與山姆大叔的著作物貿易:從平行輸入,台美貿易與合理使用談起

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(1)國立交通大學. 科技法律研究所. 碩士論文. 與山姆大叔的著作物貿易: 從平行輸入,台美貿易與合理使用談起 Trading Copyright Products with Uncle Sam: Parallel Imports, Taiwan-U.S. Trade and Fair Use. 研究生. ：. 江苑臻. 指導教授. ：. 王敏銓博士. 中華民國九十六年五月.

(2) 與山姆大叔的著作物貿易: 從平行輸入,台美貿易與合理使用談起 Trading Copyright Products with Uncle Sam: Parallel Imports, Taiwan-U.S. Trade and Fair Use. 研究生：江苑臻. Student: Yuan-Chen Chiang. 指導教授：王敏銓. Advisor:Dr.Ming-ChuanWang. 國立交通大學科技法律研究所碩士論文. A Thesis Submitted to Graduate Institute of Technology Law College of Management National Chiao Tung University in fulfillment of the requirements for the Degree of Master in Technology Law. May 2007 Hsinchu, Taiwan, Republic of China. 中華民國九十六年五月.

(3) 與山姆大叔的著作物貿易:從平行輸入,台美貿易與合理使用談起研究生：江苑臻. 指導教授：王敏銓. 國立交通大學科技法律研究所碩士班. 摘要. 一國是否允許著作物的真品平行輸入，牽涉到該國在著作權之立法政策上是否允許著作權人享有散布權及輸入權，是否採取耗盡理論( Exhaustion Doctrine)，以及所採用者究為「國際耗盡」、「國內耗盡」亦或「區域耗盡」而有不同。在美國三零一貿易報復的強大壓力下，我國於民國八十二年四月修正著作權時，明文禁止著作之真品平行輸入(著作權法第八十七條第四款)，只於相當有限的例外情形下(著作權法第八十七條之一)承認平行輸入的合法性，此舉無異於在未承認著作權人散佈權的情況下，先行創設了屬於散佈權能的輸入權；民國九十二年修正的著作權法為了矯正此矛盾立法，增訂散佈權(新法第二十八條之一)，採用國內耗盡理論對散佈權的範圍加以限制(新法第五十九條之一)，然而這樣的做法仍未徹底解決此問題，因為平行輸入物一般係由輸入者於國外合法取得，既然該著作物並非在國內取得，著作權人的散布權並未耗盡，輸入者仍須受民事與刑事追訴，加上司法實務上總將此纇平行輸入之著作重製物，視為「非法重製物」，因此縱使該輸入物係在國內取得後輸出國外再回銷回台灣，第三人亦無法依著作權法第六十條的例外規定而合法出租及散佈平行輸入物。. i.

(4) 本文從平行輸入的形成、現行台灣著作權法對平行輸入的規範及其法源依據出發，探討立法過程中台美貿易政策所扮演的角色，禁止平行輸入對台美貿易的影響，以及此種立法對台灣與美國著作權產業的負面效果，進而比較國際公約與美國著作權法對於平行輸入的規定，觀察我國此種立法政策及司法運作是否妥適；本文另外也指出美國貿易法的三零一條款並未遵守 WTO 相關規定，而禁止平行輸入也可能反被其他 WTO 會員國認為是不當的貿易障礙，另外再從經濟學「市場失靈」(market failure)理論的觀點，分析禁止真品平行輸入是否能增進我國人民最大經濟效益，並主張以合理使用原則，而非耗盡原則，來解決著作物平行輸入的爭議，換句話說，法官在處理平行輸入案件時，應針對每一個案評估禁止與允許平行輸入對社會公益及著作權人權益的影響,參酌允許平行輸入的經濟效益及對於促進我國文化創新的助益，而非斷然以國內耗盡理論與僵硬的法條操作，否定平行輸入的合法性，如此才不致與著作權法所欲達成促進社會文化進步之宗旨有所扞格。. ii.

(5) Trading Copyright Products with Uncle Sam: Parallel Imports Ban, Taiwan-U.S. Trade and Fair Use. Student: Yuan-Chen Chiang. Advisor: Dr. Ming-Chuan Wang Institute of Technology Law National Chiao Tung University ABSTRACT. Under current intellectual property laws regime, Copyright Law which aims at promoting the progress of culture, along with Patent Law and Trademark Law, are all facing the challenges from parallel imports in gray market.. Taiwan’s current Patent Law expressly. permitted parallel importation (Patent Law Article 57(6)), and courts, as well as conventional wisdom, both recognize the legality of parallel imports in Trademark Law.. Nevertheless,. after Amendment in April 1993, Article 87 (4) was added to Taiwan’s Copyright Law which forbid parallel imports with limited exceptions due to the fear of Section 301 trade sanction from U.S.. This enactment essentially creates a new distribution right for copyright owner in. addition to the eumberated exclusive rights which only include the right to reproduce, right to revise, publicly display right and rental right, and etc.. Furthermore, most courts still hold. those parallel imports as illegal copies, even if they are manufactured with authorization initially.. Courts tend to deem them as unlawful copies and refused to grant exemption under. Article 60, thereby a third party distributor of those imports are still subject to civil and criminal penalties.. This Thesis starts from the cause of parallel imports, how current Copyright Law. iii.

(6) regulates parallel imports, the role U.S. and Taiwan’s trade policy played in the legislative process of Copyright Law, the impact and adverse effect of parallel import ban on trade between U.S. and Taiwan, then proceeds to research on how U.S. law and international treaties cope with parallel import issue as a reference for reviewing the propriety of this enactment.. This Thesis will indicate that Section 301 of Trade Act is not in compliance with. WTO laws, and conversely, the ban on parallel imports may risk Taiwan to be challeged by other WTO Members as an unlawful trade barrier. Furthermore, with the analysis of market failure theory, this Thesis proposed that current parallel import ban should be lifted, and, instead of exhaustion doctrine, fair use doctrine should be applied to evaluate each parallel import case in a case -by -case manner, taking into account its impact on public interest and copyright owner’s private benefit so that the regulations on parallel imports could be consistent with the objectives of Copyright Law in promoting the progress of culture and useful art.. iv.

