The letters I-P-R have given a decade of grief to government officials and businesspeople in Taiwan. By the 1980s, the United States inparticular was becoming steadily more insistent that the island shun its status as one of the world's most active violators of intellectual property rights (IPR), including copyrights, trademarks, and patents. The pressure from abroad was matched, especially in recent years, by local businesses that were producing upscale brand name products, primarily in the computer field.
The pirates are now being sunk. Old knockoffs, such as books, cassette tapes, designer wristwatches, and toys, as well as the more recent illegal copies of video games, computer components, software, and films, no longer promise easy money for counterfeiters. New laws and regulations have put teeth into IPR protection.
Taiwan's substantial move toward IPR legitimacy not only protects local computer whizzes, musicians, film producers, artists, and authors. It also puts the island's IPR laws on par with the international standards outlined in GATT, the Berne Convention, and the Paris Convention. Although the process of establishing and enforcing IPR protectionis admittedly far from over, the changes under way reflect nothing less than a major reordering of Taiwan's business philosophy and cultural attitudes.
Laser disk smorgasbord—Taiwan's MTV parlors, where clients rent LDs and a private viewing room, have been hard hit by the IPR crackdowns. More than half have closed shop since the late 1980s.
This is one sale where everything, literally everything, must go. Since late January, shoppers have jammed three floors of a high-rise building on Hengyang Road, near Taipei's "Book Street," to make selections from a constant stock of more than one hundred thousand books, all Chinese translations of American titles. As June 12 approaches, the last day of the sale, the "50 percent off" prices will be slashed even further. All unsold stock, which could range in the millions, will be destroyed.
But this government-condoned book burning will be praised, not condemned, because these books all violate the revised ROC Copyright Law, passed in June 1992. The giantsell-off precedes the end of a two-year grace period for violators. Infringers caught after June 12 face heavy fines and up to two years in jail.
Since January 1994, the ROC Publishing Association has worked with publishing firms to sell off their pirated books. Most have readily complied. Publisher Su Ching-cheng (蘇慶成), secretary-general of the association's Book Sale Commission, explains that publishers realize there would be little to gain from protesting. "When the Legislative Yuan was revising the Copyright Law, we held meetings to voice our point of view that the new law would be too strict," Su says. "But the efforts were useless." Because of the repeated U.S. threat to level trade sanctions against Taiwan for violations of intellectual property rights (IPR), Su says the ROC government had little choice. "We know that our government had to revise the law, and that the Legislature had to pass the amendment," he says. Some 110 publishing companies have sent millions of pirated titles to the sale. This widespread compliance marks a dramatic shift in the attitude among Taiwan businesspeople concerning IPR.
It has been a long, tortuous road to the book sale on Hengyang Road, and the difficulties along the route are indicative of the sorts of problems Taiwan has had in adjusting to all categories of IPR issues, be they copyright, trademark,or patent protection. Laws have to be established and refined; enforcement and judicial agencies have to be specially staffed, trained, and motivated; and long-standing public attitudes have to be changed. In fact, the concept of IPR—that people own rights to their ideas for inventions, art work, product designs, writings, or other types of creations—is relatively new in Chinese societies. In ancient China, imitating the work of a famous calligrapher or painter was the first step for a young scholar or artist. Anartist could build an entire career replicating a master's style. Traditionally, the senior artist would regard imitation as an honor.
Such ideas spread far beyond artistic circles. In Taiwan, there has been a long-standing practice of copying among competing businesses. For instance, if one brand of pineapple cakes, a popular snack food, was selling well, competitors would rush to market their own cakes with a similar brand name, logo, and packaging. Imitation has been widely regarded only as chan pien-yi (佔便宜), "giving yourself a little advantage," just a way of cutting corners rather than breaking the law. Even though the ROC has had a trademark law since 1931, few people followed it, and violators were rarely taken to court. When disputes did arise, they usually were settled privately and with little publicity.
