Taiwan Company Fined $500 Million for Illegal Price-Fixing

Taiwan liquid-crystal-display (LCD) manufacturer, AU Optronics Corp. (AUO), took a gamble and lost big in a criminal case brought against it in the U.S., based on several years of regular price-fixing activities in the LCD-panel industry. A San Francisco jury found AUO guilty in March 2012, after an eight-week trial, but the court announced the sentence just this past week, ordering AUO to pay US$500 million and sentencing two of the company’s top-executives to three years in prison.

AUO was found guilty of participating in more than 60 meetings between 2001 and 2006, at which AUO and most of the other leading manufacturers of thin-film transistor (TFT) LCD-panels conspired to fix production levels and prices of TFT-LCD panels, which are used in computers, cell phones and other products.

It was a rare trial, as defendants in such cases almost always enter into plea bargains. In fact, AUO and its officers were the only defendants in the case who chose to go to trial, with seven other Asian manufacturers and 22 of their executives all pleading guilty, agreeing to pay combined fines of $890 million and accepting prison sentences ranging from six months to slightly over one year. Continue reading

Trade Secret Litigation in Taiwan

One of my former employers in Taiwan lost several employees to a competitor. Before leaving, the employees downloaded numerous files of sensitive financial information which they took to their new employer and used to try to steal our customers. We notified the authorities, the police launched a raid on the new employer, searched their computers, discovered the stolen data and another trade secrets battle had just begun.

Such cases are common; they’re also notoriously challenging. In Taiwan, the Trade Secrets Act prohibits the unlawful misappropriation, disclosure or use of trade secrets. Trade secrets are defined as business or technical information that is not known to the public, derives value from its secrecy, and is the subject of reasonable measures taken by its owner to protect its secrecy.

If trade secrets are unlawfully acquired, used or disclosed, the Act authorizes a civil suit for injunctive relief or damages. However, the basic measure for damages is plaintiff’s lost profits or defendant’s unlawful gains, both of which can be hard to prove. Additionally, Taiwan’s discovery procedures are practically non-existent, so it can be difficult proving knowledge and use of the secrets by the company receiving the secrets. Without that, all one has is a potential case against the individuals and no real proof of damages. Continue reading

Taking Depositions in Asia for use in U.S. Litigation. Part II: Logistics.

Due to the costs and difficulties of taking depositions outside the U.S., one should usually search for alternate solutions first. Try to limit the scope of required foreign evidence, obtain the evidence through other means, obtain it from the target’s parent company, subsidiaries, affiliates, employers or officers who are located in the U.S. or, if possible, convince the witnesses to fly to the U.S. to be deposed.

When such tactics won’t suffice, depositions can be taken in Asia, but one should prepare carefully to ensure the process will be successful and testimony will be admissible in court. If the depositions will take place in Japan, several months will be required just to reserve a room in the embassy or consulate and obtain required visas. Even in less rigid countries, it can be daunting lining up qualified interpreters, stenographers and making other critical arrangements, while ensuring compliance with applicable U.S., foreign and possibly international laws.

Consequently, prudent counsel will prepare well in advance, seeking stipulations from opposing counsel, informing the presiding U.S. judge of the plans, obtaining necessary orders, and retaining foreign counsel to assist with foreign laws and logistics. Continue reading

Taking Depositions in Asia for use in U.S. Litigation. Part I: Legal Basis.

Earlier this year, the judge in a US patent infringement lawsuit issued an Order requiring three Japanese witnesses to be deposed in Taiwan, rather than California or Japan, because taking the depositions in California would have been too inconvenient for the witnesses and taking them in Japan would have involved too many legal and procedural hurdles.

The witnesses argued the depositions should be held in Japan, because they lived and worked there (their Japanese employer was a defendant and they were being deposed as agents or officers) and US courts recognize a general right for witnesses to be deposed near their residence or place of business. Opposing counsel argued for California, because the onerous requirements concerning taking depositions in Japan allegedly offset any inconvenience of forcing the witnesses to travel. The judge settled on Taiwan as a compromise, “present[ing] minimal inconvenience to the witnesses and avoid[ing] the procedural and legal impediments to conducting the depositions in Japan.”

When taking depositions of foreign witnesses for use in US litigation, the process can be greatly simplified if the witnesses will agree to be voluntarily deposed in the US. Absent such consent, FRCP Rule 28 authorizes several procedures for initiating depositions in a foreign country. However, as explained below, each of those options has limitations and the process can be challenging. Continue reading

10 Tips for Drafting Bullet-Proof Settlement Agreements

Few contracts bring as much satisfaction as a well-crafted settlement agreement, for its ability to fully and finally resolve a dispute and bring lasting peace. To ensure that your settlement agreements meet those objectives, here are ten tips to consider.

1. Who is being released? The party being released (Releasee) will generally seek a release of not just itself but its subsidiaries, affiliates, officers, agents and so forth. Provided the Releasor agrees to such language, it should be included in the release provision (e.g., “Releasor hereby releases, waives and forever discharges…”), not in the first paragraph of the agreement after the name of the Releasee, as that would complicate matters, making the subsidiaries and affiliates parties to the agreement.