(7) 誌謝工作幾年後能再回到校園重溫學生夢，並有機會出國進修，進而完成這篇論文，真要感謝科法所所長老師們、家人以及朋友們的支持。首先要感謝指導老師王敏銓教授的細心指導，在我回國時特別於百忙之中抽空與我討論論文大綱與內容，針對論文結構及參考資料提供專業的寶貴意見，使我受益良多；此外，口試委員所長劉尚志教授從我入所以來，亦師亦友的提攜照顧，在我赴美留學期間的不斷鼓勵，並引領我從經濟學角度詮釋法律的另類思考，帶給我深刻的啟發；而口試委員卲瓊慧教授對著作權立法背景的熟稔，加上豐富的執業經驗及深厚的學術造詣，在口試中所提出的中肯意見，使我有機會提升論文的巖謹度。能有幸進入科法所受教於這麼多位專精智慧財產權的前輩，而得以一窺智慧財產權法的堂奧，我心存感激。其次要感謝林志潔教授的精神支持，大學時期的死黨珮慈於口試當天為我幫老師們準備茶水及後續行政事宜，以及所上助理玉佩、宏鳴及素美的行政與技術支援，使口試得以順利進行。在所上學習期間，從與宏節、培錚、育竹、宜臻的課堂及日常討論中，讓我認識到法學辨證的實踐性，也為我開啟了智慧財產法的另一扇窗。赴美求學期間，感謝傳立、王軼對我在生活及情感上的鼓舞，使我有動力繼續完成論文的寫作;張嵐為我細心校對註腳，使我得以完成論文最後的潤飾階段。最後，一路走來，要感謝我的家人對我無條件的支持，父親是我在智識上最重要的啟蒙導師，每當我面臨人生諸多抉擇而裹足不前時，他永遠在一旁理性並客觀的為我分析提供意見，同時並容忍這個看似不停浪跡天邊的女兒追逐自我實現的夢想；母親樂. v.

(8) 觀的人生態度，是我在異鄉遭遇困頓寂寞時的學習榜樣；弟弟這些年來與我在生活上的交流，讓我學習到以不同角度看待事物的多面性；貼心的大妹從我的論文寫作過程到口試準備，總是給我最適切的意見，是我在寫作過程中情感上最大的支持者；而小妹的藝術天份與善體人意，總在我疲憊時給我最大的安慰，我何其有幸能擁有如此豐富的人生資產，謹以此論文獻給這些關心我的人們，希望能對智慧財產法制有些許貢獻。. vi.

(9) 目. 錄. 中文摘要……………………………………………………………………………… i~ii 英文摘要………………………………………………………………………………iii~iv 誌謝…………………………………………………………….………………………..v 目錄…………………………………………………………….……………………...vi~vii CHAPTER I INTRODUCTION……………....………………………………………………................1 CHAPTER II PARALLEL IMPORTS UNDER CURRENT TAIWAN COPYRIGHT REGIME ………………………………………………………………………...................2 A. Parallel imports - “Harry Potter” as an example……………………………………...2 B. Formation of the gray market………………………………………………................6 C. Distribution right v. Exhaustion Doctrine in Taiwan………………………................10 D. Taiwan’s Copyright Law §87 (4)…………………………………………….............16 CHAPTER III PARALLEL IMPORTS UNDER INTERNATIONAL INTELLECTUAL PROPERTY TREATY AND U.S. LAW….……………………………………................26 A. Exhaustion doctrine under TRIPs & WCT…………………………………………..27 B. Parallel Imports under U.S. Law- Copyright Act of 1976…………………..............29 CHAPTER IV COMPARITIVE STUDY OF TAIWAN AND U.S. COPYRIGHT LAW, AS WELL AS THEIR INTERNATIONAL TRADE POLICY…………………………..39 A. Free Trade Theory and Copyright………………………………………………......40. vii.

(10) B. Conflict between Free Trade and Copyright…………………………………….......41 C. The U.S. International Trade policy and Taiwan’s Copyright Law………................43 D. Taiwan’s International Trade Policy and its Copyright Law………………………..46 E. The inconsistency of Article 87(4) with WTO rules………………………………...47 Chapter V TRADING COPYRIGHTED PRODUCTS WITH U.S. ………………………................50 A. The Inconsistency of U.S. Section 301 of the Trade Act With WTO laws................50 B. Issues Arising From Parallel Imports Ban on Trade between U.S. & Taiwan……………………………………………………………………….58 C. The Impacts of Parallel Imports Ban upon U.S. Entertainment Industry in Taiwan market……………………………………………………………............62 D.The Impacts of Parallel Imports Ban on Taiwan Itself……………………..............64 CHAPTER VI APPLY FAIR USE DOCTRINE TO PARALLEL IMPORTS CASES…………………....66 A. Apply Fair Use Doctrine to Parallel Imports Cases……………………………….66 B. Policy Consideration in Application of Fair Use Doctrine……………………......69 C. Market Failure Theory in Application of Fair Use Doctrine…………..……….....70 D. Recommendation……………………………………………………………….....76 CHAPTER VII Conclusion..................................................................................................77 REFERENCE……………………………………………………………………………...80 A. English References…………………………………………………………………..80 B. Chinese References…………………………………………………………………..86. viii.

(11) Trading Copyright Products with Uncle Sam: Parallel Imports, Taiwan-U.S. Trade and Fair Use Yuan-Chen Chiang CHAPTER I INTRODUCTION The legislative process of Taiwan’s Copyright Law with respect to parallel imports is heavily influenced by U.S. laws because of the close tie between these two trading partners. However, the exercise of Section 301 threat from the U.S. apparently also impairs the ability of Taiwan’s Copyright Law to adequately address this issue.. Chapter II illustrates Taiwan’s. current situation and legal framework provided for parallel imports and exhaustion doctrine under Taiwan’s Copyright Law, which is primarily shaped by the political pressure from U.S. The enactment of Article 87(4), in my opinion, is clearly a reflection of this political reality. Chapter III further explores how U.S. laws and international treaties, such as TRIPs and WCT, deal with parallel imports.. Chapter IV then discusses the conflict between free trade theory. and copyright principles, and what role that Taiwan and U.S. international trade policy has played in the legislative process of parallel imports regulations.. Chapter V indicates the. inconsistency of U.S. Section 301 of the Trade Act with WTO laws, specifies problems arising from Taiwan’s parallel imports ban and explores its impacts on both U.S.. 1.

(12) entertainment industry and Taiwan itself.. Chapter VI proposes to lift current parallel imports. ban and to apply fair use doctrine on a case-by-case basis in each parallel imports case in order to accomplish the objective of Copyright Law.. Lastly, Chapter VII summarizes the. conclusion drawn from the aforementioned analysis, and presents a viable solution for this controversial issue. CHPATER II PARALLEL IMPORTS UNDER CURRENT TAIWAN COPYRIGHT REGIME A. Parallel imports - “Harry Potter” as an example When “Harry Potter” overwhelmingly drove readers crazy and swept over the whole world in 2001, Crown Cultural Publication Corporation (hereinafter “Crown”), a prominent Taiwanese publishing company, acquired the exclusive license as to “Complex Chinese” version of Harry Potter, thus was entitled to exclusively distribute the books within the territory of Republic of China, Taiwan.. Crown, however, realized shortly thereafter that at. the same time, another publishing company was also marketing their books by giving away “Simplified Chinese” version of Harry Potter as a gift in a book festival held in Kaoshiung. Crown, as an exclusive licensee, thereby filed a criminal action in Kaoshiung District Court, alleging that the distribution of those Simplified Chinese “Harry Potter” infringed its copyright and sought to impose criminal penalty on the defendants1. 1. Under Article 91bis of Taiwan Copyright Law, a person who distributes the original of a copyrighted work or. its copy through transfer of ownership (including sale, gift) may be put into prison for no more than three years.. 2.

