IP Observer

“I think Taiwanese companies should realize that patents are an effective weapon against competitors. And if they can secure the core patents for products, it can bring considerable profit for the company.”

Jay: I graduated with a BSc in chemistry in 2007. I went on to undertake a master’s program at National Cheng Kung University in chemical engineering, graduating in 2009, with a focus on semiconductor technology, including LEDs. After graduation I went into the LED packaging industry. At the time over 80% of the world's LEDs were produced by Taiwanese businesses. Taiwan used to make up about 20% of the global LED market, although this has dropped since. I thought it was a field with a lot of potential for development. Originally I had planned to apply to Taiwan Semiconductor Manufacturing Company (TSMC), but I changed my mind, thinking that the LED industry had a better future. In my time in the LED industry, I found the hours very long – 8am to 8pm – so I worked there for just under a year. Some companies would even have their employees on call, so your boss could email you at any time with a problem that you’d have to resolve. I realized that R&D engineers were mostly working on improving existing products and there was little focus on research. Clients had specific requirements and there was very little fundamental research. Often it was just putting stuff together and seeing if it worked. And we wouldn’t look to reasons as to why it worked, we’d just hand it over to our clients. Sometimes clients would meet with some problems down the line, like white LEDs turning yellow, for example, and they would come to us to resolve these problems.

Jay: Yes, it runs through all industries in Taiwan. Although Taiwan has R&D units, unless they are an extremely large company like TSMC or MediaTek, which can engage in fundamental R&D, most companies focus on more basic development for existing products. It is a bit hit and miss, they just make something, then see if it works.

I was quite frustrated in my first job. Training in the industry isn’t very good. The turnover rate can be as high as 50%. I was only in the job three months when I was promoted to a senior engineer. As the turnover was so high, no-one had enough experience. People would leave after half a year or a year, so most people were new to the company. Although Taiwan's LED industry makes up around 15% of the global LED industry, the technology threshold is quite low, and competitors - particularly China, South Korea and Japan - are getting stronger, so profits are getting lower and lower. If you launch new products they don’t earn you much and this becomes a vicious circle, pulling down salaries.

Jay: No. Our professors often didn’t have an understanding of industry, as there is a divide between education and industry in Taiwan. They don’t teach you about the industry and life as a student is quite comfortable comparatively.

Jay: As I felt my opportunities for self-development in the LED packaging manufacturer were quite limited, it occurred to me to change profession. I came across a patent attorney job description by chance on the internet - as the patent attorney system had only been in place for two years at that point. I liked the idea of it because it involved mostly paperwork and would allow me to engage with new technology. The Taiwanese government was also striving to move from a contract manufacturing oriented manufacturing industry to an R&D-led manufacturing sector, which meant that they had an urgent need for patent agents and patent attorneys. At the time I thought the patent industry in Taiwan had great potential for development, so I joined North America Intellectual Property Corporation in 2011 and became a patent engineer. As I had set a goal of becoming a patent attorney before entering the industry proper, I passed the 2012 patent attorney examination, which qualified me as a patent attorney. My main fields of expertise include chemical compounds, semiconductor components, solar powered batteries, LEDs and materials for electronics.

As of 2016, there are only around 284 professional patent attorneys in Taiwan and given that there are around 80,000 patent applications per year filed at the Taiwan Intellectual Property Office, there is still a strong demand for patent attorneys in the patent field. As there are not enough patent attorneys, many patent applications are still drafted by patent engineers. To make up for the lack of patent attorneys, the Taiwan Intellectual Property Office (TIPO) established a system under which the skills of professionals engaged in intellectual property can be authenticated.

Andy: I didn’t think as much as Jay about it. I was just introduced into the industry by an officer I served under during my year of compulsory military service. My first job was related to patents. I studied biology but at that time there was no bio-tech industry in Taiwan, unless you wanted to do research, which wasn’t really appealing to me. I was interested in patents because of the opportunity to engage with new technology, and, from another point of view, the work is more stable.

“Biosimilar patents are complex, because biological agents are a lot more difficult to define than chemical compounds, so you have to think through a wide range of factors when you are drafting claims for them.”

