Montevideo, May 17th, 2005

 

Etchegaray Associated Consultants

A/P Pedro J. Etchegaray - Director

c/c: Senior Analyst M. Bordabehere - Partner

P r e s e n t

 

Ref: Legal Report about conflict EAC vs AIPTEK Updated May 17th, 2005

 

Dear A/P Pedro Etchegaray:

                                               We make reference to the urgent solicitude achieved from your associate Bordabehere, last Monday May 9th, 2005, about a complete legal analysis of the conflict that your organization EAC (Etchegaray Associated Consultants with headquarters in Montevideo – Uruguay), have against the corporation AIPTEK (with headquarters in the city of Hsin-Chu, R.O.C Taiwan).

We apologize for not having given this report in an earlier date as it was our primary objective.

Such delay was a consequence of the enormous documentation volume that we should analyze: 51 emails, with the last email received yesterday Monday May 16th, a 20-pages Preliminary Business Plan, and more than 50 pages with corporate information about AIPTEK that include: countable information, stock rates, press articles, all that overcame our initial presage and budget thoroughly.

Besides this, in the morning of Friday May 13th, 2005, your associate also requested us that our report was presented in Spanish and in English, that which demanded us an effort and important additional cost.

Fortunately, this involuntary delay, facilitated to add to the whole existent overwhelming evidences, the analysis of the last email received from AIPTEK  (Monday May 16th, 2005) whose content is a new and more complete explicit recognition on behalf of AIPTEK regarding its responsibility about the damage caused against EAC.

As you will understand, we invest many more resources and work that the originally budgeted ones, and we think that the potentiality of this work will be of maximum utility to obtain the indemnity of the damages that rightfully EAC has requested AIPTEK, so much by the way of a friendly agreement, or by the application of Law.
 

• 1) Analyzed documentation
 

To verify the chronological order of the events and the entirety of the received documentation, we guide ourselves by the work sheet named "Control of resources" that your associate gave us. To develop this report, we put together the documentation in the following groups:
 

a) AIPTEK' Corporative Information

This documentation has been fundamental to understand the main characteristics of AIPTEK, the company that t has aggrieved repeated times to EAC.

There, we find information about the business type that AIPTEK manage, the commercial volume that annually they operates, an idea of your infrastructure and the economic performance that historically it has obtained.

Now, we have an idea of the enormous relative size of AIPTEK in comparison to EAC, and of the strategic value that represents for AIPTEK the information contributed by EAC in relation to Latin America, a commercial region where seemingly AIPTEK has not still been developed strongly.
 

b) Mail with Aiptek (Mr.Wayne Wang and Mr. Vincent Luo) until Aiptek receive from EAC the document referred as “Preliminary Business Plan” at December 23rd, 2004

Documents referred as # 1 to # 28
 

c) Mail with AIPTEK (Mr. Vincent Luo and Mr. Peter Chen) linked to the formal birdcall of the payment by Aiptek' Unfair and Disloyal Business Practice, from March 23rd, 2005 to April 13rd, 2005 included.
 

Documents referred as # 29 to # 32
 

d) Mail with AIPTEK (Mr. Peter Chen and Mr. Ben Lee) linked to the effort of EAC to reach a friendly agreement with AIPTEK, concretion of the agreement and later nonfulfillment from AIPTEK, between April 16th, 2005 and May 16th, 2005.

Documents referred as # 33 to # 51.

 

• 2) Facts' Analysis
 

We have the opinion that doesn't exist any doubt that AIPTEK has aggrieved to EAC and that at least (we emphasize "at least") it has incurred in the commercial injury defined as “unfair conduct”. This arises clearly of the analysis of the following elements:

§         The new offer of AIPTEK for U$S 3.000, improving their previous offer of U$S 2.000 (See Doc #44), it is a re-confirmation of the rights generated by EAC over AIPTEK, as well as of the "unfair behavior" of AIPTEK.

§         We think that AIPTEK has not taken conscience that it has made one time, other and another time, a punishable crime for the right of R.O.C. and instead of having taken advantage of the lack of legal advice of EAC and to pay immediately, it is negotiating their reputation as if it was ordinary merchandise.

