New electronic payments law will encourage patent growth

In October 1998 the Taiwan Intellectual Property Office issued the Examination Guidelines for Computer Software-Related Inventions to improve the protection of IP rights related to computer software. In order to clarify that a computer software solution for a business method may be patentable if it has technical effect, the guidelines were amended further in May 2008 and January 2014. Following these amendments, in order to participate in the online shopping industry Taiwanese software companies began to patent computer software with the technical means to achieve specific functions related to online transactions through stored-value accounts (the main function of third-party payment operators).

These amendments encouraged software companies to engage in e-commerce and in 2014 the total value of the industry in Taiwan was estimated at NT$880 billion. Well-known third-party payment operator PayPal does not yet operate in Taiwan – mainly because at present, the provision of third-party payment services entails high legal risks. However, this will change once the Statute for the Administration of Electronic Payment Institutions takes effect in May 2015.

According to the Statute for the Administration of Electronic Tickets, all debt instruments which store monetary value in electronic forms or other forms with data storage or calculation functions are electronic tickets, and only an 'electronic ticket institution' – defined as a financial institution with a high asset benchmark and government approval – can provide electronic ticket services. As stored value is the core function of online third-party payment systems, and the stored-value function falls within the definition of 'electronic tickets', under the Statute for the Administration of Electronic Tickets third-party payment providers cannot provide such service without setting up or working with an electronic ticket institution regulated by the law.

As it is difficult for third-party payment providers to raise high capital to set up or work with an electronic ticket institution, as per the Statute for the Administration of Electronic Tickets, on January 16 2015 the Legislature Yuan passes the Statute for the Administration of Electronic Payment Institutions. The statute was promulgated on February 3 2015 and will take effect three months after that (ie, May 3 2015). The key part of the statute is that third-party payment providers can engage in business such as value storage through online accounts, offline transactions and remittance for online transactions, and need not be financial institutions, which are highly regulated in Taiwan.

Once the statute takes effect the Statute for the Administration of Electronic Tickets will no longer prevent third-party payment operators from expanding their services into online shopping. Further, with the development of mobile payment devices such as Apple Watch, third-party payment operators may pose a major challenge to more traditional financial institutions. Thus, the statute should lead to an increase in patents for computer software solutions for online transactions in Taiwan in the near future.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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