP Guidelines of Taiwan are basically friendly towards the end product and the net sales approaches for calculating royalties. However, Article 5 of the Guidelines still gives TFTC the power to find a “maybe” antitrust violation upon any improper matters. Such maybe violation makes the protection under IP Guidelines shaky and even not that useful. c. No such thing as excessive profit. One of the legislative reasons behind the prohibition of excessive pricing in Taiwan is that - “when a firm does not price its products based on reflection of the costs but intends to gain exorbitant profits, such improper pricing conduct would be the most effective way to exclude competition.” [48] Firstly, there is no such thing as an excessive or exorbitant profit in a free market economy when a price is determined by supply and demand which results in profits you earn accordingly. Secondly, instead of the profits, it should be the price or the pricing practice to be evaluated due to the purpose of excessive pricing violation. d. Missing harms to competition. Most important of all in any excessive pricing case – where are the harms to competition? It should be clear that unjustified profits are not what antitrust laws aim to punish but the anticompetitive market conducts that harm competition. Which is to say – if a monopolistic enterprise has been charging excessive prices through abuse of monopoly that generates harms to competition? With the ultimate goal of protecting the overall competition and consumers, there must be potential or actual harms to competition proven in any excessive pricing case. Such as higher prices, lower outputs, exclusion of competition, entry barriers, negative impact on innovation, or so. E. The Reasonable Royalty Approach under the Patent Act in Taiwan 1. Damages as reasonable royalty   Article 97(1) of Patent Act of Taiwan lists three approaches for calculating damages in any event of patent infringement.[49] One of the approaches is the reasonable royalty approach.[50] The so-called reasonable royalty is the royalty the licensee would have paid if there had been a negotiation instead of an infringement. In practical, any profit earned by the licensee from the infringement is excluded from the damages while adopting such approach. Since the infringing licensee saved the costs of negotiation and the licensor spent extra costs on patent infringement litigation, it is also recognized that damages calculated by adopting the reasonable royalty approach can be more than the royalty the licensee would have paid.[51] 2. Determinants and principles in a hypothetical negotiation over royalty   After all, the reasonable royalty approach assumes a hypothetical negotiation over royalty between the licensee and licensor. There are still controversies over the determinants and principles to be applied while adopting such approach. Various considerations would possibly lead to drastically different reasonable royalties just like the NT$10 million and NT$1 billion damages in the Philips v. Gigastorage case. [52] Koninklijke Philips NV (Philips) brought a patent infringement lawsuit against Gigastorage Corporation (Gigastorage, a Taiwan-based manufacturer) at the IP Court of Taiwan in 2014, alleging that Gigastorage had been infringing their Taiwanese patent from 2000 through 2015 by manufacturing and selling DVD related products. The pricing issue here is how to calculate the damages and compensation of unauthorized utilization of the patent involved where the calculation methods and considerations would make big differences. IP Court of Taiwan awarded NT$10.5 million as damages based on reasonable royalty approach in the first trial. However, the same court of different judges later ruled that the damages should be over NT$1 billion according to unjust enrichment. The case was brought to the Supreme Court of Taiwan in 2017. In September 2018, the NT$1 billion judgement was remanded and now the IP Court of Taiwan is thus responsible for a retrial.[53]   Nevertheless, the two most common determinants to a reasonable royalty under this approach are – licensing history and comparable patents. Interestingly and importantly, these two determinants are also taken into consideration by several antitrust jurisdictions in the world while dealing with the issue of reasonable royalty. III. WHETHER TO REGULATE EXCESSIVE PRICING AND THE MONDERN REASONABLE ROYALTY APPROACH IN THE U.S. A. Whether to regulate excessive pricing?   Supply and demand are two key factors that determine a price in a free market. Profits are usually what encourage innovation and attract firms doing businesses in the first place. There is no doubt that a firm sets a price it believes to maximize its profits – which is profit maximization rule in economics. When a monopoly tries to manipulate or disturb the market by setting a lower or higher price that does not go along with profit maximization rule, here are some possible consequences: (1) new entries in the market trying to share the profits; (2) consumers might switch to substitutes of the product in order to pay less; (3) monopoly might lose profits that it would earn otherwise. Simply saying, a free market usually responds to market changes quite well and can function accordingly without too much disruption. Regardless of the free market mechanism, there are still many voices discouraging the prohibition of excessive pricing due to the inherent dangers of regulating prices – such as discouraging investment in research and development activities, impairing innovation, and ultimately harming consumers.[54]   Along with the antitrust jurisdictions that prohibit excessive pricing by law, there are studies showing that prohibition of excessive pricing may benefit the market or – the consumers. A 2015 research finds that: “when economies of scale and entry barriers imply a great likelihood of dominant firms not subjecting to regulation but capable of charging supra-competitive prices, excessive pricing regulation is then important for smaller markets.”[55] A study in 2017 further examines the competitive effects of the prohibition of excessive pricing by applying two competitive benchmarks – retrospective benchmark and contemporaneous benchmark to assess the price charged by a dominant firm excessive or not. The study finds that the two benchmarks restrain the dominant firm’s behavior but soften the firm’s behavior when its competing with a rival. By setting certain factors homogeneous, a retrospective benchmark for excessive pricing benefits consumers. While under different circumstances, consumers are worse off and inefficient entries are created. Overall, the study indicates that the competitive effects of prohibition of excessive pricing vary as we consider various factors – such as the nature of competition, the expected fines, incentive to invest in research and development (R&D), cost of litigation and more. [56]   As a whole, there are still a great number of concerns about potential dangers of regulating price. However, whether to regulate excessive pricing or not, the fundamental question to ask is still – “how to determine a reasonable price to assess if the price at issue is excessive?” B. The Modern Reasonable Royalty Approach in the U.S.   