The Ministry of Economic Affairs adjusts restrictions on technical cooperation to Mainland China — Announce Draft Amendment to Articles 5 and 10 of the “Regulation on Permission for Investment or Technical Cooperation in Mainland China” (Taiwan)

Teresa Huang and Yuki Chiang

According to Articles 5 and 7 of the “Regulation on Permission for Investment or Technical Cooperation in Mainland China ” (hereinafter referred to the “Act”), when citizens, legal persons, organizations, or other institutions of Taiwan are investing or engaging in technical cooperation in Mainland China, including direct or indirect transferring or licensing specialized technology, patent, trademark, or copyright to the citizens, legal persons, organizations, or other institution in Mainland China, they shall first file an application for approval with the Investment Commission of the Ministry of Economic Affairs (“MOEAIC”).  However, the transference and licensing of trademark and copyright are common in practice, and most of the technicalities involved are less critical than a patent or specialized technology.  Thus, having each of such transference or licensing cases reviewed by the MOEAIC is not very efficient.  Accordingly, The Ministry of Economic Affairs (“MOEA”) announced on October 15, 2021, the draft amendment to Article 5 of this Act, stating that “since trademark or copyright transference or licensing is a common commercial behavior in the modern era, they are different in nature from technical cooperation, which should be regulated under Article 5 of this Act; thus, an amendment to exclude them is proposed.”

Furthermore, if an investment to Mainland China has passed the review by critical technical-group convened by the competent authorities and approved by the MOEAIC, a transference of shares of such investment may in effect lead to a technology transfer to Mainland China, the addition of the Act’s Article 5, Paragraph 2 — which specifies such forms of share transfer should be considered as technical cooperation and shall apply for approval in advance — is proposed.  Further, Article 10, Paragraph 1 of this Act is amended accordingly.  The aforesaid draft amendment has been disclosed to the publics for comments until December 15, 2021.  The MOEA will further announce the official amendment to this Act after it organizes all comments collected. For other relevant information, please refer to the announcement made by the MOEA on October 15, 2021: https://join.gov.tw/policies/detail/1873a6f2-dae6-421a-b08f-879509d1553b