Taiwan brings amendment for restricting the flow of IP to China

Taiwan brings amendment for restricting the flow of IP to China

Recently, Taiwan's Ministry of Economic Affairs tightens the control of Taiwanese technology and IP going to China by making two regulatory amendments. These two amendments are related to Article 4 of the Examination Guidelines for Investment or Technical Cooperation in the Mainland Area and Article 5 of the Regulations Governing Approval for Investment or Technical Cooperation in the Mainland Area.

The Ministry stated that "Selling or licensing Taiwanese technology or IP will now be considered 'technical cooperation' and must be approved in advance. 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."

These two amendments hope to tighten the control of Taiwanese investment or technical cooperation coupled with the issues of national security of Taiwan. With these amendments, it will be difficult for any authorities in Taiwan to obtain the approval from Ministry of Economic Affairs concerning investment or technical cooperation in China. The approval must be sought from the Ministry of Economic Affairs since it being the authority in charge of the examination.

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 cover the area of specialist technologies, patents, trademark, and copyright. The recent Ministry's statement said that "the scope of the sectors targeted has also been widened from the integrated circuit sector to any specialist technology." Through this, the integrated circuit will also be defined as an item covering specialist technology. Therefore the amendment will also include the restriction for integrated circuits layout.

Undoubtedly, the relations between China and Taiwan could become tense and China can reiterate with measures such as limiting imports and exports to Taiwan. Probably the trade between China and Taiwan will have substantial commercial effects with relevant investment more likely to drop.