U.S. antitrust agencies do not prohibit excessive pricing. An IPR holder is free to charge a monopoly price just as a monopoly is free to earn its monopoly profits as long as the monopoly price and profits are not resulted from anticompetitive conducts that violate antitrust laws in the U.S. While saying that, U.S. still has a reasonable royalty approach developed under its patent law which is the law Taiwan has copied a lot from. [57]   There are different methodologies for the reasonable royalty approach in the U.S., the most common one would be the hypothetical negotiation which was matured from Georgia-Pacific Corp. v. United States Plywood Corpin 1971 (Georgia-Pacific case), ruling that the proper damages in a patent infringement case as – “the amount that a licensor and the infringer would have agreed upon.” By adopting this hypothetical negotiation framework, the case eventually developed a list of 15 determinants as to a reasonable royalty: [58] (1) The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty. (2) The rates paid by the licensee for the use of other patents comparable to the patent in suit. (3) The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold. (4) The licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly. (5) The commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promotor. (6) The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales. (7) The duration of the patent and the term of the license. (8) The established profitability of the product made under the patent; its commercial success; and its current popularity. (9) The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results. (10) The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention. (11) The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use. (12) The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions. (13) The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer. (14) The opinion testimony of qualified experts. (15) The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license.   The U.S. reasonable royalty approach and the calculation of reasonable royalty have been evolving since then. The Federal Circuit in a 2011 case held that the long-used and criticized 25 percent rule of thumb is fundamentally flawed for determining a baseline royalty rate in a hypothetical negotiation.[59] The rule suggests that 25% of the expected profits for the product that incorporates the IP at issue as a baseline royalty rate. Practically, the profits earned by the licensee and the revenues of the product are still often taken into consideration nowadays while applying the U.S. reasonable royalty approach.   Further, the Ninth Circuit modified some factors in Microsoft Corp. v. Motorola Inc. (2012) which was a case involved with reasonable and non-discriminatory (RAND) commitment, standard essential patents (SEPs), and patent pool. [60] This case raised some important factors to determine a RAND royalty, such as RAND commitment and its purposes, SEPs’ contribution and importance, alternatives of SEPs to the adopted standard, and so on. Comparable patents play a very critical factor in this case in terms of calculating a RAND royalty. Also, it is important to notice that the function of a RAND commitment limits a SEP licensor to royalties that reflect their ex ante values instead of the incremental monopoly power provided by the standard.[61]   In Ericsson, Inc. v. D-Link Systems, Inc. (2014), a modified version of the 15 factors was adopted after the Federal Circuit held that – not every factor from the 15 factors in Georgia-Pacific will apply to every case, and courts must instruct the jury on factors that are relevant in the case. Also, the burden of proof is on the implementer (or, the antitrust authority in an excessive pricing case) to establish a baseline royalty with evidence. That royalty then must be assessed to determine if it is excessive. [62]By adopting incremental value approach and incorporating apportionment, the Federal Court here provides a more complete guidance on how to calculate royalties for patents on RAND terms:[63] (1) Importance of RAND commitment; (2) Apportionment of patented features: the royalty for the patented technology must be apportioned from the value of the standard as a whole; (3) Incremental value approach: the royalty must be based on the incremental value of the invention, instead of any value added by the standardization of the invention or the standard itself.   Lastly, two factors that were not often discussed while determining a reasonable royalty were applied inPrism Technologies LLC v. Sprint Spectrum L.P. (2017) - previous settlement agreements and cost savings though infringement.[64] In conclusion, the modern reasonable royalty approach under U.S. patent law was evolved from the adopted 15 factors in Georgia Pacific case. The approach then has been developing along with changes of law, development of technology, adoption of SEPs, RAND and FRAND commitments, and more other relevant factors. IV. A PROPOSED ANTITRUST FRAMEWORLK OF REASONABLE ROYALTY FOR TAIWAN   Having articulated the past attitude and the current antitrust framework of reasonable royalty in Taiwan, we have pointed out some misunderstandings in the current framework. Having addressed the reasonable royalty approaches under the patent laws in Taiwan and the U.S., we also have found similarities in between – the hypothetical negotiation framework and relevant determinants. Even though there are concerns against prohibition of excessive pricing due to potential dangers of regulating price and supports towards ultimate protection of free competition, TFTC and the courts in Taiwan are still required by law to apply the prohibition of excessive pricing against IPRs for the current time being. Therefore, the most important section and the core of this paper now has come forward – which is a proposed antitrust framework composed of possible methodologies and clearer guidance for Taiwan to deal with the antitrust issue of reasonable royalty in an excessive pricing case.   The proposed framework is based on the proposed methodologies in a 2016 paper[65] - which is to apply the hypothetical negotiation framework under U.S. patent law to determine a reasonable royalty or a competitive benchmark in an excessive pricing case. By applying the most relevant factors and adhering to important and correct principles in the case, a reasonable royalty as a baseline is thus determined to evaluate if the price at issue is excessive.   