 

• 3) Legal framework about restrictive business practices and
Unfair trade practices

3.1) International guidelines about unfair trade practices

We could extend a lot in mentioning different International regulatory schemes that condemn the unfair trade practices that AIPTEK it has perpetrated against EAC.

Firstly GATT (General Agreement on Tariffs and Trade), later WTO (World Trade Organization) and UNCITRAL (United Nations Commission on International Trade Law) they have developed abundant bibliography and jurisprudence on this type of commercial violations, as well as convict the activities and to who develop them, and suitable specific sanctions with international juridical hierarchy.

It also exists in all the countries with cultural, industrial or commercial high-level, like they are in fact all those where AIPTEK has business or headquarters, a very abundant legislation that penalizes those "unfair business practices"

However, the case that summons us (EAC versus AIPTEK) it is much simpler that to face the problem in the International right, since the own Republic of China, where AIPTEK has its headquarters, to hold one of the more modern and transparent outlines regulatory juridical to protect the International trade.

Taiwan doesn't only have specific laws to condemn unfair trade practices, but also specialized discussion environments (courts of arbitration) and supplementing the solution of the problems among privates, with the additional penalization of the State against the companies resided in the country that they have observed these behaviors.

For this reason, in this report, we will concentrate on illustrating you how the legal system of R.O.C works. regarding the companies that develop behaviors unfair business and commercial practices.

3.2) Legal Trade Framework in R.O.C (Taiwan)

The R.O.C. has a law mother as named First Trade Law that is the regulatory base of the business relationships inside domestic and internationally.

3.2.1) About the Fair Trade Law


The Fair Trade Law was enacted mainly to prevent restrictive and unfair competition, thus striking a balance among the principles of a free market economy, promotion of business activities, maintaining order in transactions, and consumers' rights. The Fair Trade Law provides a legal framework regarding business behaviors and conditions such as monopolies, mergers, concerted actions, and unfair competition, as well as for damages and punishments, with the Fair Trade Commission making decisions according to information provided or investigation.

The Fair Trade Law was promulgated on May 4th,1991, and effective on Feb.4th,1992 in order to maintain trade order and consumer’s rights, to ensure fair competition, to promote economic stability and prosperity. After amendments, the current law was promulgated on Feb. 6, 2002.

Fair Trade Law regulates the following commercial activities:

1.      Monopolistic, Merger and Concerted Activities

2.      Unfair Competition Activities

Attached to this report, you find the complete text of the Fair Trade Law, updated May 27th, 2003.


3.2.2) About Unfair Competition

Because the FTL is a type of competition law, and its main purpose is to maintain fair competition in the market, Article 18 of the FTL thus identifies various business behaviors that are deemed to be forms of unfair competition, which can be sorted into two categories:

Interfering with competition, including but not limited to, horizontal price restrictions, discrimination, improperly acquiring trading opportunities, improper acquisition of others' trade secrets, and improperly restricting the business activities of trading counterparts; and

Bad faith competitive behaviors, including but not limited to the counterfeiting and false advertisements, damaging the business good-will of others, and improper business practices in connection with multi-level sales. Because improper business behaviors vary, Article 24 provides a general prohibition against all kinds of unfair competition, or other deceptive or obviously unfair conducts.


3.2.3) About Compensation for Damages

The Article 32 say textually:” In response to the request of the person being injured as referred to in the preceding article, a court may, taking into consideration of the nature of the infringement, award damages more than actual damages if the violation is intentional; provided that no award shall exceed three time of the amount of damages that it is proven.”

Where the infringing person gains from its act of infringement, the injured may request to assess the damages exclusively based on the monetary gain to such infringing person.

3.2.4) Punishment

If the business violates the Fair Trade Law, except specified by law, the Fair Trade Commission may, in general case, orders the business to cease, rectify the activity or make necessary corrective measures within a given time limitation, and to pay the administrative penalty no less than NT$50,000 and no more than NT$25 million.

If the business does not follow the order, and the commission not only can continue ordering the business to cease, rectify the activity or make necessary corrective measures, but it can also order the business to pay the administrative penalty each time no less than NT$100,000 and no more than NT$50 million until the business complies with the commission’s order.