In modern times, the publishing industry has been especially hard hit by illegal copying. The common Chinese saying, "All stories originate from someone else," illustrates a long-standing belief that writings are not really the property of any one person. For generations, writers borrowed extensively from previously published works, without footnotes or a bibliography, and even compiled the works of several people and marketed them as their own. Although plagiarism was not condoned, it was widely overlooked if the author added a bit of new information. Wang Chuan-lu (王全祿), chairman of the Copyright Committee of the Ministry of the Interior (MOI), explains this viewpoint: "Most people believe if you copy one book, you violate someone's copyright; if you copy two books into one, you violate two people's copyrights; but if you copy three books into one, you are compiling your own book—you are not copying at all."
During the 1950s and 1960s, publishers expanded their pirating to include foreign publications. The market for international books was steadily growing, and copying was extremely easy. "Forty years ago, many local publishing companies just took an American book, photocopied it, put a cheap binding on, and then sold it at a much cheaper price," says Deborah Schwartz, chief of the Economic Section at the American Institute in Taiwan (AIT), Taipei Office. But such practices attracted more attention during the 1970s and 1980s. When trade surpluses started mounting with Western countries, Taiwan's rampant IPR violations—which soon included much more than copying books—came under increasing fire.
Neighbourhood video stores have come under fire because new releases often show up here before they reach the theaters.
Taiwan's booming manufacturing industries created opportunities for new types of pirating, including high-tech, high-value items. Since many factories were original equipment manufacturers (OEM) for foreign companies, the employees had access to the technology for creating many international brand-name products. Low-priced imitations began showing up for sale locally and overseas. First it was toys, cassette tapes, designer clothing, and wristwatches. Later the pirates shifted to computer components, software, CDs, and movies. "As Taiwan's production capabilities have become more sophisticated, so have the counterfeits," says AIT’s Deborah Schwartz. "Ten years ago, Taiwan became known as the counterfeiting capital of the world. A lot of American companies were hurt financially."
In the late 1980s, the United States becameTaiwan's most vocal opponent on IPR violations. In 1988, the island's trade surplus with the United States reached a high of US$10 billion. The following year, IPR violations became a focus of U.S. efforts to balance its trade deficit with Taiwan. That year, the American government implemented the Special 301 section of the U.S. Trade Act,which establishes annual review of countries deemed to violate American intellectual property rights. Those categorized as Priority Foreign Countries, the most serious designation, face the threat of trade sanctions. Taiwan has been listed on one of the three levels of designation every year since Special 301 began (see "The Big Stick in IPR Protection").
The U.S.and ROC had already signed a document in 1946 designed to protect each other's intellectual property rights, the Treaty of Friendship, Commerce and Navigation. But the treaty offered a loophole for Taiwan entrepreneurs because translation rights were not protected; at the time, the U.S. was encouraging translations of American books in underdeveloped countries. This has long served as the ROC's only treaty protecting intellectual property rights.
The ROC has bilateral IPR agreements with only one trade partner other than the United States; in 1993, it signed a patent and trademark agreement with Australia. Because the ROC lacks diplomatic ties with most countries, it cannot join the international IPR conventions such as the Berne Convention or the Paris Convention, and most tradepartners refuse to sign bilateral agreements for fear of retaliation from Beijing. As an alternative, the ROC and Britain separately drew up agreements in 1985 in which eachstates that it will honor the intellectual property rights of the other, and the ROC has a similar arrangement with Hong Kong.But the lack of bilateral agreements exacerbated copyright, trademark, and patent infringements through the 1970s and 1980s.
Taiwan passed a Copyright Law in 1928, a Trademark Law in 1931, and Patent Laws in 1949. These laws protected the rights of ROC residents only, not foreign copyright holders.Wang Chuan-lu, the MOI's Copyright Committee chairman, points out that for decades few people were aware of these laws because they were rarely enforced. "Take the Copyright Law as an example," he says. "Because the public didn't know the details of the law, nobody sued for infringement."