(13) Kaoshiung District Court, nevertheless, dismissed this action solely on the procedural ground under Article 319 of Rule of Criminal Procedure2 and found that Crown didn’t obtain the license of Simplified Characters version from the author J.K. Rowling, instead, what it obtained in the contract was “Complex Characters only.” The scope of Crown’s exclusive license was thereby confined to “Complex Chinese” version with the deliberate omission of “Simplified Chinese” counterpart, therefore, Crown can only sue for copyright infringement of Harry Potter’s Complex Chinese version, rather than its Simplified Chinese version. Since the defendants were licensed to distribute Simplified Chinese version “throughout the world”, their conducts thus fell outside the scope of the plaintiff’s copyright.. As a result, the. Court concluded that no infringement could be found because Crown, as a criminal plaintiff, is not a direct victim and thereby lacked standing to sue against defendants.3 This case again highlights the long-standing legal problem as to whether parallel importation is permissible, as well as how to strike a balance between protection of a. Where the representative, agent or employee of a legal entity commits any of the offenses specified in Article 91 – Article 96bis within the scope of its employment, such legal entity may be fined accordingly. See Taiwan Copyright Law, art. 101. 2. Article 319 of Taiwan’s Rule of Criminal Procedure provides: “[t]he victime of a crime may file a private. prosecution. Where he is without, of limited, or dead, such private prosecution may be filed by his statutory agent, lineal relative, or spouse.”. It has been widely accepted by the courts and scholarship that only a “direct. victim” of a crime is entitled to file private prosecution. When filing a criminal case in Taiwan, the default is filing through public prosecution, private prosecution is filed only in exceptional cases. Taiwan Rule of Criminal Procedure (latest amendment in Feb. 6, 2003), art. 319. 3. See Kaoshiung District Court 90 Nen Du Tze Sue Tze No. 237 His Shi Pan Jue (No. 237 of Private. Prosecution Criminal Judgment of the Kaoshiung District Court, 2001), available at the website of Lawbank: http: //fyjud.lawbank.com.tw/ (last visited May 9, 2007). 3.

(14) copyright holder’s distribution right and public welfare resulted from the accessibility of copyrighted works in a gray market. However, Kaoshiung District Court in its judgment did not address the issue regarding the legality of parallel imports, nor did the Taiwan Supreme Court while affirming Kaoshiung District Court’s judgment.4 Today, copyright industries5 are playing an increasingly important role in the economy of the whole world.. However, a major problem facing copyright industry engaged in. international trade has been the development of “gray market”6, also termed as “parallel imports”— the unauthorized importation of copyrighted products lawfully acquired abroad.7 “Parallel Imports”, a situation where goods are initially manufactured under a license that. 4. This lawsuit was initially brought by Crown against the managing agency of this book festival, including. Kaoshiung World Trade Center, Asia-American Publication Company and Hong-Tzung Cultural Entertainment Company.. The Kaoshiung District Court’s decision was eventually affirmed by Taiwan Supreme Court on. March 20, 2003. See Zuai Kao Fa Yuan 92 Nen Du Tai Shan Sue Tzu No. 1372 Hsi Shi Pan Jue (No. 1372 of Criminal Judgment of the Taiwan Supreme Court, 2003). This judgment is available at the website of Judicial Yuan: http: //jrs.judicial.gov.tw/ (last visited May 9, 2007) 5. Some experts have categorized four groups particularly affected by copyright laws as copyright industry: (1). core copyright industries, which primarily produce copyrighted goods such as newspapers, periodicals, books, motion pictures, theatrical production, advertising item, computer software, and data processing items; (2) partial copyright industries, which produce goods or services that encompass copyrighted element, such as fabric or architecture; (3) distribution industries, which provides the channel to distribute copyrighted goods to consumers , such as transportation services and retail trade; (4) copyright-related industries, which produce and distribute items used in association with copyrighted goods. This group includes televisions, computers, recording, and listening devices. See, e.g., STEPHEN E. SIWEK & HAROLD FURCHTGOTT-ROTH, COPYRIGHT INDUSTRIES IN THE U.S. ECONOMY: 1977-1990 3 (1992). 6. See Ferrero U.S.A., Inc. Ozak Trading, Inc., 952 F.2d 44,46 fn.1 (3d Cir. 1991) (defining gray market goods). 7. A similar definition made by U.S.Federal District Court for the Central District of California is "goods that are. intended to be sold outside the United States but which are imported into this country without the consent of the owner of the United States trademark or copyright associated with the goods." Parfums Givenchy v. C & C Beauty Sale, 832 F. Supp. 1378 at 1382 n.1 (C.D. Cal. 1993). 4.

(15) grants the licensee or distributor the exclusive right to sell the goods in a particular country; these goods then somehow flow into other countries where the copyright licensor/owner is already selling the same goods, where there are other licensees, or where the goods have not yet been marketed.. These goods are not counterfeit or pirated; nevertheless, they indeed. impose significant hurdle for the copyright owner to maintain different price structures, product models, and quality standards among the countries where the goods are being marketed.. This is particularly true in countries that are members of a customs union or a. free trade area where the free movement of goods among member states is guaranteed. From the policy-making perspective, parallel imports involve a country’s international trade concerns as to whether the notion of free movement of intellectual property goods trumps the protection of copyright owners; from the legal standpoint, nonetheless, whether a country allows parallel importation primarily depends on whether the copyright owner is entitled in that country the import right; whether that particular country adopts first sale doctrine, and, to what extent it adopts. doctrine.”8. First sale doctrine is also called “exhaustion. There are three approaches to define its scope: the “national exhaustion” where. copyrights are exhausted only when the owner makes his first sale in domestic market; “regional exhaustion” where only when the copyright owner makes his first sale in a. 8. “First sale” doctrine is known as “exhaustion doctrine” in Europe, meaning copyright owner’s distribution. right is exhausted after its first sale.. 5.