If the business still does not cease, rectify the activity or make necessary corrective measures, or if it resumes the same or similar violation after ceasing the previous violation, the violator is punishable by imprisonment for no more than three years, detention or a fine of no more than NT$100 million.

If the business violates Article 23 of the Fair Trade Law, which regulates Multi-Level Sale activities, by receiving economic benefits from introducing others to participate, and is an aggravated offender, the business may be ordered to dissolute, suspend or terminate its business operation in addition to the above mentioned disposition.

3.3) Our opinion about the AIPTEK attitude

Really, we are astonished that AIPTEK has not solved this matter friendly from its beginning, avoiding to deepen more the conflict, when it had the opportunity to eliminate the problem easily.

Probably, the different speakers that represented AIPTEK tried to handle the situation like a business, not noticing the made fault, being based on the fact that already had the documentation in their power (the Preliminary Business Plan) without having had to make any payment, since they didn't honor the generated business expectations, and thinking that EAC would not make a formal birdcall, more than this, an international legal demand.

The current situation is that with its attitude, AIPTEK forced EAC it is necessary to distract and to invest more valuable resources in the collection of the work that in the  itself, that which speaks very bad of the commercial reputation of AIPTEK.
 

We have the opinion that AIPTEK has not only incurred in several "unfair business practices", but rather also, it exists abundant and reiterated evidences of admitting its fault, and in spite of it, and being noticed by EAC, instead to stop and to solve the problem, it  has repeated the offenses and the crime continuously, increasing more its legal situation.

AIPTEK now takes a risk not only to a demand for more amount, but also to the intervention of the Fair Trade Commission of Taiwan that can execute a voluntary investigation, not only so that it solves the conflict between parts and emergent compensations, but rather the FTC can also apply an administrative penalty for reiterated and obviously unfair conducts of AIPTEK", according to the Article 41 that begin in the NT $50.000,00 (fifty thousand New Taiwan Dollars) that would be to the current exchange rate almost U$S 1.600,00 (one thousand six hundred U.S. Dollars) until a maximum of NT $25 million (twenty-five millon New Taiwan Dollars) that are approximately U$S 790.000 (seven hundred ninety thousand  U.S. Dollars U.S.A).


 

• 4) The strategy that we counsel
 

§         4.1) EAC should update the money reclaimed money originally, adding the later collection costs now (costing effort and offered dedication, legal support, etc) in those that EAC is incurred up to now to protect their legitimate right.

 

§         4.2) Determined the new updated  amount, EAC should make the last intent of friendly collection, with the personnel of higher hierarchy of AIPTEK

 

§         4.3) Finally, if it is impossible to reach a friendly and reasonable agreement for EAC, then make accessible easily all the documentation related with this problem so that interested potentials can revise it directly.

 

§         4.4) EAC should communicate the existence of this conflict against AIPTEK to all the actors that can probably be interested direct or indirectly in being informed of the disloyal, unfair trade and abusive behavior of AIPTEK

 

§         4.5) EAC should contest legally against AIPTEK through a legal representative directly installed in Taiwan
 

• Comments and explanations above each point of the outlined strategy
 

C.4.1)

EAC should update the money reclaimed money originally, adding the later collection costs now (costing effort and offered dedication, legal support, etc) in those that EAC is incurred up to now to protect their legitimate right.

EAC is an Advisor or Consultant Firm, that is to say that is a service company that, among other elements, it bases its revenues on the dedication that its specialized professionals invest in advising clients in personal or written form.

It is notorious for any rational individual that has the task of only to read the traffic of mail between EAC and AIPTEK for this conflict that EAC has invested so much or more effort in trying to collect its work by means of a friendly solution that in the development of the Preliminary Business Plan itself.

Therefore, we understand that it corresponds at least, to add to the cost of the "Preliminary Business Plan" initially reclaimed, the cost of the additional effort invested in obtaining the corresponding payment.

The increment in the money is easily justified, since the Director of EAC that is the most expensive professional in the company, was forced to distract its working hours in solving this problem instead of dedicating that effort to other tasks that had been revenue-yielding for the company.

