1. Distribution Right- Created under Article 28bis of Copyright Law in 2003
Amendment
18 See Ghosh, supra note 11.
19 See Lawrence M. Friedman, Business and Legal Strategies for Combating Grey-Market Imports,32INT’L
LAW. 27, 28-29 (1998) (suggesting that unwary consumers of grey-market goods usually get products without a factory warranty and do not receive the full benefit of their bargains)
20 Daniel A. DeVito & Benjamin Marks, Preventing Gray Marketing Imports After Quality King Distributors, Inc. v. L'Anza Research International, Inc., J.PROPRIETARY RTS.2 (May 1998).
a. Historical development
Parallel imports involves the issue as to whether a copyright owner or licensee has the exclusive import right to block the entry of gray market goods. The import right is arguably regarded as part of distribution right because it essentially gives the copyright owner to control not only the sale to a distributor or licensee in a different geographic market, but also the chain of all future distribution to potential parallel importers.
However, prior to 2003, Taiwan’s Copyright Law failed to enumerate distribution right in the bundle of copyright owner’s property rights identified from Article 22 to 2921. Instead, the Copyright Law merely defines the act of “distribution” in Article 3 as meaning “the activity of providing the original of a work or its reproduction to the general public for trading or circulating, no matter whether with or without compensation”. It then separately confers copyright owners and performers rental right in Article 29.22 Prior to the 2003 Amendment, the distribution right is implicitly inferred partly from the right to rent under Article 29, and partly from the reproduction right under Article 22, based on the reasoning that reproduction would not have taken place but for the intent to distribute, and that therefore the law providing an exclusive reproduction right is directed to control distribution.23
21 Taiwan Copyright Law Article 22-29 enumerates eight exclusive property rights: reproduction, public recitation, broadcast, presentation, performance, exhibition, adaption, and rent.
22 Article 29 of Taiwan Copyright Law provided: “Except as otherwise provided in this Act, authors of works have the exclusive right to rent their works. Performers have the exclusive right to rent their performances reproduced in sound recordings.”
23 See Chang, Chong-Hsin, Review of “Distribution Right” in Copyright Law 3, available at his personal
b. Distribution Right and Parallel Imports in 2003 Amendment
Due to the long-standing criticisms about the Copyright Law’s implicit import right, coupled with the failure to enumerate distribution right and the lack of exhaustion doctrine to balance the parallel import restriction24, Taiwan Legislative Yuan, by referencing to Article 6 of World Intellectual Property Organization Copyright Treaty (WIPO Copyright Act, hereinafter “WCT”)25, Article 8, 12 of The WIPO Performances and Phonograms Treaty (WPPT),26 and U.S. Section 106 of Copyright Act27, enacted Article 28bis in 2003 which expressly provides distribution right by stating that “ except otherwise provided in this Law, authors of works have the exclusive rights to distribute their works through transfer of ownership; Performers have the exclusive right to distribute their
website: http://www.copyrightnote.org/paper/pa0020.doc (last visited May 9, 2007).
24 Before 2003, many Taiwanese copyright practitioners and scholars have been fiercely criticizing this loophole in Copyright Law.See, e.g., Chang, Chong –Hsin, Research on Parallel Importation of Copyrighted Goods, 1998, at http:// www. copyrightnote.org (last visited, May 9, 2007); Fong, Cheng-Yu, Parallel Imports Ban in
Copyrighshall BeLifted, Editorial in COMMERCIAL TIMES, Mar. 13, 1998; and Chang, Kai-Na, Comments on Parallel Copyrighted Imports Legislation, MOON SUN LAW JOURNAL 86-93 (1997).
25 Article 6 of WCT defines the scope of right of distribution as “authors of literary and artistic works shall enjoy the exclusive right of authorizing the making available to the public of the original and copies of their works through sale or other transfer of ownership”
26 WPPT Article 8 Right of Distribution: “(1) Performers shall enjoy the exclusive right of authorizing the making available to the public of the original and copies of their performances fixed in phonograms through sale or other transfer of ownership.”
27 U.S. Section 106 of Copyright Act of 1976 provides: “Subject to section 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:….. (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease,or lending.”
performances reproduced in sound recordings through transfer of ownership.”28 However, this statutory language of distribution right remains controversial since some scholars argue that the scope of distribution right should not be confined to “transfer of ownership”, it should also cover public display or the possession of the works with the intent to distribute because those conducts make copyrighted goods accessible to the public as well.29
2. Exhaustion Doctrine – “National Exhaustion” under Article 59bis in 2003 Amendment
Exhaustion doctrine30 serves an important limit which extinguishes copyright owner’s distribution right to control what the purchaser or future owners might do with the work once the compensation for a copy is already received. It mandates that once a copyright owner makes a first sale, he has exhausted his copyrights embodied in his goods, regardless of whether he received the “full value” from that sale because the continuation of his control would unjustifiably permit him to obtain excessive compensation and deprive the buyer of the freedom to assign his property. Aiming to prevent restraints on trading of property, this doctrine is a primary limitation on the distribution right. Prior to 2003, nevertheless, exhaustion doctrine could only be found in Article 60 of Copyright Law which merely limits
28 The legislative record of Article 23bis stated that current Copyright Law only protects copyright owner’s rental right as part of distribution right, which is insufficient and thus wholesale distribution right should be added. Available at the website of Parliamentary Library: http://lis.ly.gov.tw/ttscgi/lgimg?@923402;0003;0168 (last visited May 9, 2007).