(16) particular region would the copyrights be exhausted9, and the “international exhaustion” where a copyrighted product marketed in one nation can be freely sold anywhere, based on the theory that all rights are exhausted internationally upon first sale. A country may adopt any of the above legal approaches based on its own circumstances, and its international trade policy. B. Formation of the Gray Market 1. Factors Contributing to Gray Market Imports The gray market is essentially developed from the ability of third party distributors or purchasers to exploit the profit resulted from the differentiation of market strategy in the foreign market where they legally obtained copyrighted goods. Differences in currency exchange rates, product quality and characteristics, warranties, and services offered all contribute to the gray market.. Price difference may result from copyright owners’. intentional price discrimination10 in foreign market or simly be a reflection of the variation in foreign currency’s exchange rate. Those factors motivate a third party who legally bought. 9. E.U. basically adopts this approach by exhausting copyright owner’s distribution right only within European. Community 10. There seems to be some reasonable incentives why price discrimination is more desirable for copyright. owners. Copyright owners tend to regard price discrimination as an essential tool to the success of their development and marketing efforts. It’s also an effective way to divide a copyright owners’ global market. With appropriate market segmentation, price discrimination can also benefit developing countries where most consumers can’t afford high priced copyrighted products. See John Barton, Symposium: Global trade issues in the new millennium: The economics of TRIPs: International Trade in Information-Intensive Products. 33 GEO. WASH. INT'L L. REV. 473 (2001). 6.

(17) the products abroad to ship it back to copyright owner or licensees’ domestic market and sell it in competition with the higher priced version provided by the authorized domestic distributors. 2. Benefits of Gray Market a. Promote competition and efficiency Advocates of gray market goods pointed out that parallel imports may provide beneficial price competition that leads to lower prices for consumers and encourage copyright owners and their licensees to find the most efficient ways to manufacture and distribute copyrighted goods, so that goods are distributed in an efficient fashion to people who are willing to pay the most for them.11 b. Increase public access to copyrighted goods, increase the overall public welfare Also, parallel imports may allocate resources to their best use in view of consumer demands by offering consumers more options, the public thus gains more access to the copyrighted works, therefore increases the overall welfare for the public although it might reduce the individual copyright owner’s profits due to the lowered price resulted from more. 11. See Shubha Ghosh, An Economic Analysis of the Common Control Exception to Gray Market Exclusion, 15 U.. PA. J. INT’L BUS. L. 373, 377 (1994); Matthew Burgess & Lewis Evans, Parallel Importation and Service Quality: An Empirical Investigation Of Competition Between DVDs and Cinemas in New Zealand, 1 J. COMPETITION L. & ECON. 747, 758. 7.

(18) supply of copyrighted goods12. c. Prevent copyright owner’s global monopoly power through price discrimination in different countries For years, one major concern for the protection of intellectual property is its potential to support monopoly pricing.13. Since copyright owners have exclusive right to. reproduce the copyrighted work, there is a risk that they may reduce production in an attempt to establish monopolistic prices which, in economicists’ view, leads to the loss of “consumer surplus” represented as “deadweight loss.”14. Supporters of parallel import thus assert that,. by importing lawful copies to another country, parallel imports serve the function as to reduce the deadweight loss, facilitate the dissemination of copyrighted works, and prevent the exercise of copyright owner’s monopoly power through geographic price discrimination in the global market.15 d. Break down trade barriers, equalize price globally and harmonize the market. 12. Matthew Burgess & Lewis Evans, supra 768 (Burgess and Evans’ investigation indicated that the introduction. of parallel imports into the New Zealand film sector has resulted in increased overall welfare.) 13. Keith E. Maskus, Intellectual Property Rights and Economic Development, 32 CASE W. RES. J.INT’L L.471,. 490 14. See Alan O. Sykes, Public Helath and International Law: TRIPs, Pharmaceuticals, Developing Countires,and. the “Doha” Solution, 3 CHI. INT’L. 47, 57 15. See Michael J. Meurer, Copyright Law and Price Discrimination, 23 CARDOZO L. REV. 55 (2001) (indicating. that price discrimination, which requires substantial market power, is socially undesirable. The author therefore supports the restrictions on using import right to block parallel imports.). 8.

(19) What’s more, from the perspective of international trade relationship, parallel imports actually help break down trade barriers established due to copyright owner’s exercise of monopoly power, serving to equalize prices globally and thus harmonizing the market.16 3. Problems of Gray Market a. Creating intra-brand competition However, opponents assert that parallel imports entail many problems, such as intra-brand competition.17. This competition would force the domestic exclusive licensee to. lower price on the authorized goods.. If copyright licensor himself also distributes the. products in domestic market, he will have to compete against imports of his own products. Since domestic licensees may be forced to cut prices in order to survive in intra-brand competition, they may therefore no longer be willing to make investment in copyrighted goods or provide service related to this product (such as warranties, pre-sale quality control) within their market area had parallel imports are allowed. In other words, gray marketing reduces the size of profits originally enjoyed and used by copyright owner/licensor to further improve the quality of goods because the intra- brand price competition diminishes the ability. 16. See Ghosh, supra note 11; see ALSO JOHN H. JACKSON, WILLIAM J. DAVEY & ALAN O. SYKES, JR., LEGAL. PROBLEMS OF INTERNATIONAL ECONOMIC RELATIONS: CASES, MATERIALS AND TEXT ON THE NATIONAL AND INTERNATIONAL REGULATION OF TRANSNATIONAL ECONOMIC RELATIONS 961, 950 (4th ed. 2002) 17. Intra-brand competition is the competition between different distributors of the same product licensed from. the same licensor. Continental T.V., Inc. v. GTE Sylvania Inc. 433 U.S. 36, 52 n.19 (1977). 9.

(20) of manufacturers and distributors to provide better quality products.18 b. Causing consumer confusion Opponents also argue that it’s very likely that consumers will confuse gray market goods with the domestic authorized goods; further, because consumers might not receive any warranty protection for gray market goods, they have to bear the risk of inferior or unsafe goods, which is detrimental to the general public19. c. Free-riding and diminishing goodwill Parallel imports are said to free ride the exclusive domestic licensee or copyright owner’s efforts in advertisement and promotion.. Those goods may even, because. of their compliance with foreign regulations such as instructions in a foreign language, look or package adjusted for the targeted foreign market, reduce the goodwill attached to the original products when they appear materially different from those intended for domestic distribution.20 C. Distribution right v. Exhaustion Doctrine in Taiwan 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, 32 INT’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).. 10.

(21) 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”. copyright owners and performers rental right in Article 29.22. It then separately confers. 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. 11.

(22) 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.”. 12.

(23) 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, NCCU INTELLECTUAL 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.. 13.

(24) 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. 14.