Not so today. In 1993, ROC courts filed more than 3,500 cases of copyright infringement, 335 patent cases, and 274 trademark cases. Few businesspeople in Taiwan are now ignorant of the IPR laws, especially the revised Copyright Law. The widely publicized revisions, which expanded the law from 58 to 117 articles, dramatically increase protection for copyright holders. For instance, ownership is now given to authors even when their work is created within the scope of employment, and the duration of economic rights to works has been extended from thirty years after the death of the author to fifty years. The punishment for copyright infringement also increased, from a maximum fine of NT$50,000 (US$1,850) and jail term of six months to five years, to a current maximum fine of NT$450,000 (US$16,665) and one to seven years in prison.
The new law has had a substantial impact on publishing firms, computer companies, the recording industry, and the media. Like many publishers, Chuanhua Technology Publishing Co. has set up a copyright division to apply for licenses for translations and to educate its writers to avoid infringing copyrights. But Hsiao Hsiu-fei (蕭秀妃), chief of the copyright division, explains that obtaining licenses can be difficult. While some foreign firms, including McGraw-Hill Publishing Co. and Maxwell Macmillan Singapore Pte. Ltd., have set up local licensing offices, many other publishers refuse to grant them in Taiwan because they believe the market is too small to be profitable. And local publishers often balk at the royalty fees charged by foreign firms. Hsiao estimates that one-fourth of Chuanhua's proposed translation projects are rejected by one side or the other. "It is really a loss to our readers," she says.
And even with these new systems in place, plagiarism has not disappeared. Many Taiwan writers still do not give credit when reprinting information, whether from local or foreign writers. Hsiao explains that many authors honestly do not realize that they are infringing copyrights, and editors do not catch plagiarism when screening manuscripts. Last year, among two hundred books published by Chuanhua, thirty violated the law, and six had to be withdrawn from the market and destroyed. "Many of our writers are college professors," she says. "Although we have reminded them many times and have given copyright training courses to our editors, infringement still happens."
Because IPR concepts go against a tradition of freely using published and recorded works, Hsiao says the Copyright Law instilled panic when it was first revised. "It is so easy for us publishers to violate the law that when we meet, we have a running joke." she says. "We say, 'See you tomorrow in prison.'"
But the publishing industry, along with the computer and entertainment industries, has quickly learned the new regulations—and the new punishments. To avoid the long, complicated legal process, most cases are still settled out of court. But the new law has sent settlement fees soaring. "Because our copyright law is strict, the compensation sometimes is extremely high," says Hsiao Hsiung-lin (蕭雄淋), an attorney with Peichen Copyright Law Firm. He tells of one newspaper reporter who photographed a legislator during an interview. The legislator then used the photo during his campaign without the photographer's consent. When the reporter threatened to press charges, the politician settled privately for Nf$500,000 (US$18,500).
Meanwhile, the movie industry is still mired in IPR difficulties. Local and foreign film companies suffered great losses during the 1980s becauseof the island's many MTV parlors (theaters that rent videos and private viewing rooms). More recently, film production houses suffered from rampant unauthorized airing of movies via the three hundred to four hundred illegal cable TV stations operating in Taiwan before the Cable TV Law passed in 1993.
In the late 1980s, most MTV parlors carried two thousand to three thousand unauthorized films for clients to rent. Most of these companies have now closed down. Taipei had more than two hundred MTV parlors operating four years ago, but only a handful have survived. Those remaining have stayed in business by paying royalties, moving upscale, and charging customers more.
During the past five years, Taiwan's illegal cable TV stations have been the main source of copyright violations for films. Underground cable operators filled their programming hours with a constant supply of foreign and domestic movies—all without paying royalties. "They were like a 24-hour film-eating monster," says Jonathan Chu (朱程吾), director of the Foundation for the Protection of Film & Video Works, Motion Picture Export Association of America. "Each cable station had at least ten channels showing movies. They were showing films twenty-four hours a day, seven days a week. You can imagine how many they could go through."
