1. Intellectual property strategy

We encourage innovation and independent research and development, which closely aligns with our business objectives and focuses on the long-term development of our core businesses. As part of our intellectual property strategy, we will focus on future key technologies, continuously strengthen our IP portfolio, and deepen collaboration between our legal and intellectual property and business department to achieve our IP portfolio direction and long-term operational goals.

2. Intellectual property strategy and management system

We have always valued intellectual property rights, and this year we have further strengthened our commitment by implementing the Taiwan Intellectual Property Management System (TIPS). This initiative enables us to improve our management processes for acquiring, maintaining, and utilizing various forms of intellectual property, including patents, trademarks, copyrights, and trade secrets. By doing so, we aim to enhance our company's competitiveness and safeguard the interests of LITEON and our shareholders.

Patent management:

We aim to encourage employees to actively convert their research and development achievements into intellectual property protection, including patent application, trade secrets, or thesis publication, by providing a well-refined disclosure, evaluation process, and reward system. This practice drives the development of our company's products and technology, and promotes a culture of innovation. By enhancing our patent portfolio, we aim to improve our overall patent strength, thereby increasing LITEON's competitiveness in the technology industry.

Trademark management measures:

We also have a trademark management system. The system establishes the procedures for application, evaluation, acquisition, and maintenance of trademarks, and promotes the correct use of trademarks. It serves the purpose of protecting LITEON's intangible assets, establishing and maintaining LITEON's reputation, and protecting LITEON's brand interests by preventing from trademark squatting.

Trade secret management measures:

We combine our information security system with our IP management process to implement daily management processes for classifying and grading information documents, as well as providing ongoing employee education and training to strengthen their awareness of protecting confidential information and avoid the improper disclosure of information, thereby achieving more effective protection of our research and development achievements.

Meanwhile, for the purpose of protecting the company's intellectual property, employees joining the company are required to sign an employment agreement and related documents to agree, in addition to making their inventions created on the job as required by law of the intellectual property of the company, to undertake the duty to safeguard the confidentiality of the company's intellectual property rights and confidential information and other obligations for the duration of employment and after termination of employment.

Furthermore, we perform regular internal audits of the R&D cycle every year in order to ensure the acquisition, maintenance, and utilization of the intellectual property are handled in accordance with LITEON's rules.

3. Implementation and outcome

During the 12th session of the 12th board of directors meeting on October 30th, 2023, OBI reported on intellectual property related matters for the fiscal year 2023.

In recent years, LITEON has mainly focused on the following initiatives:

To strengthen our intellectual property management process, we introduced the Taiwan Intellectual Property Management System (TIPS) in 2023. In addition to developing related regulations such as the "Intellectual Property Management Manual," we adjusted our existing management methods such as the " Intellectual Property Management Procedure" and the " the Invention Application and Incentive Award Program." Furthermore, we conduct internal audits to check on our company's management status and implemented corrective measures for non-compliant issues in order to promote the optimization of management procedures and mitigate intellectual property risks.

The current achievements relating to our intellectual property rights include the following:

Patents: As of the third quarter of 2023, LITEON had filed about 2,400 patent applications, with approximately 2,000 patents granted. In 2022, we successfully obtained 125 granted patents, including 1,500 patents for inventions. LITEON's patents are strategically placed in major markets and countries, covering the primary manufacturing and sales locations of relevant products.

Trademarks: LITEON has registered over 200 trademarks in more than 40 countries and ten different classes to ensure adequacy of protection for our products. We introduced the "LITEON" dynamic trademark as our new brand identity this year, and the "COOLITE" trademark for our liquid cooling solutions. We also marked our registered trademarks on business documents such as product catalogs and invoices, as well as in commercial events and exhibitions to enhance brand image and recognition.

4. Purposes of intellectual property and contributions to business activities

We work hard to invigorate and manage the existing intellectual property, such as receiving royalty from licensee, cross license, purchase, sale or trust of intellectual property, and anti-counterfeiting efforts. We sometimes use patents as weapons to open doors and form strategic alliances to create win-win situations. There have been many successes with invigorating intellectual property to create profits for the company, improving the brand image, increasing market shares for specific products, and winning clients' trust. Meanwhile, we continue to innovate and develop new products and technologies. Through the coordination among different entities in the LITEON Group, we can establish an intellectual property wall which increases LITEON’s advantage and competitiveness.

5. Countermeasures against intellectual property related risks

We take an active approach to facing and handling intellectual property disputes as appropriate with priority given to protecting the company's market, products, technologies, and clients. We do not seek out fights, nor do we shy from challenges. Besides following the dispute resolution mechanisms to perform technical, legal, and industrial analyses and formulate dispute resolution strategies, we utilize various models to erect technical barriers to trade for competitors, thereby acquiring protection of intellectual property rights or avoiding infringement on patents of others.

We organize a number of training sessions every year to communicate the importance of intellectual property and related risk management mechanisms to our employees. Topics include gaining the first-mover advantage by immediately applying for patents, use and management of confidential technical information, and monitoring of products and technologies in the market. We have also certain guidelines in place for employees to follow so to enable our employees to take appropriate response measures in the event of a patent risk incident.

To prevent the above risks, we identify operations management related intellectual property opportunities and risks, and devise countermeasures, including systems and regulations, training, confidentiality management, inventory maintenance, and reporting proven infringement and rewards. These measures ensure output of intellectual property rights, and effectively manage intellectual property risks.