(25) Quality King Distribution Inc. v. L’Anza Research Int’l33, 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 than Quality 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, 9 FORDHAM 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). 15.

(26) D. Taiwan’s Copyright Law §87 (4) 1. U.S. political influence in the legislative history of §87 (4) Parallel imports also happen in Patent and Trademark regime, and it’s permissible under both Taiwan Patent Law34 and Trademark Law35; yet current framework of Taiwan Copyright. 34. Taiwan’s Patent Law explicitly adopted international exhaustion doctrine since the amendment in 1997.. Article 57 of Patent Law provides, in relevant part: c The invention patent right shall not extend to any of the following circumstances: ………..(6) Where the patented product manufactured by the patentee or under the patentee's consent is used or re-sold after such patented product was sold.. The territory where the above stated manufacture or sale is. conducted shall not be limited to within this country. d The user referred to in items 2 and 5 of this article shall confine his continued use of the invention within the existing enterprise only. The territory where one is allowed to sell the patented product stated in item 6 shall be determined by the court based on the fact. Under this provision, Taiwan Patent Law apparently adopted “international exhaustion doctrine” which allows parallel importation of patented products from a country where the product is manufactured under patentee’s consent. 35. Paragraph 2, Article 30 of Trademark Law of 2003 provided: “Where goods bearing a registered trademark. are traded or circulated in the marketplace by the trademark right holder or by an authorized person, or are offered for auction or disposal by a relevant agency, the right holder shall not claim trademark rights on the said goods. However, the aforementioned shall not apply in case of preventing deterioration or damage of goods or any other fair reasons.” Even before the amendement on May 28, 2003, it’s well settled by conventional wisdom and numerous precedents that parallel imports of trademark products is lawful. In Zuai Kao Fa Yuan 81 Nen Tai Shan Tzu No. 444 Min Shi Pan Jue (No. 444 of Civil Judgment of the Taiwan Supreme Court, 1992), the Taiwan Supreme Court held that where the parallel importation of genuine trademarked goods has same quality as the products marketed by the trademark holder in Taiwan, and incurs no danger of misleading, confusing or concealing the consumers, those imports harm neither the good will of trademark holders nor the interest of consumers, it actually benefit the society by preventing the risk of monopolistic price controlled by trademark holder, thereby facilitates the competition and provides more options for consumers, which does not undermine the aim of Trademark Law, it’s therefore not an infringement. Likewise, in 1993, Taipei District Court, one of the biggest District Courts in Taiwan, ruled for defendant in 82 Nen Du Sue Tzu No. 1718 Hsi Shi Pan Jue (No. 1718 of Criminal Judgment of the Taipei District Court, 1993), a case regarding Nintendo computer game.. The Court held that “the defendant’s computer games at issue are legitimate goods, the trademark on. those goods is genuine mark, not pirated trademark, thereby defendant’s importation and exportation both do not constitute the infringement of trademark.” This judgment is available in the website of Judicial Yuan: http://jirs.judicial.gov.tw/. 16.

(27) Law apparently has rather different view from Patent Law and Trademark Law when dealing with this issue.. Taiwan’s Copyright Law basically prohibited parallel imports after the. amendment in 1993, which can be traced back to the fear of potential Special 301 trade sanction imposed by the United States during that period.36. Under U.S. Trade Act of 1974. (hereinafter “Trade Act”), the violation of intellectual property right is deemed as a type of anti-competitive conduct, and also a violation of Omnibus Trade and Competitive Act that adds “Special 301” to the original Section 301 of Trade Act in 1988. Special 301 is named for its close relationship with the special investigative proceedings under Section 301 of the Trade Act. According to this Act, the Office of the United States Trade Representative (USTR) is empowered to identify “Priority Foreign Country” if a trading partner “has committed the most onerous or egregious acts, policies or practices” in denying “adequate and effective protection of intellectual property rights”37, or denying “fair and equitable market. 36. Taiwan and U.S. signed a memorandum of understanding in June 1992 requiring the Taiwan Executive branch. to make its best efforts to work with the Legislative Yuan for passage of the U.S.-Taiwan Copyright Pact of 1989 by January 31, 1993. However, the Legislative Yuan refused to sign eight provisions, including the provision on creation of import rights, while ratifying this bilateral agreement.. To its dismay, U.S. copyright industry. thereby recommended USTR that immediate trade sanctions under “Special 301” be imposed on Taiwan. This threat aroused the Exectuive Yuan and the then-ruling party, KMT, to launch a lobby effort in the Legislative Yuan that eventually resulted in the withdrawal of refusion. The ban on parallel imports was accordingly enacted in consistent with the establishment of copyright owner’s import rights. See Robin Winkler, Taiwan: Parallel Imports- The Debate Continues, IP ASIA 5 (Aug. 6, 1993). 37. 19 U.S.C. 2242 (a)(1)(A): A country “denies adequate and effective protection of intellectual property rights”. if it “denies adequate and effective means under the laws of the foreign country for persons who are not citizens or nationals of such foreign country to secure, exercise, and enforce rights relating to patents, process patents, registered trademarks, copyrights and mask works.” 19 U.S.C. 2242 (d)(2). 17.

(28) access to United States persons that rely on intellectual property protection.38” Once identified as a “Priority Foreign Country”, the USTR then initiates an unfair trade practice investigation according to the regular Section 301 procedure. If a violation of a trade agreement is found, the USTR is then authorized to “suspend, withdraw, or prevent the application of, benefits of trade agreement concessions”39 as a trade sanction.. In order to monitor the adequacy of a. country’s protection of U.S. intellectual property rights, the USTR also creates three other categories in increasing level of seriousness: countries of “Growing Concern” where the concern of U.S. intellectual property protection is just growing, countries on a “Watch List” where U.S. needs to pay special attention because those countries maintain intellectual property barriers to market access., and countries on a “Priority Watch List” whose policies and practices meet some of the criteria for “Priority Foreign Country.” Taiwan has been constantly on USTR’s hit list since the enactment of the “Special 301” provision.40. 38. USTR. 19 U.S.C. 2242 (a)(1) (B): A country “denies fair and equitable market access” if it: effectively denies access. to a market for a product protected by a copyright or related right, patent, trademark, mask work, trade secret, or plant breeder’s right, through the use of laws, procedures, practices, or regulations which – (A) violate provisions of international law or international agreements to which both the United States and the foreign country are parties, or (B) constitute discriminatory non-tariff trade barriers. 19 U.S.C.2242 (d)(3) 39. See 19 U.S.C. 2411 (c)(1)(A). 40. According to the USTR’s annual report for 2005, Taiwan, along with Argentina, Bahamas, Brazil, Egupt,. European Union, India, Indonesia, Korea, Kuwait, Lebanon, Pakistan, Republic of the Philippines, Russia, and Turkey, was listed on the “Watch List.” See OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, SPECIAL 301 PRIORITY WATCH LIST(2005), available at http://www.ustr.gov/assets/Document_Library/Reports_Publications/2005/2005_Special_301/asset_upload_file6 62_7650.pdf. In 2006, Taiwan remained on the Watch List even if U.S. also recognized Taiwan’s efforts to improve its IPR regine, such as increasing the number of seizures of pirated optical media, counterfeit. 18.