Before articulating the proposed framework in a more detailed way, it is important to notice some basic differences between reasonable royalty in a patent infringement case and an excessive pricing case: Table 1 Reasonable Royalty in between a Patent infringement Case and an Excessive Pricing Case Reasonable Royalty in an Excessive Pricing Case Reasonable Royalty in a Patent Infringement Case Base Country Countries that prohibit excessive pricing. U.S. Case Type Antitrust case Patent infringement case Governing Law Antitrust (competition) law Patent law Prohibited Action A prohibited act of charging unfairly high price through abuse of monopoly. A prohibited act of unauthorized making, using, offering, or selling any patented invention. The Reasonable Royalty Issue Through determining a reasonable royalty to evaluate if a firm is charging excessive royalty through abuse of monopoly. Through determining a reasonable royalty to establish damages/compensation for the act of patent infringement. Proof of Harm Having found excessive pricing, competitive harms should be proved to establish an excessive pricing violation. Harm is proved after determining the reasonable royalty. Having proven the act of patent infringement, damages will then be determined based on reasonable royalty. Harm is proved to exist before calculating the damages. Negotiation There was negotiation over royalty before the lawsuit starts. There sometimes had no negotiation over royalty. Reasonable Royalty Approach Apply relevant factors to determine a reasonable royalty, then compare it with the price at issue to decide if the firm is charging excessive price through abuse of monopoly. Apply hypothetical negotiation framework to determine the royalty the licensor and the infringer would have agreed upon if there had been a negotiation instead of an infringement. Relevant Factors There are multiple and various factors applied in different countries, often not systematic or relevant. The 15 factors evolved from Georgia-Pacific, and some modified and new factors developed later on. A. Step 1 – Important Principles to Keep in Mind Regarding the Antitrust Issue of Reasonable Royalty. 1. No presumption of monopoly power: Ownership of IPRs does not necessarily confer monopoly power. 2. IP conducts may possibly constitute antitrust violations: Enforcing IPRs or any seemingly proper IP conduct may still possibly constitute an antitrust violation, so that they shall not be excluded from the application of FTA. 3. No such thing as excessive profit in free market economy: It is the pricing practice conducted by a monopolistic enterprise that should be evaluated in an excessive pricing case, instead of the profits the enterprise earns. 4. Harm to competition is and should be the key to establish an antitrust violation under Article 9 of FTA: Simply charging a perceived excessive price or earning some unjustified profits does not automatically constitute an antitrust violation. It is the competition and consumers that we should protect in terms of any excessive pricing case. Thus, harms to competition and consumers should be proved – such as lower outputs, entry barriers, and negative impacts on innovation or R&D activities. B. Step 2 – Compliance with Article 45 of FTA & IP Guidelines of Taiwan. 1. Firstly, all proper conducts pursuant to all IP laws in Taiwan are excluded to the application of FTA even though there is no clear explanation of what would be proper IP conducts. 2. If Article 45 of FTA does not apply in the case, we should turn to IP Guidelines of Taiwan to see if the involved market conducts or pricing practices would violate the Guidelines. If the Guidelines do not apply here, then we shall turn to Step 3 of the proposed framework. C. Step 3 – If it is a Potential Excessive Pricing Case?   Section 2 of Article 9 of FTA articulates - “Monopolistic enterprises shall not engage in improperly setting, maintaining or changing the price for goods or the remuneration for services.[66]” 1. There must be a monopolistic enterprise. 2. The prices of goods or services or the pricing practices involved are reasonably challenged by the implementers or TFTC. [67] D. Step 4 – When would a hypothetical negotiation have taken place?   When it is a potential excessive pricing case under Section 2 of Article 9 of FTA, it is time to apply the hypothetical negotiation framework under patent law to determine a reasonable royalty within antitrust framework. While the first thought we come up with is usually “how much the parties would have agreed upon,” what we often ignore is that – “when would a hypothetical negotiation have happened? “The timeframe of the hypothetical negotiation is in fact highly related to what relevant factors we should consider in terms of determining a reasonable royalty. Such timeframe issue thus could cause huge impacts on the amount of damages in a patent infringement case and affect the competitive benchmark in an excessive pricing case. More clarifications are as follows: 1. In a patent infringement case:[68] a. Pure ex ante approach: By assuming the parties would have negotiated over the royalty before the infringement began, such approach reflects an ex ante negotiation in the absence of infringement based on the information available before the infringement. Two supporting reasons are: (1) preservation of incentives; (2) avoidance or lowering the cost of patent holdup.[69] b. Pure ex post approach: This approach sets the negotiation reached on some later date, such as the date of judgement or any time after the infringement. Such approach could possibly provide more available and provable information to determining a royalty but could also give the patentee more bargaining power when the patentee is holding an injunction against the infringer. Figure 1 Timeframes of the Hypothetical Negotiation Applying Pure Ex Ante Approach and Pure Ex Post Approach c. Contingent Ex Ante Approach: Pros and concerns when applying pure ex ante and pure ex post approaches are out there to be noted. While a proposed approach claims to address the issues of patent holdup and bargaining power at the same time – which is called contingent ex ante approach. This approach sets the negotiation prior infringement reached contingent on the ex post information, arguing that ex post information provides a better measure for the true value of the patented technology. Further, it is said to be able to take new and changed circumstances into account in every individual infringement case. Here is a simple example presented in the paper:[70] (1) A $500,000 royalty might be agreed upon based on the parties’ expectation that the infringer would earn $1 million above what it would earn if it used the next-best available non-infringing patent. (2) At the date of judgement, the infringer is proven to earn $1.5 million instead of $1 million. This $1.5 million earning would be the ex post information applied in an ex ante negotiation. On the other hand, if the proven earning is only $500,000, then the royalty the parties might have agreed upon would be lower. (3) By applying contingent ex ante approach, it is argued that the patent hold-up would be avoided and the bargaining power between the parties would be balanced. Figure 2 Timeframes of the Hypothetical Negotiation Applying Contingent Ex Ante Approach 2. In an excessive pricing case: Applying the hypothetical negotiation framework under patent law in an excessive pricing case is much more difficult on one matter – the timeframe discussed above. Some important reasons are as follow: (1) Excessive pricing cases involve comparing a competitive benchmark with the price at issue, yet the prices in a case could be changing over time. (2) There were already negotiations over royalty before an excessive pricing lawsuit starts. (3) Involvement of FRAND and SEPs only make it more complicated to determine a reasonable royalty while facing the timeframe issue. E.g. the timing of a patent’s incorporation into a standard is critical and affects the value of the invention. Figure 3 Excessive Pricing Case and the Timeframe Issue E. Step 5 – If there are FRAND or RAND terms?   