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Taiwan restricts IP flow to China

29 January 2021

Taiwan restricts IP flow to China

Taiwan’s Ministry of Economic Affairs has made two regulatory amendments to tighten control of Taiwanese technology and IP going to China, namely, Article 5 of the Regulations Governing Approval for Investment or Technical Cooperation in the Mainland Area and Article 4 of the Examination Guidelines for Investment or Technical Cooperation in the Mainland Area.

The Executive Yuan’s Central Regulation Standard Act stipulates that regulations shall become effective since the third day of the enactment or publication date. As both of the amendments were published on December 30, 2020, the official effective date was January 1, 2021.

“Selling or licensing Taiwanese technology or IP will now be considered ‘technical cooperation’ and must be approved in advance,” the Ministry stated. “This includes indirect technical cooperation through a third country,” adding that the scope of the sectors targeted has also been widened from the integrated circuit sector to any “specialist technology.”

“Both of the amendments to the Regulations Governing Approval for Investment or Technical Cooperation in the Mainland Area and the Examination Guidelines for Investment or Technical Cooperation in the Mainland Area will definitely tighten control of Taiwanese investment or technical cooperation in China more strictly due to the issues of national security of Taiwan, which are frequently raised and discussed recently in Taiwan,” says Ruey-Sen Tsai, a partner at Lee and Li in Taipei. “It will be getting cumbersome to obtain an approval from the Ministry of Economic Affairs and/or other authorities in Taiwan for the investment or technical cooperation in China.”

“The authority in charge of examination of the relevant investment is the Ministry of Economic Affairs, Investment Commission,” Tsai says. “The examination period will depend upon the investment amount of a specific case, which will be from three to more than 40 days.”

The Ministry’s statement that “the scope of the sectors targeted has also been widened from the integrated circuit sector to any specialist technology” is not really correct, Tsai says. “Actually the ‘specialist technology’ has been stipulated in and governed by both of the Regulations Governing Approval for Investment or Technical Cooperation in the Mainland Area and the Examination Guidelines for Investment or Technical Cooperation in the Mainland Area. During the previous discussions, it is an issue whether or not ‘integrated circuit layouts’ should be specifically stipulated as an item in both of the two regulations. After several discussions, the major opinions hold that ‘integrated circuit layouts’ may be defined as an item of the ‘specialist technology.’ The scope of the Regulations Governing Approval for Investment or Technical Cooperation in the Mainland Area and the Examination Guidelines for Investment or Technical Cooperation in the Mainland Area actually covers specialist technologies, patents, trademarks and copyright. The term of specialist technology does not mean anything ‘high-tech’ but should include ‘integrated circuit layouts’ and trade secrets according to the prevailing practice.”

Cross-straits relations are likely going to become tense as China might try to retaliate by limiting imports from and exports to Taiwan – and we are not only talking about intangibles.

Take Australia, for example: China has recently banned lobsters coming from there after recently accounting for 94 percent of Australian rock lobster exports worth A$752 million (US$575 million) in 2018-19, according to Bloomberg

Fortunately, it is not the end of the world for local fishermen, as Australian consumers queued up for the lobsters and other crustaceans in huge numbers. “We’re hearing from retailers and producers right across the country that they’re up, on average, 30 percent from last year’s December sales,” Veronica Papacosta, chief executive officer of Seafood Industry Australia told ABC News in Australia last December.

So, on the surface, commercial trade in high-tech products between China and Taiwan might become more time- and money-consuming, and the number of relevant investments made is likely to drop. But who knows – when one door closes, another might well open, as it did for lobstermen in Australia.

 

Johnny Chan


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