Another form of saying the same is to clarify that EAC should pay to another professional of similar characteristic that those of its Director, to cover the work that it could not carry out because he was dedicated to solve this matter.

If AIPTEK had paid the moderate claimed U$S 3500 immediately, ECA had not needed to continue in this task, not even neither required our legal advice.

We suggest to apply moderation when make this evaluation and upgrade of expenses. AIPTEK already knows that EAC estimates in U$S 50 (fifty U.S. Dollars) the working hour of a Senior Analyst.

A value not very far from that, it can be a moderate reference for the upgrade of the reclaimed amount, since inclusive AIPTEK, it has already accepted previously it, when it made a quite near offer to the amount originally reclaimed (U$S 3.000 against U$S 3500 claimed) that finally neither completed.

As the goal of a friendly agreement it is simply to compensate the effort, to recover the minimum expenses, and it is not a business in itself, it should be clear for AIPTEK that the new amount doesn't include the commercial value of the work (that it would be bigger because they are costs and not sale prices of services) neither emergent moral damage (that is easily demonstrable for the lack of answers) neither corresponding loss of profit, neither trial lawyers' honorarium neither any additional one more.

AIPTEK should understand that it’s a minimum amount figure non-assignable (a very kind figure), very different and below the amount that with more than enough arguments, it could be claimed if finally it was necessary to begin a judicial demand.

We have the opinion that this way, AIPTEK will make the consultations of the case with its attorney-at-laws of its trust and they will surely make understand that this is an excellent opportunity of solving the topic quickly and with the smallest possible cost.


 

C.4.2)

Determined the new updated  amount, EAC should make the last intent of friendly collection, with the personnel of higher hierarchy of AIPTEK

It is a good preparatory measure for the legal cause, to insist for last time on looking for a friendly and quick solution, and to let registered that antecedent, in spite of the reiterated non fulfillments shown by AIPTEK.

We suggest that EAC channels its last intent (now with the amount moderately updated) to the more executive high-level of AIPTEK.

As we have read in the added documentation, these people are Mr. Peter Chen (CEO), Mr. Ted Tung (Vice-President and Official Spokesman), and Mr.Jacky Chen (Public Relation).

We suggest that if this possibility exists, EAC establishes a new dialogue directly with these three high executives of the company, to seat the precedent that AIPTEK has been formally notified of all that happened.

That communication should be brief and concrete and supported in all the new elements that have arisen that will be mailed as attachments (copies of all its exchange of emails with Mr. Ben Lee). It is very possible that to that high level, don't still have been informed of the delicate thing that it has put on the situation.

EAC should offer as new sample of good will and generosity, a new term to AIPTEK to obtain the definitive answer. That term should be enough so that AIPTEK analyzes those facts, consult to its lawyers and make the correct decision in this last opportunity that should be the payment of the update amount.

If EAC obtains a favorable answer to its outline, then, given the bad antecedent demonstrated by AIPTEK, EAC should declare that it is willing to subscribe the documentation that liberates AIPTEK of any later litigation and to facilitate the things, it is also willing to authorize the use inside AIPTEK of the Preliminary Business Plan as Mr. Ben Lee he has requested it,.

All these concessions are conditional exclusively to the previous collection on the part of EAC of the entirety of the reclaimed amount that must be transferred from AIPTEK.

So that the procedure will be without frictions, EAC can suggest that could be AIPTEK itself who edits the document with the conditions that EAC should accept to approach of AIPTEK. This will facilitate the things. That document will be revised by us.

In compensation to the concessions, and always inside the terms of a friendly agreement, EAC should request AIPTEK I sent its a recognition letter and gratefulness for the Preliminary Business Plan developed for them. In that way, both companies have valid guarantees that the episode has finished satisfactorily and they leave strengthened of this traumatic process.

If past the term defined by EAC, it doesn't reach the outlined agreement and it has received the payment of the reclaimed figure, we suggest not to lose more time trying to solve the topic friendly and to pass to execute the planning that follow, preparing the land for the legal reclamation that is it that, to our opinion, EAC should have made at least one month ago.