(29) accordingly insisted that Taiwan needs to prohibit parallel importation of copyrighted works without prior authorization from copyright owner41.. In response to the tremendous political. and economic pressure from U.S., although import right is arguably regarded as an extension of distribution right, and Taiwan Copyright Law back then didn’t entitle copyright owner the distribution right, in 1993 the Taiwan Legislative Yuan enacted Article 87, Paragraph 4 which in principle prohibits the parallel importation with very few exceptions outlined in Article 87bis, thus implicitly conferred the copyright owner a new import right.42. Violation of this. Article will lead to the confiscation of the excess copies under Article 90 and a maximum two-year imprisonment under Article 93 (3) of 1993.43 Article 87 of Taiwan’s Copyright Law provided: “Any of the following circumstances. pharmaceuticals, and prosecution of peer- to- peer internet service Kuro.. The 2006 report suggested that the. U.S. will continue to call on Taiwan to “strengthen border enforcement against transshipment of pirated and counterfeit goods, consider legislative amendments to address ISP liability, implement stronger criminal penalties for IPR infringement, and extend the term of copyright protection for works and sound recordings.” Available at http://www.ustr.gov/assets/Document_Library/Reports_Publications/2006/2006_Special_301_Review/asset_upl oad_file190_9339.pdf 41. WILLIAM P. ALFORD, TO STEAL A BOOK IS AN ELEGANT OFFENSE: INTELLECTUAL PROPERTY LAW IN CHINESE. CIVILIZATION 46 (1995). 42. Some Taiwanese scholars disagree that the prohibition of parallel imports implicitly creates an independent. import right for copyright owner, arguing that the right to bar parallel imports is simply supplemental to distribution right because this right can’t be independently transferred without the transfer of copyright itself. See Chang, Chong-Hsin, Comments On Related Regulations of Distribution Right In New Copyright Law, Vol. 1, Issue 2, NCCU INTELLECTUAL PROPERTY JOURNAL (2004) ; see also LUO MING-TUNG, COPYRIGHT LAW 204 (2004). 43. Article 93 of 1993 stated that in addition to the prison sentence, a fine of a maimum of five hundred thousand. New Taiwan Dollars may be imposed.. 19.

(30) shall be deemed as an infringement upon copyright or plate right, unless this Law provided otherwise… (4) import [ing] any originals or [lawful] copies of a work without copyright owner’s authorization” In comparison to Paragraph 3 in this Article which prohibits the importation of any “unlawful” copies or pirated works, Paragraph 4 is commonly interpreted as a ban on parallel importation of “lawful” copies. Yet it is worth noting that back to the year of 1992, one group that exercised particular influence upon the USTR is the International Intellectual Property Alliance (IIPA) which represented eight major copyright organizations and served as a coalition of movie producers, software publishers, and record companies44.. As part of its lobby efforts, IIPA testified. before the U.S. Congress that piracy in Taiwan costs the U.S. motion picture, televisions, sound recordings, publishing, and computer software industries the loss of $669 million in 199245, which makes Taiwan the largest violator that year. They also stated that this $669 million loss consisted of approximately $585 million in piracy of computer software. However, in my opinion, since parallel imports are not pirated goods and there is no evidence that people who purchase a pirated good would buy parallel imports if illegal copies were not. 44. Each year, IIPA’s list of offending countries often becomes the basis for US. trade action under Section 301.. See John Maggs, Group Releases “Hit List” of Countries Seen as Lax on Copyright Protection, J.COM. (1993), 2A (1), available at Westlaw, JOC dialog database. 45. Edward G. Durney, Copyright Law in China and Taiwan, 367 PLI/ Pat 311, Global Intellectual Property Series. 1993: Protecting Trademarks and Copyrights Successful Strategies, Patents, Copyrights, Trademarks and Literary Property Course Handbook Series, Sep. – Oct. 1993 at 9, Practicing Law Institute, available at Westlaw, PLI DATABASE (Sep.-Oct. 1993). 20.

(31) available, the justification for a ban on parallel imports should be based on the loss resulted from parallel imports, rather than from piracy.. Although the U.S. media estimated two. decades ago that sales of parallel imports accounted for approximately six billion dolloars of total retail sales in the United States46, so far there is no reliable estimate of profits lost from the retail sales of parallel imports in Taiwan.. IIPA actually confused the American public. and U.S. Congress by failing to establish a trustworthy statistics that proves those parallel imports contributed to this $669 million loss. USTR, as a matter of fact, mistakenly relied on those piracy loss figures to support a conclusion that parallel imports is a primary factor in Taiwan’s inadequate protection of U.S. intellectual property rights.47 2. Exemptions for parallel imports– Art. 87bis, Art. 59bis & Art. 60 There are two types of exemptions for parallel imports to enjoy lawful status in Taiwan. One is quantitative exemptions in Art. 87bis which allows a certain amount of parallel imports to enter into Taiwan under specific circumstances; the other is exhaustion exemptions under Art. 59bis and Art. 60 which, though do not exempt parallel imports themselves, do exempt certain types of distribution after parallel importation, based on exhaustion doctrine. The quantitative exemptions under Article 87bis are rather limited; they apply only when the. 46. See Doris R. Perl, Note, The Use of Copyright Law to Block the Importatino of Gray-Market Goods: The. Black and White of It All, 23 LOY. L. A. L.REV. 646, n. 12 (quoting that the estimates of annual retail sales of parallel imports in 1984 accounted for approximately $6 billion in U.S. domestic retail sales, from Boyer, The Assault on the Right to Buy Cheap Imports,Fortune, Jan. 7, 1985, at 89) 47. The same opinion can be found in Soojin Kim, In Pursuit of Profit Maximization by Restricting Parallel. Imports: The U.S. Copyright Owner and Taiwan Copyright Law, 5 PAC. RIM L. & POL’Y J. 205, 218 (1995). 21.