2. What is being released? To ensure broad coverage, the Releasee will usually want to include detailed recitals of the facts, claims and allegations leading up to the settlement, then state something like this: (all claims and liabilities relating to such matters shall be known as the “Dispute”). It’s then a simple matter to release all claims concerning the Dispute. Of course, the Releasor should make sure that any unsettled disputes are expressly excluded. Continue reading

Enforceability of Forum Selection Provisions by U.S. Courts

My former employer, a Taiwan OEM, was sued in U.S. District Court for $5.4 million for alleged breach of a patent licensing agreement. The agreement states that “any U.S. District Court will have jurisdiction” over disputes arising from the agreement. We promptly moved to dismiss for lack of jurisdiction, the case was dismissed and we sued them in Taiwan instead (“Ha! Welcome to Taiwan. How’s your Mandarin?”).

In that case, the U.S. federal court lacked jurisdiction – despite the choice of forum provision – because none of the parties was a U.S. entity, so no diversity jurisdiction existed, and the claim was for breach of contract, which is a state, not a federal claim. That is, the criteria for federal jurisdiction were not met and parties cannot create federal jurisdiction even by mutual agreement where it does not otherwise exist.

While the dismissal of our case was exhilarating, it was hardly a rare event. Courts routinely disregard the express language of choice of forum provisions when they feel the chosen forum is improper. Continue reading

International Service of Process in Taiwan? Relax, it’s FedEx.

Last month a U.S. district court asked, “When service of process absolutely, positively has to be effected on a Taiwanese defendant pursuant to Federal Rule of Civil Procedure 4(f)(2)(C)(ii), is Federal Express enough?”

The case, SignalQuest v. Chou, involved allegations of U.S. patent infringement. After filing the Complaint and failing to convince defendant’s counsel to accept service of process on defendant’s behalf, plaintiff’s counsel filed a request for consent to serve Mr. Chou at his business in Taiwan by FedEx.

Federal Rule of Civil Procedure (FRCP) Rule 4 allows process to be served on a foreign defendant by any internationally agreed means of service, such as means permitted by the Hague Convention, but Taiwan is not a party to most international agreements, including the Hague Convention. Continue reading

10 Tips for Successful Negotiations

Perhaps no skill is more valuable for attorneys than the ability to negotiate well. Whether one is concluding a commercial or corporate agreement, resolving disputes over defects or patents, or reaching a deal with a client or colleague, strong negotiation skills will always come in handy. Here are 10 tips to consider.

1. Collabortive v. Competitive. In a collaborative approach the parties seek a win-win solution through cooperation, sharing information and creative problem-solving. A competitive or win-lose approach, involves threats, manipulation and withholding of information. Collaboration is usually preferable, particularly if the parties are present or potential business partners, but sometimes a competitive approach may be appropriate.

2. Assess the Issues Beforehand. Before commencing negotiations, list your issues and your counterpart’s issues and prioritize them. Are some issues linked? Can or should they be linked? What areas of common ground exist? What concessions might be available for each side? What are some reasonable proposals? How badly does each side need an agreement? Continue reading

U.S. Patent Liability based on Foreign Sales or Manufacturing

Can a Taiwan company that manufactures products in China and delivers them in Hong Kong, pursuant to contracts signed in Taipei, be held liable for infringing U.S. patents based on those transactions, even if it never imports the goods to or does business in the U.S.? Surprisingly, yes.

Direct Infringement. Under Section 271(a) of the U.S. Patent Act it is unlawful to make, use, offer to sell, sell or import in/into the U.S. any device that makes use of a valid patent, without authority from the patent owner. To do so constitutes direct infringement.

It’s not always clear what constitutes U.S. sales. In MEMC v. Mitsubishi, a Japanese supplier sold goods exclusively to a Japanese customer, but placed shipping labels on the products indicating a U.S. destination and otherwise helped facilitate importation by the customer. Nonetheless, a U.S. court found the supplier didn’t engage in U.S. sales.

However, in LightCubes v. Nothern Light, the court found a supplier engaged in U.S. sales despite delivering the goods in Canada, because it sold them to U.S. customers. And in SEB v. Montgomery Ward, the court found U.S. sales despite delivery in Hong Kong, because the supplier manufactured the goods with North American electrical fittings, affixed U.S. trademarks on the goods, and stated U.S. destinations on the invoices. Continue reading

International Arbitration v. Litigation: Is ADR really Better?

How many times have we heard the old clichés about arbitration being faster, cheaper and preferable to litigation? Well, that may be true in some cases, but often a party may be better off with litigation. Making that determination depends on multiple factors. This article will address seven of them.

1. Speed Surveys note a growing perception that arbitration is no faster, no cheaper and less reliable than litigation. In theory, there are many methods to speed up arbitration, such as using just one arbitrator, rather than three; restricting discovery, witnesses and submissions; submitting the case on the pleadings; and so forth. However, parties may feel such limitations inhibit their ability to fairly present their case and receive a correct decision. Consequently, such methods may be less suitable for more costly or complex disputes.

2. Cost Resolving a US$10 million dispute in the International Court of Arbitration, using three arbitrators, will cost $397,367 in administrative costs and arbitrator fees; a US$5 million dispute with one arbitrator will cost $132,349; but those figures don’t include fees for attorneys and experts. As with speed, the parties may reduce cost by limiting evidence, procedures and number of arbitrators; but, again, any savings must be weighed against the possibility of compromised justice. Continue reading