Some of the most interesting patents for me are biosimilar patents. Biosimilar patents are complex, because biological agents are a lot more difficult to define than chemical compounds, so you have to think of a wide range of factors when you’re drafting claims for them.

Jay: As a patent attorney, as well as a scientific understanding, we also had to have an understanding of the patent application process, how patent rights work and patent litigation. This is a much broader spectrum of understanding than a patent engineer requires. As a patent attorney has skills ranging beyond writing the patent specification and claims, they are responsible for a more diverse range of cases.

Jay previously pointed to a lack of innovation in Taiwan’s R&D, is this reflected in the Taiwanese patent industry?

Jay: According to the Global Competitiveness Report 2015, published at the World Economic Forum, Taiwan came in 21st place in terms of capability for innovation, in 13th place in company spending on R&D, and 11th in the overall ranking, which suggests Taiwan is one of the leaders in terms of innovation skills in the world.

Taiwan used to just be a copycat, but as Taiwanese industries started to sell products abroad, they met with a lot of infringement suits, so they started to place more importance on intellectual property. However, according to figures from Taiwan's Central Bank, Taiwan manufacturers paid foreign manufacturers IP licensing fees of US$3.8 billion, whereas it only received IP licensing fees of just over US$1 billion. That's a balance of payments (BoP) of 0.27 in intellectual property licensing, meaning Taiwan is still a net importer of intellectual property. Even though Taiwanese companies are always ranked in the top ten for number of patents filed with the USPTO, Taiwanese patents are innovative, but to a limited degree. They are often improvements on existing products, not really core innovations. In the LED industry, for example, often the innovations just improve the structure of an existing product, or improve the manufacturing process. This means that the patents you apply for, often don’t earn significant profits for the company, which means the core patents for the majority of products are still in the hands of foreign companies.

Taiwanese companies patent products that are about to go on the market, but are more reluctant to apply for patent rights for products that won't go on the market for some time. I think the management of Taiwanese companies should realize that patents are an effective weapon against competitors. And if they can secure the core patents for products, it can bring considerable profit for a company.

Andy: Like Jay said, Taiwanese manufacturers tend to patent small improvements on existing products and rarely think about the next generation of products. This is often to do with the personality of the management of the companies.

Jay: There is not enough protection for patent holders at the Taiwan Intellectual Property Court. Complainants only win 11.6% of cases when it comes to patent infringement cases in Taiwan, whereas the rate is 50% in the US and above 40% in Japan. The result of this low rate of success is an increase in willful infringement. For this reason, some foreign companies in Taiwan just don’t apply for patents here, as the plaintiff rarely wins, and, even if they do win, the compensation rate is quite low – around NT$1million (US$22,480). When we’re drafting patent claims therefore, we will try and expand the scope as far as possible, as this relates to the amount of compensation awarded. When I’m drafting the claims for a solar cell panel, for example, the invention may just relate to a small part of the panel, but I will draft the claims for the entire panel, as this increases the rate of compensation. It is also important to clearly define technical terms, as the examiner won’t look at these definitions, but they will be discussed in the case of an infringement lawsuit.

Andy: We take our clients right through the patent application process, so they’ll be assigned to one patent attorney throughout.

Jay: Before an interview, normally we will first receive an invention disclosure report in the form of several PowerPoint slides, which we have to study carefully, including all the minor headings, the footnotes and the experiment results. Some inventors are not very good at disclosing the thought process behind their inventions, so any information revealed in the invention disclosure report can be used to pick out the features of the invention. Then, I will take some notes on the main technical features of the invention and use these keywords to search for the closest prior art on a patent search engine like that of the World Intellectual Property Office (WIPO). Sometimes, the main technical features of the invention have already been disclosed in prior art, so then I have to continue to search for secondary technical features. After that, I will make a note of the technical features not disclosed by the prior art, and use these technical features as the focus of the interview. During the interview, the inventor will normally first give a detailed explanation of the invention, and, after they are finished presenting, I will ask open-ended questions, to prompt them to talk about the specific technical methods. If I have already found similar prior art, I will give it to the inventor at this point and ask them to explain the differences between their invention and the prior art. I think the most important part of the patent drafting process is the prior art search, because the invention as described by the inventor might have been disclosed in prior art long before. A prior art search can avoid clients applying to patent inventions that are not patentable. Prior art can also be used to understand the technological background of an invention, which makes drafting the patent easier. If there is similar prior art, you have to find a way of distinguishing the two inventions.