Royalties negotiated on FRAND or RAND terms (FRAND royalties) can be and are usually different from those without. FRAND royalties may involve the following factors which often consequently affect royalties in real world: 1. FRAND obligations and terms: such as fairness, royalty free, grant back provision, exclusivity and other reciprocal terms. 2. Timing of the establishment of a standard: A patent may exist before the establishment of an industrial standard. As this patent is considered essential to a standard and also is included in such standard, the value of such patent – SEP usually goes up.[71] 3. Cooperation between SEP holders: the number of SEP holders and the number of SEPs included in a standard can be influential. 4. Other factors: standard setting organizations’ policies, threat of injunction, patent hold-up and hold-out, royalty stacking, other available and comparable technologies, and relationship between licensors and licensees. F. Step 6 – Consider the Most Relevant Factors.   No matter what approach or timeframe of hypothetical negotiation gets adopted in an excessive pricing case, the most relevant factors to consider in determining a reasonable royalty are as follow: 1. Comparable patents The best potential non-infringing alternatives should be the top determinant. What we usually consider as alternatives here are the existing patents in the marketplace since it would be impractical to include expired or invalid patents as comparable patents. But if we take the issue of the timeframe of a hypothetical negotiation into consideration, the status of the patents could be different – which means the hypothetical negotiation could have happened when there were more or less comparable patents. Undoubtedly, comparability is hard to judge. Loads of factors have been taken into account – technical and economic standpoints, the underlying technology, timing of the licensing, previous settlements or litigations, and other more. As noted here, comparable patents are provided as evidence to determining a reasonable royalty – not to its admissibility. Further, here are more difficulties while looking for comparable patents: a. Lots of technology-related royalties nowadays are negotiated on a patent portfolio basis using the end-user device as the royalty base. Both end-user based and portfolio based calculations make it harder to extract the value of an individual patent. b. Cross-licensing or business relationships are sometimes built in exchange of patent licensing. It means that there sometimes has no cash payment involved to know the values of patents. c. Should the allegedly comparable patents cover foreign patents? 2. FRAND royalties: a. FRAND or RAND commitment and its importance. b. Number of SEPs and number of SEP holders in a standard setting. c. Proper apportionment: By the reason that not all patents are created equal or of the same value, the value of an individual patent’s contribution to the standard and the end product is a critical factor when determining a FRAND royalty. As noted here for clarification, even though the Federal Circuit in the famous Ericsson v. D-Link case stated that a FRAND royalty should not include the value that a technology gains from simply being included in a standard, it should not be interpreted as a complete exclusion of any of a standard’s value. When a patented technology in fact creates values for a standard due to its inclusion, these values should definitely be considered as contribution and an important factor.[72] G. Step 7 – Consider Other Factors 1. Other factors may possibly be considered a. The terms and scope of the licensing agreement, as exclusive, non-exclusive, restrictive, or non-restrictive. b. The nature and benefits of the technology or invention. c. Licensor’s monopoly power, and its policies or programs to maintain or preserve such power. d. Licensing history between the parties, and between the licensor and other firms. e. Investments made to implement the technology or the standard. f. Barriers to entry, it could be legal barriers, exclusive agreements, economies of scale, or network effect.[73] As for antitrust of excessive pricing in Taiwan, a paper suggests that entry barriers should be one of the keys to determine if TFTC should step in. That is to say - when there are entry barriers delaying or barring new entries in a market, TFTC should possibly have jurisdiction and a case according to the types of the barriers. g. Royalty stacking and patent hold-up and hold-out. h. Smallest saleable component rule: Institute of Electrical and Electronics Engineers (IEEE) amended its patent policy in 2015 and included the smallest saleable Compliant Implementationas an important consideration in terms of determining a reasonable royalty.[74] 2. Factors not recommended to be considered. a. Profits earned from charging the allegedly excessive royalty. b. The profitability, commercial success, popularity, advantages, utilities, and the sales of the patented products. c. The value of the pure adoption of the standard. d. Commercial and business relationships involved. e. Other non-competition, non-patent-related, or pure business factors. H. Step 8– Compare the Reasonable Royalty to the Alleged Excessive Price 1. The determined reasonable royalty is a baseline or what we call a competitive benchmark. It should not be a minimal royalty a patent owner can charge. 2. As for practicality, it is allowed to be more than just reasonable royalty to be compensated to the patent owner in a patent infringement case. Just like a firm can charge a price more than the cost of its product. Therefore, the price at issue should not be necessarily excessive when the determined reasonable royalty is greater than the alleged excessive price. V. CONCLUSION   Excessive pricing cases involving the antitrust issue of reasonable royalty can be a matter of tremendous cost of litigation, fines of billion dollars, and unimaginable potential harms to competition. The great dangers involved through regulating price can lead to negative impacts on innovation, industries, and consumers - consequently to the ultimate failure of protection of competition. Putting aside the doubts about the prohibition of excessive pricing, I respectfully propose an antitrust framework of reasonable royalty in this paper with a sincere goal to help Taiwan with the issue of reasonable royalty in any excessive pricing case in the future. Lastly, I sincerely address the most essential and ultimate principle of antitrust here, again - it is and should always be the competition that antitrust laws and agencies aim to protect, not competitors, prices or only the consumers.