29 See Chang, Chong-Hsin, Comments On Related Regulations of Distribution Right In New Copyright Law, Vol.
1, Issue 2, NCCUINTELLECTUAL PROPERTY JOURNAL(2004).
30 “Exhaustion doctrine” is used in Europe while it’s also termed as “first sale doctrine” in U.S., meaning copyright owner’s distribution right is exhausted after its first sale.
copyright owner’s right to rent, conferring the owner of lawful copies, except for the owner of computer program and sound recording, the right to rent them.31 The exhaustion exemption under Article 60 does not apply to other types of distribution such as sale, lending, bestow, exchange or various sorts of transfer of ownership; therefore, even under Article 60, absent the copyright owner’s consent, owners of originals or lawful copies of original works may only rent those copies to a third party, they may not resell or distribute them in other forms.
During the 2003 Amendment, with an effort to balance the distribution right which enlarges the scope of copyright, the Legislative Yuan codified exhaustion doctrine in Article 59bis, stating that “A person who has acquired ownership of the originals or a lawful copy of the originals within the territory of the Republic of China may distribute it by means of transfer of ownership.” National exhaustion doctrine is therefore explicitly adopted. The legislative
history32 suggests that this provision is corresponding to U.S. Supreme Court’s decision in
31 Article 60 of Taiwan Copyright Law provided: “Owners of originals and lawful copies of original works may rent such originals or copies, yet this shall not apply to sound recordings and computer programs. However, where computer programs are incorporated in products, machinery or equipment legally rented, and not the subject matter of such rental, the proviso in first paragraph does not apply.”
32 After Quality King, parallel import issue was brought up on several occasions during a series of meetings between an U.S. delegation and senior Taiwan officials in May 1998. The U.S. delegation is organized by Asia Pacific Legal Institute (APLI) and its members, which included the Honorable Randall R.Rader (Circuit Judge of the United States Court of Appeals for the Federal Circuit), Marybeth Peters (United States Register of
Copyrights), Professors Martin J.Adelman of Wayne State University, Charles M. McManis of Washington University, Paul C.B.Liu of APLI, Jerome H.Reichman of Vanderbilt University, Toshiko Takenaka of University of Washington, along with Michael N.Schlesinger (Counsel to the International Intellecutl Property Alliance) and Andy Y. Sun (Associate Director of the Dean Dinwoodey Center for Intellectual Property Studies, The George Washington University Law School). The legality of parallel imports is hotly debated during a Workshop on Trade-Related Aspect of Intellecutl Property Protection, organized by APLI and as a part of the official program
Quality King Distribution Inc. v. L’Anza Research Int’l
33, which adopted exhaustion doctrine and allowed parallel imports as long as they are manufactured in U.S, no matter being distributed or acquired within or outside U.S. In other words, under Quality King, even if the work is acquired outside U.S., they can still be imported back to U.S. without copyright owner’s consent should they be originally manufactured in U.S (the “round-trip” scenario of parallel importation). However, when interpreting the language “acquired ownership of the originals or a lawful copy of the originals within the territory of the Republic of China” in Article 59bis, the exhaustion doctrine here seems to adopt a more stringent standard thanQuality King by requiring the first sale, not the manufacture of copyrighted goods, to take
place “within Taiwan’s territory” as a prerequisite in the application of exhaustion doctrine.
This means if the first sale took place abroad, and an importer subsequently acquired the lawful copies from an authorized distributor overseas, since copyright owner’s distribution right is not exhausted, those imports will be barred even if they are originally manufactured within Taiwan.
of the 68th Biennial Conference of the Internatinoal Law Association in May, 1998 in Taipei. See Andy Y. Sun, From Pirate King to Jungle King: Transformation of Taiwan’s Intellectual Property Protection,9FORDHAM
INTELL.PROP.MEDIA &ENT.L.J.67, notes 151, 152. The Quality King decision had apparently generated Taiwanese legislators’ and scholars’ interests to reexamine the enactment of Article 87(4). Subsequently in the 2003 Amendment, legislative record indicates that the purpose of Article 59bis is to balance the relationship between copyright owner’s distribute right and lawful copies owner’s right to dispose his property. It also specifically stated that the round-trip type of parallel imports is permissible as concluded in Quality King
decision. Available at the website of Parliamentary Library: http://lis.ly.gov.tw/ttscgi/lgimg?@923402;0003;0168 (last visited May 9, 2007).
33 523 U.S. 135 (1998)