Normally I’ll do another prior art search after the interview, however, some companies do not like you to search again after the interview.

How did you develop the skill of being able to pick out the main features of an invention?

Jay: I think that it comes with experience. In your own field, you will be more or less aware of potential problems.

Andy: Prior art search really is the most important aspect in getting the patent to pass its substantive examination. So often when you are writing claims for an invention you will have a specific instance of prior art that you compare it to.

Jay: In some cases patent examiners will request an interview. As patent examiners are paid per case, if we can help to lighten the load of examiners with phone interviews or in person, it is good for both the applicant and the examiner. Before an interview with an examiner you have to be very clear about what arguments you are going to use and the likely response of the examiner. Normally patent examiners have good attitudes, and won’t make life difficult for you.

Why did both of you decide to qualify as Chinese patent agents, as well as qualifying here in Taiwan?

Andy: When I first came to the company, the CEO, Winston Hsu, was competing for business in China. In certain respects the Chinese and Taiwanese patent industries are similar, whereas in other respects they are rather different. So I thought I should pass the Chinese patent agent qualification examination, given that I’d already passed the Taiwanese examination. Mainland China is a big market, despite some teething problems.

Jay: China is also facing a shortage of patent agents, with only 12,600 professional patent agents. Looking at the potential of the Chinese market, and with so many manufacturers focusing on China as a major market where they wish to assert patent rights, from 2013 onwards, I started to prepare to take the Chinese patent agent examination, and I qualified in 2014.

Andy: There is still a lack of understanding of patents among the general public in China. The government was also providing subsidies for companies to apply for patents, so there was a situation under which, the content of a patent was not that important, and firms just applied for useless patents to get government subsidies. They had a high application rate, but they weren’t good quality patents.

In terms of the government agency there, the quality of China’s patent examiners was not great. They would not address the core aspects of a patent application, but would get fixated with surface details and were quite difficult to communicate with. The patent industry there has seen some improvement in recent years, however.

Jay: I think mainland China has progressed quite rapidly. Patent applications in China have gradually risen. In 2016 they have already received over 1,102,000 applications, which is quite high. They are also a signatory of the Patent Cooperation Treaty and they have had to make rapid progress to meet international standards. I do not really think there is a big problem with the quality of their patent examiners anymore. I think the problem was, like Andy said, that the government policy aimed to increase patent applications with subsidies. This has negatively affected patent quality, as they were solely pursuing quantity. Private companies were not necessarily motivated by patent protections, but rather, they were just out to earn a quick buck from subsidies. There is a change underway in China, however, and I think that this means that the quality of their patents will gradually improve. This is, to some extent, because Chinese companies often face infringement suits when they attempt to take their companies global.

What advice would you give to Western companies who want to patent an invention or a design in Taiwan?

Jay: As the Taiwan Intellectual Property Office has patent prosecution highways (PPHs) in place with the United States Patent and Trademark Office, the Japan Patent Office and the Spain Patent and Trademark Office, if you apply to Taiwan as your country of first application, the result of the substantive examination is used as reference for the country of second application, to accelerate the examination process for the office of second application. Six months after having received an accelerated examination application form, the Taiwan Intellectual Property Office sends out a notice of the result of the examination. Applying for a patent in Taiwan is also very cheap. I advise foreign companies to apply for patent in Taiwan first, then to use the result of the substantive examination to expedite the examination procedure in other countries. As well as this, as Taiwan uses the same language as China, and Taiwan’s patent professionals are superior to those in China, it is often advisable to get a Taiwanese patent firm to draft your application for a Chinese patent. The quality of Chinese patent agents is a little uneven, as some are great and some are terrible.