[75] [1] Anti-Monopoly Law of the People’s Republic of China, Law Info China, http://www.lawinfochina.com/display.aspx?lib=law&id=0&CGid=96789 (last visited Aug. 6, 2019); The Antimonopoly Act, Japan Fair Trade Commission, http://www.jftc.go.jp/en/legislation_gls/amended_ama09/amended_ama15_01.html(last visited Mar.9, 2018); Monopoly Regulation and Fair Trade Act, Fair Trade Commission of Korea, http://www.moleg.go.kr/english/korLawEng?pstSeq=54772(last visited Aug. 6, 2019); Fair Trade Act, Fair Trade Commission of Taiwan, https://www.ftc.gov.tw/law/EngLawContent.aspx?lan=E&id=29 (last visited Mar.9, 2018). [2] Anti-monopoly Law of the People's Republic of China §17(1), available at http://www.china.org.cn/government/laws/2009-02/10/content_17254169.htm (last visited Mar.12, 2018). [3]Huawei Technologies Co. v. InterDigital Technology Co., Guangdong High Court Decision No.306 (2013), available at http://www.mlex.com/China/Attachments/2014-04-17_BT5BM49Q967HTZ82/GD%20verdict.pdf (last visited Mar.9, 2018);CLEARY GOTTLIEB STEEN & HAMILTON LLP, China’s NDRC Concludes Qualcomm Investigation, Imposes Changes in Licensing Practices (Mar. 16, 2015), https://www.clearygottlieb.com/-/media/organize-archive/cgsh/files/publication-pdfs/chinas-ndrc-concludes-qualcomm-investigation-imposes-changes-in-licensing-practices.pdf (last visited Mar.9, 2018). [4] THE MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA, Full text of the Draft of the Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights (2017), http://fldj.mofcom.gov.cn/article/zcfb/201703/20170302539418.shtml (last visited Mar. 12, 2018). [5]Bruce Kobayashi, Douglas Ginsburg, Joshua Wright & Koren Wong-Ervin,Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Anti-Monopoly Commission of the State Council's Anti-Monopoly Guidelines against Abuse of Intellectual Property Rights, GEORGE MASON LAW & ECONOMICS RESEARCH PAPER, No.17-19, available at https://ssrn.com/abstract=2952414 (last visited Mar.12, 2018). [6] European Commission is the competition authority within European Union. [7] TheTreaty on the Functioning of the European Union §102(a), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:2016:202:FULL&from=EN (last visited Mar.12, 2018). [8] United Brands Company and United Brands Continentaal BV v Commission of the European Communities, Case 27/76 (1978). [9] Antitrust: Commission sends Statement of Objections to Motorola Mobility on potential misuse of mobile phone standard-essential patents- Questions and Answers, European Commission, http://europa.eu/rapid/press-release_MEMO-13-403_en.htm (last visited Mar.12, 2018); see also Protecting consumers from exploitation-Chillin’ Competition Conference, Brussels, 21 November 2016, European Commission, https://ec.europa.eu/commission/commissioners/2014-2019/vestager/announcements/protecting-consumers-exploitation_en (last visited Mar.12, 2018). [10] Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība v. Konkurences padome, C-177/16(2017). [11] TheTreaty on the Functioning of the European Union §267(a), available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E267:en:HTML (last visited Mar.13, 2018). [12] Miranda Cole,Kevin Coates&Siobhan L.M. Kahmann, Welcome clarifications by the EU Court on the concept of excessive pricing, Covington & Burling LLP - Inside Tech Media (Sep. 15, 2017), https://www.insidetechmedia.com/2017/09/15/welcome-clarifications-by-the-eu-court-on-the-concept-of-excessive-pricing/ (last visited Mar.13, 2018). [13] Martin André Dittmer & Sofie Kyllesbech Andersen, Recent decisions on excessive pricing, abuse of dominance, cartel penalties and gun jumping (2018), https://www.internationallawoffice.com/Newsletters/Competition-Antitrust/Denmark/Gorrissen-Federspiel/Recent-decisions-on-excessive-pricing-abuse-of-dominance-cartel-penalties-and-gun-jumping (last visited Jan. 17, 2019). [14] Michal S. Gal, Monopoly Pricing as an Antitrust Offense in the U.S. And the EC: Two Systems of Belief About Monopoly? ANTITRUST BULLETIN, 49, 343-384 (2004), available athttps://ssrn.com/abstract=700863 (last visited Mar.14, 2018). [15] U.S. Federal Trade Commission v. Qualcomm Incorporated ( N.D. Cal. Filed Jan. 17, 2017), available at https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf (last visited Mar. 14, 2018). [16] Federal Trade Commission v. Qualcomm Incorporated, Case No. 5:17-cv-00220-LHK (D. Northern District of California, filed Feb.1, 2017). [17] FAIR TRADE COMMISSION, Dissenting Statement of Commissioner Maureen K. Ohlhausen In the Matter of Qualcomm, Inc. (Jan. 17,2017), https://www.ftc.gov/system/files/documents/cases/170117qualcomm_mko_dissenting_statement_17-1-17a.pdf (last visited Mar. 2, 2018). [18] Taiwan Fair Trade Act §9(1) (2017), available at: http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0150002 (last visited Mar. 2, 2018). [19] Bruce H. Kobayashi, Douglas H. Ginsburg, Joshua D. Wright, and Koren W. Wong-Ervin, “Excessive Royalty” Prohibitions and the Dangers of Punishing Vigorous Competition and Harming Incentives to Innovate, CPI ANTITRUST CHRONOCLE, 4(3) (2016). [20] Kung-Chung Liu, Interface between IP and Competition Law in Taiwan, THE JOURNAL OF WORLD INTELLECTUAL PROPERTY, 8(6), 735–760 (2005). [21] Pei-Fen Hsieh, Antitrust Regulatory Measures Under the trend towards Bureaucratic Regulation- A Study on Consent Decree, FAIR TRADE QUARTERLY, 13(1), 166 (2005). [22] Taiwan Fair Trade Commission, Meeting Minutes No.352 (1998). [23] Hong Xuan, On principles in tackling technology license and market competition, 112-113 (2008). [24] TAIWAN FAIR TRADE COMMISION, Meeting Minutes No.480 of Taiwan Fair Trade Commission (2001), https://www.ftc.gov.tw/upload/upload-90R480_REC.txt (last visited Feb. 7, 2018). [25] Kung-Chung Liu & Vick Chien, Analysis of and Comments on CD-R-related Cases: Focusing on Competition Law and Patent Compulsory Licensing Issues, FAIR TRADE QUARTERLY, 17(1), 2 (2005). [26] Sony and Taiyo Yuden did not appeal against the administrative decisions in 2010; therefore their cases were affirmed before 2015. See TAIWAN FAIR TRADE COMMISSION, Administrative Decision No.104027 (2015), https://www.ftc.gov.tw/uploadDecision/269b6dff-a0fc-46a0-8512-ca5f716732bb.pdf (last visited Feb. 7, 2018). [27] Taipei High Administrative Court, Philips Electronics NV v. TFTC, Decision No. 00908 (2003). [28] TAIWAN FAIR TRADE COMMISSION, Administrative Decision No. 095045 (2006), https://www.ftc.gov.tw/uploadDecision/2005302-0950426_002_095d045.pdf (last visited Feb. 23, 2018). [29] Taiwan Intellectual Property Court Appeal Case No.14 (2008), https://law.judicial.gov.tw/FJUD/data.aspx?ro=10&q=cd8bdbb8d80f8d587805c863b2e64c55&gy=jcourt&gc=IPC&sort=DS&ot=in (last visited Aug. 6, 2019). [30] TAIWAN FAIR TRADE COMMISSION, Administrative Decision No. 098156 (2009) http://www.ftc.gov.tw/uploadDecision/faed94a8-34ce-4f8e-b59a-239a9eaece1d.pdf (last visited Feb. 23, 2018). [31] Supreme Court of Taiwan, Case No.883 (2012), https://law.judicial.gov.tw/FJUD/data.aspx?ro=0&q=033765ef814495b27d346fcbd9f38606&gy=jcourt&gc=TPS&sort=DS&ot=in (last visited Aug. 6, 2019). [32] TAIWAN FAIR TRADE COMMISSION, Administrative Decision No. 104027 (2015) https://www.ftc.gov.tw/uploadDecision/269b6dff-a0fc-46a0-8512-ca5f716732bb.pdf (last visited Feb. 26, 2018). [33] TAIWAN FAIR TRADE COMMISSION, Administrative Decision No.106094 (2017) https://www.ftc.gov.tw/uploadDecision/561633e4-42bd-4a4f-a679-c5ae5226966b.pdf (last visited Mar. 2, 2018). [34] Fair Trade Act of 2017 §9(1), available at: http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0150002 (last visited Mar. 2, 2018). [35] id, at Page 61-62. [36] Settlement between TFTC and Qualcomm, TAIWAN FTC NEWSLETTER, August 10, 2018, https://www.ftc.gov.tw/internet/main/doc/docDetail.aspx?uid=126&docid=15551 (last visited Nov. 30, 2018). [37] TAIWAN FAIR TRADE COMMISSION, Record of Commission Meeting No. 1396 (Nov. 2018), https://www.ftc.gov.tw/upload/b0aa3b61-d0e7-41c4-b6a0-b1e6a472ee04.pdf (last visited Nov. 30, 2018). [38] TAIWAN FAIR TRADE COMMISSION, Qualcomm’s Investment Plan under the Settlement, (Oct. 2018), https://www.ftc.gov.tw/upload/ee937bcf-68b9-4751-b2da-b636c46b0faa.pdf (last visited Nov. 30, 2018). [39] The latest amendment of the Fair Trade Act of Taiwan was proposed in the October of 2018, waiting to be reviewed. https://join.gov.tw/policies/detail/898e30a4-1ee8-491b-8c5a-5fbdbb5973f9 (last visited Jan. 18, 2019). [40] See Fair Trade Act of 2017 §45:”No provision of this Act shall apply to any proper conduct in connection with the exercise of rights pursuant to the provisions of the Copyright Act, Trademark Act, Patent Act or other Intellectual property laws.”; available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0150002 (last visited Mar. 5, 2018); also see FAIR TRADE COMMISSION, Administrative Statement No. 02678 (2000), https://www.ftc.gov.tw/internet/main/doc/docDetail.aspx?uid=225&docid=431 (last visited Mar.25, 2018). [41] Legislative Rationales of Fair Trade Act of 1991, available at https://www.ftc.gov.tw/law/LawContent.aspx?id=FL011898 (last visited Aug. 6, 2019). [42] Guidelines on Technology Licensing, Fair Trade Commission, https://www.ftc.gov.tw/internet/main/doc/docDetail.aspx?uid=163&docid=227 (last visited Aug. 6, 2019). [43] id, §3. [44] id, §5(C): “Stipulations that, for ease of calculation, fees for licensed technology that is part of a manufacturing process or that subsists in component parts are to be calculated on the basis of the quantity of finished goods manufactured or sold that employ the licensed technology, or the quantity of raw materials or component parts used that employ the licensed technology, or the number of times such materials or parts are used in the manufacturing process.”; see also §6(L): “Requirements that the licensee pay licensing fees based on the quantity of a particular type of good manufactured or sold irrespective of whether the licensee used the licensed technology.” [45] id, §5: “The following kinds of technology licensing arrangement stipulations do not intrinsically violate the provisions of the Act on restraint of competition or unfair competition, with the exception of those improper matters to be found after reviewed in accordance with Point 5(C) and 5(D)…” [46] Fair Trade Act §9(2): “Monopolistic enterprises shall not engage in any one of the following conducts… improperly set, maintain or change the price for goods or the remuneration for services,” available at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0150002 (last visited Mar. 8, 2018). [47] Douglas H. Ginsburg & Joshua D. Wright, Whither Symmetry? Antitrust Analysis of Intellectual Property Rights at the FTC and DOJ, COMPETITIN POLICY INTERNATION, 9 (2) (2013). [48] Id. [49] id, Section 1-3 of § 97(1). [50] id, Section 3 of §97(1) :”the amount calculated on the basis of reasonable royalties that may be collected from exploiting the invention patent being licensed.”; see also The 2013 Amendment to Patent Act of Taiwan, List of Amendments to Patent Act of Taiwan, http://www.6law.idv.tw/6law/law2/專利法歷年修正條文及理由.htm#_%EF%BC%8E12%EF%BC%8E%E4%B8%80%E7%99%BE%E9%9B%B6%E4%BA%8C%E5%B9%B4%E4%BA%94%E6%9C%88%E4%B8%89%E5%8D%81%E4%B8%80%E6%97%A5%EF%BC%88%E5%85%A8%E6%96%87%E4%BF%AE%E6%AD%A3%EF%BC%89 (last visited Mar. 8, 2018). [51] id. [52] Intellectual Property Court of Taiwan Case No.38 (2014); see also Intellectual Property Court of Taiwan Case No.24 (2017); Chung-Lun Shen, Taiwan Supreme Court to Clarify Distinction between Patent Damages and Unjust Enrichment: Koninklijke Philips N. V. v. Gigastorage Corporation, IP OBSERVER, 18 (2017). [53] <與飛利浦專利訴訟 國碩扳回一城>,經濟日報UDN,https://money.udn.com/money/story/5607/3393179 (last visited Jan. 19, 2019). [54] Bruce H. Kobayashi, Douglas H. Ginsburg, Joshua D. Wright, and Koren W. Wong-Ervin, “Excessive Royalty” Prohibitions and the Dangers of Punishing Vigorous Competition and Harming Incentives to Innovate, CPI ANTITRUST CHRONOCLE, 4(3) (2016). [55] Reena Das Nair & Pamela Mondliwa, Excessive Pricing revisited: what is a competitive price?, Presented at Conference: 1st ANNUAL COMPETITION AND ECONOMIC REGULATION (ACER) WEEK, SOUTHERN AFRICA (2015), https://www.researchgate.net/profile/Reena_Das_Nair/publication/290440699_Excessive_Pricing_revisited_what_is_a_competitive_price/links/5698d5f408ae34f3cf2070dd/Excessive-Pricing-revisited-what-is-a-competitive-price.pdf (last visited June. 5, 2018). [56] David Gilo & Yossi Spiegely, The Antitrust Prohibition of Excessive Pricing, INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION, Elsevier, vol. 61(C)(2018). [57] 35 U.S. Code § 284. [58] Georgia-Pacific Corp v. United States Plywood Corp, 318 F. Supp. 1116 (NY.S.D.N.Y. 1970). [59] Uniloc USA, Inc. v. Microsoft Corp., 632 F. 3d 1292 (Fed. Cir., 2011). [60] Microsoft Corp. v. Motorola Inc,696 F.3d 872 (9th Cir. 2012). [61] William H. Page,Judging Monopolistic Pricing: F/RAND and Antitrust Injury, TEXAS INTELLECTUAL PROPERTY LAW JOURNAL, 22, 181-208 (2014), available at http://scholarship.law.ufl.edu/facultypub/588 (last visited Mar. 28, 2018). [62] Ericsson, Inc. v. D-Link Systems, 773 F.3d 1201 (Fed.Cir. 2014). [63] Anne Layne-Farrar & Koren W. Wong-Ervin, An Analysis of the Federal Circuit's Decision in Ericsson v. D-Link,Competition Policy International, CPI Antitrust Chronicle, (1) (2015), available at https://ssrn.com/abstract=2669269 (last visited Mar. 29, 2018), see also Huntern Shu, Determination of royalties in Ericsson