The conflict began in the spring of 1993 when, without consulting the 900 member AmCham, COCUSA formally recommended to the USTR that Taiwan remain designated as a Priority Foreign Country, which can lead to trade sanctions. The AmCham board of governors protested that they had not been consulted and that they disagreed with the recommendation. In June, the local chamber resigned from COCUSA—a move believed by AmCham to be the first time an overseas American chamber of commerce has formally broken with the U.S.-based organization.
The chairman of AmCham's IPR Committee, Robin Winkler, an American attorney at the firm of Koo, Winkler, Hsu & Hwang and a fourteen-year resident in Taiwan, says many members of the local chamber believed that keeping Taiwan listed as a Priority Foreign Country would have been counterproductive. Last year, Taiwan faced some criticisms from the United States, especially because it had not yet passed a series of revisions to its IPR laws. But many AmCham members believed the island had made significant improvements to its intellectual property protections and that the U.S. government should recognize this. "After all the effort that had been made, the people who really were 'friends of intellectual property' would feel like we had put them in a difficult position," Winkler says. "People who had been critical [of the United States] could then say, 'See, even with all our effort, we still get the worst designation.'"
In April 1993, despite COCUSA's recommendation, the USTR moved Taiwan to the less serious Priority Watch List. In December, AmCham applied to re-enter COCUSA, following a promise that the U.S.-based organization would solicit input from it on all matters concerning Taiwan. But in February1994, COCUSA again failed to consult with the local chamber before submitting a recommendation to the USTR. And once again, the viewpoints of the two organizations differed sharply. COCUSA wrote that Taiwan and five other countries were "sufficiently egregious at this time to merit their designation as Priority Foreign Countries." AmCham argued the opposite—that Taiwan had made enough progress in IPR during the past year to be downgraded from the Priority Watch List to the Watch List.
In a letter to U.S. Trade Representative Mickey Kantor in March, AmCham stated, "...it is our strong belief that COCUSA, for whatever reason, misunderstands what has actually transpired in Taiwan over the last twelve to fourteen months" and that COCUSA's recommendation was "clearly without any factual foundation." The letter stressed that Taiwan had made great strides in the past year, listing the passage of the Cable TV Law; revisions of the Patent Law, the Trademark Law, and the Copyright Law; and the signing of the Agreement for the Protection of Copyright with the United States.
Winkler calls this year's recommendation by COCUSA "totally out of line." He finds fault with each of the four trouble areas mentioned by COCUSA: continuing enforcement problems, inadequate protection for pharmaceuticals, trademark regulations and procedures that do not comply with international standards, and an unclear success rate for the Computer Software Export Monitoring System.
"They simply got it wrong," Winkler says. Addressing the charge that Taiwan has continuing problems with enforcement, he asks, "What country doesn't? Nobody expected enforcement problems to stop overnight, but they have gone down and there are indications of resolve to reduce enforcement problems. That's the important thing." Winkler also calls "inaccurate" the claim that the trademark regime does not comply with international standards, arguing that Taiwan's trademark regulations are very close to those of the World Intellectual Property Organization and of the Trade-Related Intellectual Property Standards laid out in GATT. And concerning the lack of "pipeline protection" for pharmaceuticals, which protect U.S.pharmaceutical products that were in the testing "pipeline" when the Trademark Law was revised in 1986, he points out that the major international pharmaceuticalcompanies represented in AmCham Taipei have not complained about this.
"None of these [problems] on their own or together come close to justifying putting Taiwan on the Priority Foreign Country list," Winkler says. He points out that there is a large group of people in the United States who benefit from Taiwan staying on the list. "There is definitely an economic motive aside from solving the piracy problem," he says. "Special 301 has given rise to a whole new industry of lawyers and lobbyists specializing in singling out countries and putting their problems in the worst possible light.”
Robert Cox, first vice president of AmCham and an American attorney at the firm of McCutchen, Doyle, Brown & Enerson, stresses that U.S.-based trade associations including the International Intellectual Property Alliance, the Business Software Alliance, and the Pharmaceutical Manufacturers Association all recommended that the USTR downgrade Taiwan to the level of Watch List. "In this case, COCUSA seems to be out of step with not only what AmCham Taipei is saying, but also with what other trade associations within the industry are saying," he says.
Cox, who has practiced in Taiwan for five years, has seen his clients become increasingly satisfied with Taiwan's IPR protection. "I think companies that have a real interest in IPR issues, as a matter of protecting their assets and technology, generally recognize the improvements that have taken place in Taiwan over the last few years," he says. But enforcement still falls short. "That is the area where U.S.-based technology clients are still looking for further improvement," he says. "I think people generally say we are getting the legislation in place [in Taiwan]. Now it is a matter of working with prosecutors and judges to put the legislation to work."
Cox points out that because of Taiwan's high level of technological expertise, U.S. companies stand to lose more money to IPR violations here than in less developedcountries. "The kinds of losses that occur here are quite large," he says. For example, because Taiwan is now the world's second largest producer of notebook computers, after the United States, there is a great potential loss from unauthorized copies of software.
William Botwick, president of AmCham and general manager of General Motors Taiwan, says businesses are seeing more action against infringers. "Companies like General Motors, that have taken advantage of the enforcement mechanisms that are available here, have seen over the years that enforcement has improved," he says. "We want it to continue to improve, but substantial progress has already been made."
Botwick adds that Taiwan's protection exceeds international standards in some aspects, including the Computer Software Export Monitoring System. Installed in 1992, the program requires that software companies receive a license and submit copies of their export software to the government to screen for copyright infringement—a process that cost Taiwan about US$5 million in 1993. "I don't think any other country has such a system," he says. "And certainly because it is new, and perhaps unique, it is not surprising that itis not working perfectly."
Botwick and Winkler also fault COCUSA for ranking Taiwan with Argentina, Brazil, Turkey, India, and the People's Republic of China—countries that they believe violate IPR to a far greater extent. "They seem to be way off base," Botwick says of COCUSA. "They're grouping Taiwan with countries that have nowhere near the regulatory infrastructure for enforcing IPR protection."
Winkler says budget constraints and lack of expertise are the main obstacles to improving Taiwan's IPR enforcement, pointing out that people in all areas need specialized training, from judges to patent and trademark examiners, copyright personnel, and prosecutors. "This is being done," he says. "The dissatisfaction is, at most, that it is not being done fast enough. But would it be reasonable to do it faster? Probably not. They are probably doing very close to as much as they can."