 

C.4.3)

Finally, if it is impossible to reach a friendly and reasonable agreement for EAC, then, make accessible easily all the documentation related with this problem so that interested potentials can revise it directly.

After analyzing the whole documentation detailedly, we don't find any reference to any "Non-disclosure agreement" commitment of privacy subscribed between EAC and AIPTEK in relation to the confidential character the exchanged information, therefore EAC can make public the documentation. Do it, of course.

A practical and very effective way for this goal consists on publishing all documents in a Web Site, where this whole information remains accessible for the whole public. All the expenses that are generated by the development, maintenance and modifications of this web site, will be for bill of AIPTEK and added on demand.

 

C.4.4)

EAC should communicate the existence of this conflict against AIPTEK to all the actors that can probably be interested direct or indirectly in being informed of the disloyal, unfair trade and abusive behavior of AIPTEK

As we have already explained previously, the Government of Taiwan is specially careful with the behavior of the companies that they operate in that country.

We suggest that once the place web site is operative, this case will be diffused thoroughly among who besides EAC, they can be affected by this unfair trade practice and abusive behavior.

With this motive, we have made the following list:

 

01

Fair Trade Commission de Taiwan (Taipei) -

02

Ministry of Foreign Affairs of f those countries where AIPTEK has commercial operation: Republic of China (ROC) Taiwan, China, Germany and United Stated of America mainly.

03

ROC's Embassies; Consulates and Representative in the world

04

Office of the President of R.O.C.

05

Bureau of Foreign Trade – R.O.C.

06

Taiwan Stock Exchange Corporation

07

Securities firms,  Brokers & Stock sales of Taiwan

08

AIPTEK’s Shareholders

09

AIPTEK’s Suppliers

10

AIPTEK’s Customers

11

AIPTEK’s Resellers around the World, mainly in that markets where AIPTEK has branch offices or high volume of operations

12

AIPTEK’s Competitors

13

Newspapers of R.O.C, China, Germany and U.S.A.

14

Publications as magazines, specialized in the technology area (electronic)  and international trade so much at  all levels (international and local)

15

Taiwan International Business Offices in United States of America

16

Accounting Firm  - PricewaterhouseCoopers

17

International Trade and Technology Organizations  where AIPTEK intervenes

18

Administrators of the Hsin Chu Science Park and all the neigh boring companies there installed

According to us we have investigated, in some cases, the Fair Trade Commission, it has acted "of vocation or voluntary" when it knows some matter, since the own Government from Taiwan penalizes with strong penalties to the companies that violates the Fair Trade Law.

 

C.4.5)

EAC should contest legally against AIPTEK through a legal representative directly installed in Taiwan

Parallelly to the development of the outlined strategy, our Attorney At Law Firm, is interested and willing to negotiate with EAC, its legal representation at International level and also locally, through a partners (another Attorney At Law Firm with headquarters at Taiwan) specialized in "Unfair Trade Practices" to begin the reclamation when you will be ready.

To pass to this level, we should agree with EAC the total amount to demand legally, as well as to settle our honorarium.


 

From our analyses it arises that we think that this case will be absolutely favorable to EAC, we are willing to condition the collection of our honoraria only if EAC won the demand against AIPTEK, or if during the administration of the case, AIPTEK offered a formula of acceptable negotiation according to the amount legally demanded.

This way, we offer EAC an additional evidence of the trust that we have on the diagnosis that we have accomplished.

• 5) Honorarium of this Legal Study

The preparation of this work, it has demanded some 40 hours Junior Attorney, 10 hours of Senior Attorney, 10 hours of Legal translator, and 4 hours of an Attorney with high  Legal specialization grade in International Trade Rights.

This report has been structured to facilitate a friendly agreement among the parts (EAC and AIPTEK), but also as preparatory measure for the case that it will be necessary to install a litigation internationally.

Our honoraria for this advice ascend to the sum of U$S 3.600 (three thousand six hundred dollars U.S.A.)

Whereas clause the fact that possibly after this report the customer arrives to a reasonable agreement with the tally, and assisting the friendship between Mr. Etchegaray and our Director, it has been solved that the honoraria will be paid in the following way:

Without further, we greets sincerely to you

Attorneys at Law Firm (Signature)