v. D-Link, Science & Technology Policy Research and Information Center (STPI) (2015), http://iknow.stpi.narl.org.tw/post/Read.aspx?PostID=10945 (last visited Mar. 29, 2018). [64] Prism Technologies LLC v. Sprint Spectrum L.P., No.16-1456 (Fed. Cir. 2017). [65] GINSBURG, KOBAYASHI, WONG-ERVIN & WRIGHT ET AL., supra note 19. [66] Id. [67] Fair Trade Act §7. [68] Norman V. Siebrasse &Thomas F. Cotter, A New Framework for Determining Reasonable Royalties in Patent Litigation, FLORIDA LAW REVIEW, 68 (2016), available at : http://scholarship.law.ufl.edu/flr/vol68/iss4/1 (last visited Mar. 29, 2018). [69] U.S. FEDERAL TRADE COMMISSION, The Evolving IP Marketplace: Aligning Patent Notice and Remedies With Competition (2011), https://www.ftc.gov/sites/default/files/documents/reports/evolving-ip-marketplace-aligning-patent-notice-and-remedies-competition-report-federal-trade/110307patentreport.pdf (last visited Jan. 23, 2019). [70] id. at 21. [71] Standard-essential patents, COMPLETION POLICY BRIEF, 5 (2014). [72] id. at Page17. [73] Ma, Tay-cheng,Regulation of the Exploitative Abuse: Policy Initiative and Practical Dilemma, Fair Trade Quarterly 17(1) (2009). [74] INSTITUTE OF ELECTRICAL AND ELECTRINICS ENGINEERS, IEEE-SA STANDARDS BOARD BYLAWS (2015),https://standards.ieee.org/about/policies/bylaws/sect6-7.html (last visited Jan. 22, 2019). [75] Douglas H. Ginsburg & Joshua D. Wright, The Goals of Antitrust: Welfare Trumps Choice, FordhamLAW REVIEW, 81 (2013), available at https://ir.lawnet.fordham.edu/flr/vol81/iss5/9 (last visited Mar. 11, 2018).

The Demand of Intellectual Property Management for Taiwanese Enterprises

Science & Technology Law Institute (STLI), Institute for Information Industry has conducted the survey of “The current status and demand of intellectual property management for Taiwanese enterprises” to listed companies for consecutive four years since 2012. Based on the survey result, three trends of intellectual property management for Taiwanese enterprises have been found and four recommendations have been proposed with detail descriptions as below. Trend 1: Positive Growth in Intellectual Property Awareness and Intellectual Property Dedicated Department/Personnel, Budget and Projects 1.Taiwanese enterprises believe that intellectual property plays an important role 74.18% of Taiwanese enterprises believe that intellectual property can increase economic value and 58.61% of those believe that it can effectively prevent competitors from entering the market. Source: created by project team members Graph 1 The benefit of intellectual property for the company 2.Taiwanese enterprises increase investment in the dedicated department and full time personnel for intellectual property Nearly 80% of listed and OTC companies set up full time personnel for intellectual property and over 50% of those have established dedicated department to handle its business that is higher than 30% in 2012. Source: created by project team members Graph 2 Specialized Department or personnel for intellectual property by year 3.Taiwanese enterprises plan budget for intellectual property each year 81% of respondent companies plan certain budget for intellectual property each year. Among the expenses items, the percentage of 90.95% for intellectual property application is the highest. Next are 58.29% for inventor bonus payment and 56.28% for intellectual property education training. Source: created by project team members Graph 3 Taiwanese enterprises plan budget for intellectual property each year Trend 2: Insufficient Positive Activation for Intellectual Property 1.Interior intellectual property personnel is seldomto be involved in the core decision making in Taiwanese enterprises Based on the importance and difficulty of intellectual property, most items in the area of high importance and difficulty are demand of professionals and practical experiences (e.g.: lack of interior talent, do not understand international technology standard and specification, lack of platform to obtain experiences and cases). Only application time is for administrative procedure of Intellectual Property Offices. Therefore, it is known that intellectual property department of respondent companies lacks experienced talents. Source: created by project team members Graph 4 Importance and difficulty of intellectual property In addition, most of the jobs of intellectual property personnel are “keeping close cooperation and communication with R&D department”, “coordinating issues relevant to intellectual property between departments” and “keeping close cooperation and communication with marketing or sales department” instead of “R&D strategy involvement” and “marketing and operation strategy involvement” (see Graph 5). Therefore, it is demonstrated that the work of intellectual property personnel is mainly for providing coordination and assistance to other departments other than corporate strategy with intellectual property as basis. Maybe it is the reason for insufficient activation and lower investment of intellectual property in the business. Source: created by project team members Graph 5 The job of intellectual property department or personnel 2.Insufficient positive activation for intellectual property in Taiwanese enterprises It is shown that 60% of firms are without and did not obtain technology transfer (among which the traditional manufacturing sector has the highest percentage). 22.95% of firms are without but obtained technology transfer and 4.51% of those are with but did not obtain technology transfer. In addition, most of the jobs of intellectual property are administration other than activation such as treatment of authorization contract and transaction and sending warning letter of infringement. Therefore, it is assumed that intellectual property is not the key for profitability in the business. 3.Taiwanese enterprises with higher R&D expenses ratio intend to have more positive activation of intellectual property Although the entire firms are not positive for activation of intellectual property, it is found that enterprises with higher R&D expenses ratio (the ratio of R&D expenses / total operating expenses is higher than average) intend to have more positive activation of intellectual property. For example, intellectual property department with higher R&D expenses ratio involves more in the decision making of R&D strategy in the business. Compared with the enterprises with higher R&D expenses ratio, the enterprises with lower R&D expenses ratio also has higher ratio in the absence and failure of technology transfer. (see Graph 6) Source: created by project team members Graph 6 Presence and achievement of technology transfer in the different sector 4.Most of Taiwanese enterprises R&D on their own so to lack of introduction experience of external R&D results Among the survey, nearly 90% of firms R&D each item on their own except the copyright part with lower percentage of 78.5%. 