Feature Articles on the Act for Development of Biotech and Pharmaceutical Industry of Taiwan (VI) –The MOEA of Taiwan Pre-announced Draft Sub-law: Regulations Governing Management of Research Personnel’s Concurrent Holding of Jobs and Investments by Contribution of Technology to Start-up Biotech and Pharmaceutical Company

August 2022

Teresa Huang and Sally Yang

According to Article 12 of the Act for the Development of Biotech and Pharmaceutical Industry (hereinafter, the “Biotech Act”), research personnel in public schools at the junior college level and above or public research institutions that provide key technologies to start-up biotech and pharmaceutical companies (hereinafter, the “Biotech Companies”) are not subject to the Act of Governing the Appointment of Educators or the Civil Servants Work Act, which prohibit research personnel from operating a business, owning 10% or more of the total shares, or holding a concurrent position in another business.  To further detail the specific operational regulations of the clause, the Ministry of Economic Affairs (hereinafter, the “MOEA”) pre-announced a draft of Regulations Governing Management of Research Personnel’s Concurrent Holding of Jobs and Investments by Contribution of Technology to Start-up Biotech and Pharmaceutical Company (hereinafter, “the Draft”) for public opinion. A summary of the Draft is as follows:

1. Specifying definitions for start-up biotech and pharmaceutical companies, primary technology providers, and research personnel.

a. “Start-up Biotech and Pharmaceutical Companies” (hereinafter, “Start-up Biotech Companies”) refer to companies that have obtained the approval letter for Biotech Companies issued by the MOEA, and have existed less than 8 years since the approval date shown on the company registration form or the date shown on the MOEA website on the business and industrial public information inquiry service.

b. “Primary technology provider” refers to essential personnel who have relevant professional knowledge on biotech and pharmaceuticals and use their professional skills on conducting research or managing operations for the Start-up Biotech Companies.

c. “Research Personnel” refers to full-time teachers, full-time researchers, or managers (full-time or part-time) at academic research institutions such as junior colleges or above, who participate in scientific and technological research (Article 2 of the Draft).

2. If approved by the academic research institution where they are employed, primary technology providers may work part-time at the Start-up Biotech Companies and earn part-time wages. Part-time work hours and numbers of concurrent positions are both regulated.  Part-time researchers may not work more than 8 hours at the part-time position per week, and may not hold more than four positions in total (Article 4 of the Draft).

3. If approved by the academic research institution where they are employed, primary technology providers may obtain shares in the Start-up Biotech Companies in the form of their R&D results or technology know-how as capital. The percentage for obtaining the aforesaid shares shall not exceed more than 50% of the total shares of the Start-up Biotech Companies. (Article 5 of the Draft).

4. Academic research institutions may negotiate with the Start-up Biotech Companies to receive rewards as well as the ratio and maximum limit of those rewards on the primary technology provider’s concurrent position and investment by contribution of technology as capital (Article 6 of the Draft).

5. Information disclosure and management systems to avoid conflicts of interest

a. Primary technology providers bear an obligation to actively declare interactions with the Start-up Biotech Companies at which they are holding concurrent position or making investment by contribution of technology as capital, and disclose their interest relationship with the Start-up Biotech Companies. Examples may include that the primary technology provider, their spouse, and underage children hold 5% or more of the shares in the Start-up Biotech Companies. During the period of holding concurrent position and within two years after termination of the aforesaid position, the personnel who held a concurrent position shall avoid participating in the matters (such as purchasing or project reviewing) with the company at which they previously held a concurrent position as well as its affiliated enterprises.

b. Academic research institutions are obligated to appoint management unit and develop management mechanisms for information disclosure and avoiding conflicts of interest; periodically announce the management status of concurrent positions held by research personnel or their investment by contribution of technology; and periodically review whether the concurrent position affects the personnel’s performance at their main positions and whether the academic and the industry benefits are facilitated.

(The authors’ opinions do not represent the position of this law firm.)