Courts Split on Jurisdiction over an Outbound Transfer of Government-Funded Inventions

IPC Court Patent

  The Industrial Technology Research Institute (ITRI)—an elite and partially state-owned research organization—and Sino Matrix Technology (SMT) entered into agreements for patent assignments. The deal saw the transfer of ten patents granted in Taiwan, Mainland China, the USA and Europe from the ITRI to SMT. The patent assignments were recorded accordingly with the respective IP authorities. According to the agreements, SMT shall obtain permission from the ITRI, Taiwan’s trade authority and the Economic Committee of the Taiwanese parliament for a further transfer of any of the assigned patents to a third party. However, shortly after the agreements were made, the situation developed in a way that SMT hadn’t anticipated. The ITRI alleged that SMT had, without prior permission, arbitrarily bundled and transferred these patents for a sum of only 10 USD to a third party, namely UNM Rainforest Innovations (UNM), an affiliate of the University of New Mexico. The ITRI filed parallel lawsuits in Taiwan suing both SMT and UNM for breach of contract by SMT and seeking the return of both the Taiwanese and foreign patents from UNM back to itself. For the case involving the return of the Taiwanese patents, the trial court ruled in favor of the ITRI and the case is currently pending appellate review.[1] For the other case concerning the foreign patents, the court dismissed it on the grounds of lack of subject matter jurisdiction.


  The ITRI appealed the dismissal but once again failed to overturn the decision.[2]


  The appellate court emphasized that on the issue of whether a Taiwanese court shall have jurisdiction over a case involving a transnational matter, a number of factors must be considered; these include the actor sequitur forum rei, prospective interest of a judgment, the territorial nexus of the court, the legal theories relating to civil litigations, the fairness between the conflicting parties, the legitimacy of an adjudication, and procedural justice in a speedy trial, among other elements. In the circumstances that would undermine the principles of fairness, legitimacy, and efficiency in a trial, the court must refrain from exercising jurisdiction. In the present case, UNM’s registration and place of business were outside of Taiwan. UNM was not a contract party in the assignment agreements and was therefore not bound by them. Also, since the patents in dispute were not Taiwanese IPs, Taiwan is not the place where the parties should have the performance of their contractual obligations by way of transfers. Furthermore, the ITRI filed the lawsuits based on agreements rather than torts so in no way was Taiwan the place of occurrence of a wrongful act or injury. To summarize, the ITRI failed to demonstrate that Taiwan is a legitimate venue with strong nexus in the present case. Thus, the court refrained from exercising jurisdiction.


  Dissatisfied with the appellate court’s opinion, the ITRI once again appealed. In November 2023, the Supreme Court ruled in favor of the ITRI, finding that the lower court’s dismissal being improperly reasoned.


  The Supreme Court began by establishing its legal foundation in both international law and Taiwan’s own procedural rules for the joint trial of multiple defendants. The 2001 Brussels Regulations provide that “where multiple defendants are sued and the claims are so closely connected that it is essential to hear and determine them together to avoid risks of irreconcilable judgments due to separate proceedings, the plaintiff may initiate a proceeding in a court at the place where any of the defendants is domiciled.”[3] In addition, the legal rationale of the Taiwan Civil Procedural Act requires that “in the event of a citizen of the ROC and the citizen of a foreign country joining together as co-defendants due to common rights or obligations, a sharing of facts, or for legal reasons, Taiwan’s court shall be vested with the jurisdiction to govern such foreign element-related matters if, for one thing, the multiple claims of the separate defendants are sufficiently closely related that differing verdicts can be avoided and, for another, parties’ interests regarding judicial justice, legitimacy and efficiency are not compromised.”[4]


  In the present case, the matters of the breach of contract and the transfer of assets are closely connected. SMT allegedly violated the agreed terms in the assignments and further arbitrarily transferred the patents in dispute to UNM. The ITRI did not retroactively recognize such an unlawful disposition of assets, thus the ITRI allegedly remains the legal owner of the patents. The ITRI’s claims against both SMT and UMN for the return of assets were based on the same series of facts and legal reasoning. Since there existed a commonality of evidence between the two closely-related matters, the upcoming process of evidence investigation involving the ITRI and UNM should pertain also to SMT, the latter being a Taiwan-registered company with a domicile and business operations in Taiwan. If the trials are conducted by different courts in different countries, this could potentially result in divergent or conflicting opinions in the judgments. Consequently, the appellate court did not comprehensively reevaluate all factors previously set forth and then forwent jurisdiction by merely maintaining UNM’s lack of presence and property in Taiwan and its status as a non-party to the assignment agreement. The Supreme Court concluded that the appellate court was erroneous in its reasoning and application of law.


  Consequently, the ruling was vacated and remanded.


  On a separate note, since April 12, 2024, the Supreme Court set up three specialized divisions responsible for intellectual property matters. More specifically, the 2nd, 5th and 9th Civil Divisions hear intellectual property cases in the name of the 1st, 2nd and 3rd IP Divisions, respectively. In the present case, the subject ruling was rendered by the Supreme Court’s Second IP Division.


[1] IPC-111-CivilPatentAppeal-No. 45

[2] IPC-111-CivilPatentAppeal-No. 15 Ruling (22.05.2023)

[3] Article 6(1) of the 2001 Brussels I Regulations

[3] Articles 53(1), 53(2), and 20 of the Civil Procedural Act