(32) imported goods are fewer than “certain amount”, and only when they are for governmental use, for the purpose of preserving data in educational, academic or religious institutions, for preserving data in the library, for personal use without the intent to distribute, or when the copyrighted products are attached to lawfully imported commodity or machines. 48 Furthermore, according to “The Meaning of Certain Amount in Article 87bis” (hereinafter “The Meaning of Certain Amount”) promulgated by the Ministry of Interior Affair, the so called “certain amount” refers to that importers may import no more than one copy when the imports are audio-visual goods intended to be preserved for academic, educational or religious purpose, or for personal use without the intent to distribute. Only when the imports are non-audiovisual goods intended for preserving materials in non-profit academic or religious library can importers be allowed to bring no more than five copies.49 48. Consequently,. Article 87bis provides: Article 87(4) doesn’t apply in the following situations:. (1) Certain amount of copies of work intended to be used by central or local governments, but not including copies for use in schools or other educational institutions, or copies of any audiovisual work imported for purposes other than archival use.. (2) Certain amount of copies of any audiovisual work for archival purposes of an organization operated for scholarly, educational, or religious purposes and not for private gain; copies of any other work for library lending or archival purposes of such organization where use is in conformity with provisions of Article 48.. (3) Certain amount of copies of a work for private use of importer, if such importation is not for distribution, or by any person arriving from outside the territory if such copy forms a part of such person's personal baggage.. (4) Work incorporated into any goods, machinery, or equipment otherwise legally imported where such work cannot be copied during the ordinary operation or use of the goods, machinery, or equipment.. (5) Instructional or operational manual, accompanying any goods, machinery, or equipment otherwise legally imported. However, prohibition applies where importation of such work is an essential object of the act of importation of the goods, machinery, or equipment. 49. The Taiwan Ministry of Interior Affair in 1993 issued an administrative regulation “The Meaning of Certain. Amount in Article 87bis” defining the meaning of “certain amount” in Article 87bis, which provides : “Certain amount of copyrighted products in article 87bis (2) and (3) means the following: (1) for the importation of. 22.

(33) after 1993, no individual may bring into Taiwan more than one copy of any copyrighted work from the United States, unless it’s for use in the academic, educational or religious library. Violators are not only subject to criminal penalty50 but also may be penalized by confiscation of the excessive copies pursuant to Article 90bis.51 3. Problems of Parallel Imports Ban remained after 2003 Amendment a. Who qualifies as the claimant remained unclear Under Taiwan’s copyright regime, once an original work is created, the author enjoys two types of copyright - one is his moral rights as to publish the work, to show he is the author, to prevent any revision of the work and destruction of the integrity of his work which might damage his reputation, etc.52; those rights are attached to the author’s personality, thus may not be assigned.. The other is a bundle of property rights as to reproduce, publicly. audio-visual copyrighted goods intended for preserving them in academic, educational, or religious library, no more than one copy is permissible; (2) for the importation of copyrighted goods other than audio-visual goods intended for the same purpose, no more than five copies are permissible; (3) for the importation of a copy for personal use without the intent to distribute, no more than one copy each time is permissible; (4)imported as a part of individual’s luggage, no more than one copy each time is permissible. ” 50. The old version of Article 93 provides, in relevant part, that “[i]n any of the following circumstances, a. sentence of up to two-year imprisonment, detention or fine of no more than $500,000 New Taiwan Dollars shall be imposed, or in addition to criminal penalty, a fine of no more than five hundred thousand New Taiwan Dollars…. (2) infringement of another person’s property rights by any of the means specified in paragraph 2,3,4,5,6 of Article 87” 51. Article 90bis provides, in pertinent part, that “copyright owner or plate right holder may request custom to. confiscate imports or exports that infringe their copyright or plate right” 52. Article 15 provides the author with the right to publish his work; Article 16 provides the right to name himself. as the legitimate author; Article 17 provides that the right to prevent any change of the work which might damage author’s reputation.. 23.

(34) perform and distribute his work, etc., which are articulated in Art. 22-29, and may be assigned as a whole or in part under Art. 36.53 An author therefore may assign the distribution right in Article 28bis to one person while assigning other exclusive rights to another. Theoretically speaking, there could conceivably be many copyright property owners corresponding to different property rights, yet the ambiguous language of Article 87 leaves unanswered the question of who qualifies as the claimants to sue parallel importers. It appears to me that Article 87 does not limit the potential claimants to the holder of distribution right, yet it is not clear whether the claimants must own all of the rights enumerated in Art. 22-29 to have standing for an action; namely, whether only holder of the right related to distribution has standing; or standing requirement is satisfied as long as a holder owns any of the enumerated rights. The lastest case in U.S. regarding this issue is Brilliance Audio, Inc. v. Haights Cross Communications, Inc.54, where the 6th Circuirt held that a rental or lease agreement which does not transfer title will not trigger the first sale soctrine and therefore the lessee is not free to sell the leased copy.. This suggests that U.S. courts took the position that the first. sale doctrine applies only to the distribution right, and does not limit any of the copyright owner’s other exclusive rights under Section 106 of Copyright Act of 1976.. 53. Article 36 of Copyright Law provides, in relevant part: “(1)The property rights of a copyright owner may, in. whole or in part, be assigned to another person, or jointly owned with another person; (2) The assignee’s property right is confined to the scope of the assignment” 54. 474 F.3d 365 (6th Cir. 2007).. 24.

(35) b. Imbalance of penalty Another legal issue is the imbalance of penalty on parallel importors and the distributors of those imports. Under Copyright Law of 1993, the violation of Article 87 (4) will lead parallel importers to a criminal liability of up to two-year imprisonment pursuant to Article 93. As a result of video rental industry’s lobby efforts, this criminal penalty was eventually abolished in 200355; however, parallel importers remain liable for civil damages pursuant to Article 88. Furthermore, since parallel importation is still regarded as a conduct that infringes copyright, courts accordingly still deemed those imports unlawful copies, thus held that those imports do not qualify for the exhaustion exemption under Article 59bis and Article 60, thus could not be rented without copyright owned’s consent.. Consequently, if. one sells, rents or distributes those goods with the knowledge of parallel importation, he is still subject to the criminal penalty under Article 91bis (2)56 and Article 9257, and may be held. 55. The new Article 93 of 2003 eliminated the criminal liability for violation of Article 87,Paragraph 4. 56. Article 91bis provides: “(1) A person who infringes the property rights of another person by distributing the. original of a work or a copy by transfer of ownership is subject to imprisonment for no more than three years, detention, or in addition to the criminal punishment, a fine no more than seven hundred and fifty thousand New Taiwan Dollars. (2) A person who distributes, publicly displays or possesses copies with the intent to distribute, with the knowledge that the copies infringe on another person’s copyright, is subject to imprisonment for no more than three years, detention, or in addition to the criminal punishment, a fine no fewer than seventy thousand and no more than seven hundred fifty thousand New Taiwan dollars.” 57. Article 92 provides: “A person who, with the intent to profit, infringes on the property rights of another. person by means of public recitation, public broadcast, public presentation, public performance, public transmission, public display, adaptation, compilation, or leasing” shall be punished by imprisonment for no more than three years, detention, or in addition to the criminal penalty, a fine of no more than seven hundred and fifty New Taiwan Dollars.. 25.