The practice had a devastating effect on film producers, distributors, and theaters. As soon as a new release began showing, or a foreign movie was legally imported, it would air on the cable stations. "How could we stay in business?" asks Yang Yi-ping (楊翌平), president of the Taipei Motion Picture Dealers Association. "While our film was showing in the movie theaters, the same film was showing on cable TV. Who would go to a theater to see our movie?"
The Cable TV Law, passed in August 1993, established a licensing and monitoring system. To implement immediate regulatory measures, and to help local stations work up to international standards, a set of temporary regulations for cable stations was announced in November, and 590 operator's licenses were issued to 360 cable stations. The Government Information Office is monitoring their programming and the upgrading of standards. Those in the movie business say copyright infringement is decreasing.
The local movie industry is also promoting a viewing system in which movies are first released to theaters, then to home video shops, then for "public showings," as in MTV parlors and schools, then to cable TV stations, and finally to regular TV stations. This pattern is modeled after a similar system in the United States.
In the software industry, a controversial Computer Software Export Monitoring System was begun inmid-1993. Under this system, all computer software exporters must be licensed through the government-funded Institute for Information Industry (III). The institute then conducts random tests on software to see if programs are too similar to any of the copyrighted programs that have been submitted to the III. If a program is found to be too close, the copyright owner is notified and can press charges.
ROC Customs also checks all software exports for licenses. If any shipment seems suspicious, it can be held for analysis at the III. The system has stirred up criticism from exporters because it delays shipments for several days, but those in the industry agree that it is working as a deterrent. The institute processed 77,000 license applications in 1993 and conducted 924 tests. Of these, twenty-six programs were held and their owners may be sued for infringement.
In the area of trademark infringement, much of the illegal counterfeiting business has followed the shift of Taiwan's legitimate businesses in either moving upscale or moving offshore. During the late 1970s and early 1980s, Taiwan became the fake wristwatch capital of the world. But as local manufacturing costs rose, much of the counterfeiting of luxury goods and designer clothing moved overseas, mainly to Southeast Asia and Mainland China.
In 1991, the U.S. Customs Service found Taiwan to be the largest counterfeiter of U.S.products in the world, based on the value of confiscated goods. But during the last three years, the island has reduced its counterfeiting both in its ranking as a violator and in the value of confiscated goods. Taiwan dropped to second place in 1992, and to fourth place in 1993, behind Mainland China, "unknown origin," and Hong Kong. That year, the U.S. government confiscated US$2.1 million in counterfeit goods that had originated in Taiwan.
The Trademark Law was revised in 1993, strengthening protections for trademark holders. Under the revised law, fines for infringement increased from NT$150,000 (US$5,500) to NT$200,000 (US$7,400), and the procedures by which foreign companies can apply for trademark protection in Taiwan have been simplified. For example, companies no longer must use Chinese when applying to register atrademark. "Although the Trademark Law is an internal law, it greatly affects relationships with other nations," says Chen Tso-chen(陳佐鎮), deputy director-general of the National Bureau of Standards. "The goal of the recent amendments is to make the standards of our Trademark Law meet those of international organizations such as GATT, which we are applying to join."
The Patent Law was also revised in 1993 to cover a number of new products, including microbiological inventions, food products, hobby products, and inventions. The revised law doubles the maximum fine on patent violations to NT$600,000 (US$22,200). In addition, the ROC and United States have drafted a bilateral patent agreement.
The most controversial issue facing patents over the past year was the U.S. call for "pipeline protection" for those pharmaceutical products that were still in the testing "pipeline" when the ROC Patent Law was revised in 1986. Since the testing period often lasts as long as ten years, many of these products are just coming on the market. Although these products are not eligible for patent protection in Taiwan, the ROC agreed to allow them "administrative protection," meaning competing generic versions will have to meet the same safety standards as the original product. This protection will begin in August.
Enforcement remains the main bone of contention among IPR businesses, both locally and abroad. Many businesspeople feel that the means for IPR protection are now in place on paper. In addition to the revisions to the Copyright Law, Trademark Law, and Patent Law, the Ministry of Economic Affairs has drafted an Integrated Circuit Layout Protection Bill, a Trade Secrets Bill, and an Industrial Design Amendment to the Patent Law.