15.89% of it is from outsourcing development and 13.08% of it is from authorization. In addition, the outsourcing development and authroization of invention patent part have higher percentage which is 17.34% and 15.61% respectively. However, the speed of self R&D can’t meet the speed of product elimination nowadays. Therefore, under global open competition, corporate may try to cooperate with universities and research institutions to speed up R&D progress. Table 1 Source of Intellectual Property Right Source: created by project team members Further, among the services s that corporate ask for assistance from government, there are high demand for promotion of cooperation between industrial, academic and research sectors as well as assistance provided by academic and research institution to enhance corporate’s R&D ability. Based on this, it is clear established that a smooth access can help enterprises to cooperate with academic and research institutions for R&D instead of doing it on their own. Source: created by project team members Graph 7 The Government Policy for Intellectual Property 5.Taiwanese enterprises focus only on patent and trademark but ignore trade secret and copyright From the intellectual property items enterprises possessed each year, it is found that trademark has the highest percentage (over 80% for four-year average) and next items are invention patent and utility model patent. The awareness that corporates have on intellectual property is only limited to patent and trademark. They overlook that their core ability may be protected by trade secret and copyright. Source: created by project team members Graph 8 Owned IP right Trend 3: Increasing Demand on International Intellectual Property Service 1.The overseas intellectual property risk Taiwanese enterprises faced greatly varies from sectors Among the 2015 survey, 85% of respondent firms developed to overseas. Under which the highest percentage is 79.81% for overseas sale then 56.25% for self-establishment of overseas factory for manufacturing. Furthermore, the percentage of outsourcing in traditional manufacturing sector is the highest than that of other industries which 77.36% of traditional manufacturing firms established overseas factory for manufacturing. The percentage of overseas sale in pharmaceutical and livelihood sector is 91.3% and slightly higher than that in other industries. The result shows that different industry will select different overseas development strategy based on its sector characteristics and R&D difficulty. Source: created by project team members Graph 9 The overseas intellectual property risk As a whole, the highest risk that might be occurred from enterprises developed overseas is leakage of trade secrets. Next risks are 47.12% for being accused of product infringement and 42.31% for patent being registered. Further, the risk control greatly varies from different sector. The risks that industry and commerce service sector regards are quite different from other sectors. For example, its risk of dispute of employee jumping ship or being poached which accounted for 50% is higher than that of other sectors. In addition to the three common risks mentioned above, information and technology sector believes that there might be risk of patent dispute which accounted for 35.29% and is higher than that of other sectors. Source: created by project team members Graph 10 The overseas risk control which might be occurred by enterprises 2.The most dissatisfied part that Taiwanese enterprises have to the intellectual property outsourcing service is insufficient experiences on the treatment of international affairs Based on the 2012 and 2013 data, the too expensive fees is the primary factor that intellectual property outsourcing service didn’t meet the demand. However, from the 2014 and 2015 survey result, the experiences on the treatment of international affairs became the primary factor. It is shown that enterprises increase demand for international intellectual property work but current services from providers can’t satisfy it. From survey data, it is found that different sector has different demand on overseas development. Among which the pharmaceutical and livelihood sector has higher demand on the management of overseas trademark use, investigation of overseas infringement risk, contract of overseas patent authorization, contract of overseas trademark authorization, contract of overseas technology transfer and contract of overseas mutual R&D (See Graph 11). Source: created by project team members Graph 11 The outsourcing professional resources unsatisfied with demand – annual comparision Recommendation 1: Taiwanese enterprises shall build intellectual property creation strategy based on a variety of intecllectual property rights Enterprises may apply for patent, trademark, trade secret and copyright. For instance, brand management can be conducted with trademark and copyright and core technology or service can be protected by patent and trade secret instead of using trademark or patent alone as primary strategy. Recommendation 2: Provide Taiwanese enterprises with assistance of overseas intellectual property consultation 85% of respondent firms have overseas business which greatly varies from different sector so to accompany with different overseas intellectual property risk. Therefore, government may provide enterprises with the information of overseas intellectual property and even real time consultation services of overseas intellectual property risk which is the requirement to be satisfied immediately. In addition, the actual overseas intellectual property demand of enterprises can be found through this introduction of consultation services. To satisfy enterprises’ demand, service providers may need to improve their ability together. Recommendation 3: Build cooperation access of industry, academics and research to assist Taiwanese enterprises to enhance R&D ability Under the fast-evolved and competitive environment, enterprises shall not only depend on their own R&D. Moreover, they shall leverage the R&D result of academic and research institutions to improve so to make subsidy of those institutions from government have real impact on them. Therefore, there is demand of cooperation between industry, academics and research. The cooperation access between them should be built to achieve synergy of R&D. Recommendation 4: Experienced professionals of intellectual property are requried to be cultivated and demand of intellectual property human capital is needed to be expanded for Taiwanese enterprises Enterprises lack of experienced professionals of intellectual property. This demand could be satisfied only through on-the-job training for large personnel other than new graduates of department of intellectual property. Furthermore, enterprises can make department of intellectual property contribute its professional services into R&D and marketing strategy through design of organization work procedure to reduce risk of intellectual property they have to face.

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