(36) civilly liable58 as well. This in effect creates an ironic situation in which parallel importers themselves are not criminally punishable while distributors of parallel imports are nonetheless both criminal and civially liable for knowingly distribute those lawful copies. Furthermore, distributors of parallel imports are subject to the maximum of three-year imprisonment under Article 91bis (2), which is heavier than the importation of pirated copies, which is only punishable up to two year imprisonment under Article 93(3).. This suggests. that Taiwan’s Copyright Law views parallel imports more condemnable than pirated copies, which ignores the fact that pirated goods are the real source of copyright owner’s financial loss as well as the substantial obstacle which undermines the objective of Copyright Law in promoting the progress of culture.. In my view, 2003 Amendment failed to address these. issues and left many controversial legal problems remain unresolved. CHAPTER III PARALLEL IMPORTS UNDER INTERNATIONAL INTELLECTUAL PROPERTY TREATY, U.S. LAW AND TAIWAN LAW A. Exhaustion doctrine under TRIPs & WCT The rule governing parallel imports is not uniform either within the international legal. 58. Taiwan Supreme Court held in Zuai Kao Fa Yuan 85 Nen Du Tai Shan Tzu No. 5500 Hsi Shi Pan Jue(No.. 5500 of Criminal Judgment of the Taiwan Supreme Court, 1996) that since parallel imports are not authorized to import to Taiwan, and constitute infringement of copyright owner’s property rights under Article 87, they are still regarded as unlawful copies, therefore, if a third party knowingly acquires those copies, he does not qualify as “the owner of original works and lawful copies of works”, thereby does not enjoy the exhaustion exemption under Article 60.. 26.

(37) community or within the United States.. Berne Convention does not provide a wholesale. distribution right to all types of copyright owners 59 , neither does it stipulate that the importation of lawful copy of original copyrighted work should be banned.. In addition,. neither WTO’s agreement in Trade Related Aspects of Intellectual Property Rights (hereinafter “TRIPs Agreement60”) nor World Intellectual Property Organization Copyright Treaty (WIPO Copyright Treaty, hereinafter “WCT”) requires Member States to adopt exhaustion doctrine. Article 6 of TRIPs states, in pertinent part, that “[f]or the purpose of dispute settlement under this Agreement ….. nothing in this Agreement shall be used to address the issue of exhaustion of intellectual property rights.61”. It appears that WTO. Member States participating in the Uruguay Round negotiations were unable to agree on how to treat parallel imports and deal with exhaustion. TRIPs thus expressly refused to address the issue of gray market goods, and instead, leave this issue up to the discretion of each WTO member.. 59. The Doha ministerial meeting declaration (hereinafter “Doha Declaration”)62 in. Article 14 of Berne Convention simply confers distribution right to the author of literary or artistic work for. authorizing the distribution of cinematographic production or reproduction of the original work.. The statutory. language provides, in relevant part: “(1) Arthur of literary or artistic works shall have the exclusive right of authotizing: (i) the cinematographic adaption or reproduction of these works, and the distribution of the works thus adated or reproduced; (ii) the public performance and communication to the public by wire of the works thus adapted or reproduced.” 60. Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement. Establishing the WTO, Annex 1C, Legal Instruments - Results of the Uruguay Round vol. 1 33 I.L.M. 81 (1994) 61. Id.. 62. DECLARATION ON THE TRIPS AGREEMENT AND PUBLIC HEALTH (Nov. 14, 2001), Doc. WT/MIN (01)/DEC/2. (Nov. 20, 2001), available at WTO website: www.wto.org.. 27.

(38) 2001 further confirmed this position by declaring that “[t]he effect of the provisions in the TRIPs Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Article 3 and 4.”63. A member state is. therefore free to choose international, regional or national exhaustion doctrine.. Nevertheless,. as the Doha Declaration indicated, no matter what measure a country adopts to deal with parallel imports, it is still subject to both the national treatment and most favored nation treatment principles.64. It turned out that currently each country adopts different standard to. resolve parallel imports cases based on their own policy concerns. Likewise, Article 6 (2) of WCT provides “[n]othing in this Treaty shall affect the freedom of Contracting Parties to determine the conditions, if any, under which the exhaustion of the right in paragraph (1) applies after the first sale or other transfer of ownership of the original of a copy of the work with the authorization of the author.”. Apparently both TRIPs. Agreement and WCT have no intent to provide protection for copyright owners against parallel imports.. The underlying reason appears to be political, based on the fear among. signatories that doing so would assist multinational enterprises, mostly from developed 63. See Doha Declaration §5. The ministerial declarations within the WTO are not legally binding, and in the. event of a conflict between the treaties and declaration, the treaties would prevail. Doha Declaration is primarily interpretive of imprecise language in TRIPs, and does not appear to contracdict any textual provision, therefore, it is likely to be persuasive authority in the interpretation of TRIPs. 64. International Copyright Law and Practice 3[1][a][i]. See Alexander A. Caviedes, International Copyright Law:. Should the European Union Dictate its Development? 16 B.U. INT’L L.J. 165, 171-72 (1998). 28.

(39) countries, in engaging in global market division, price discrimination, and other anti-competitive or imperialistic practices. B. Parallel Imports under U.S. Law- Copyright Act of 1976 In my opinion, parallel imports are hotly-debated over years in U.S. due to two conflicts. First is the policy concern regarding the inherent conflict between traditional copyright principle, which purports to promote cultural progress by rewarding copyright owner the exclusive right to enjoin parallel imports, and the free trade theories, which encourage the free flow of cross-border trade, thus support the legality of parallel imports. The other conflict arises from the statutory language of Copyright Act itself. Under U.S. Copyright Act of 1976, parallel imports involve three provisions: the distribution right under Section 106 (3), the import right under Section 602 (a), and the exhaustion doctrine codified in Section 109 (a). Section 106 of the Copyright Act of 1976 enumerates five exclusive rights: reproduction, adaptation, distribution, public performance, and display65.. Under Section 106(3), copyright. owners are given the exclusive right to distribute copies to the public. This right guarantees that copyright owners determine when, where, and if the distribution of the copies occur. Nevertheless, once copyright owners have authorized the distribution of a particular copy, their right to control distribution of that copy vanishes due to the limitation of exhaustion. 65. 17 U.S.C. §106 (1994). 29.