"Overall the legislation itself is pretty good," says Deborah Schwartz of the American Institute in Taiwan. "The key is enforcement. Without adequate enforcement, the legislation is just a piece of paper." U.S. businesspeople have complained that investigations are only held on a large scale right before the ROC-U.S. trade negotiations, and that many jail terms are actually reduced to fines. In many cases, these fines have been insignificant given the profits that pirates can make.
Demand for continuous enforcement is also increasing among Taiwan firms. "Since the Copyright Law was revised, infringement has decreased greatly," says Yang Yi-ping of the Taipei Motion Picture Dealers Association. "But we hope the government will continue to provide strong enforcement and conduct frequent investigations. You have to make infringers believe they will be caught. Otherwise, they will find ways to get around the laws." Too often, he says, IPR cases are considered trivial compared with other crimes.
To streamline enforcement, many businesspeople are urging the government to establish a special IPR court. "Judges, prosecutors, and others involved in the enforcement process say they have difficulty because the technology is difficult to understand—if they can't understand the technology, it isdifficult to apply the law correctly," says American attorney Robert Cox of the Taipei law firm McCutchen, Doyle, Brown & Enerson. Cox advocates creating a special court with judges and prosecutors trained in specialized areas such as software copyright or cable transmission.
Daniel Lee (李旦), executive secretary of the Chinese National Federation of Industries, also believes the lack of expertise hinders court proceedings. "Verdicts often vary among different judges and at different levels of court," Lee says. He is also pushing the government to establish a single agency to handle IPR matters. Currently, the ministries of Economic Affairs, Finance, Interior, and Justice, as well as the Government Information Office and the Taiwan High Court, all handle different aspects of IPR protection. To streamline the process, the ExecutiveYuan has instructed the Ministry of Economic Affairs to set up a Bureau of Intellectual Property Rights, but there is no timetable for its formation.
Another facet of the government's work is to build greater public respect for IPR. The Chinese National Federation of Industries disseminates news and information through the massmedia. The Copyright Committee has targeted local businesses by establishing business associations and by hosting and participating in some four hundred seminars on related topics since the beginning of 1993. For students, the committee has printed and distributed materials featuring its Mr. Copyright cartoon character to schools and libraries, and it is now pushing the Ministry of Education to add informationon IPR protection to primary and junior high school textbooks. In February, the committee began airing a television series entitled The Rules of the Game. The drama features the intellectual property problems facing a lawyer father and his musician daughter. Thirteen episodes are planned.
Some Taiwan businesspeople feel that the IPR pendulum has swung back too far toward favoring the United States. Most criticisms have focused on the revised Copyright Law. One of the oft-targeted sections, Article 87, which covers parallel imports, states that people not authorized as distributors of copyrighted audio-visual works can only import one copy of a product (such as a movie or cassette tape) for private use. Attorney Hsiao Hsiung-lin points out that under the new law violators can be punished with imprisonment for a period of two years, which is even more severe than the punishment for adultery. Wang Chuan-lu of the Copyright Committee agrees that the revised law is too tough. He hopes that after intellectual property protection has improved, the law can be scaled back to what he calls a "normal" standard.
For the most part, local industries are learning to adapt to the revised laws. They understand that the stiffer regulations give them better protection. Wang Chuan-lu believes protecting IPR is becoming a consensus among Taiwan residents. The public has undergone a period of adjustment, he says, and respecting intellectual property rights is now becoming deeply rooted in the minds of local people. "People realize they can no longer give themselves 'a little advantage'—there is no more free lunch," Wang says.
Jonathan Chu of the Motion Picture Export Association of America sums up the changes in Taiwan's concept of IPR this way: "Before the Copyright Law was amended in 1992, Taiwan was an underdeveloped country in terms of its status in intellectual property protection. Now it has become a developing country. Hopefully in two more years, Taiwan will be a developed country in terms of IPR."