1. Intellectual property strategy and goals

We actively encourage innovation and independent research and development. The priorities in our intellectual property strategy are focusing on core technologies, and developing high quality patents. We implement an intellectual property management plan and goals that are linked to business targets and key R&D plans, and conduct risk management as needed to reduce infringement risk. Meanwhile, moving toward creating added value in intellectual property rights, we strengthen R&D outcome commoditization and enhance our brand image by creating added value from intellectual property. We aim to operate in all areas of our business and maximize the value of intellectual property while managing and utilizing effectively our patents, trademarks, trade secrets, and copyrights.

2. Intellectual property strategy and management system

As part of our ongoing commitment to intellectual property, we have implemented the Intellectual Property Management Procedure to regulate and manage the grant of right, maintenance, and utilization of patents, trademarks, trade secrets, copyright and other forms of intellectual property. The procedure serves to help LITEON compete in the market and protect the rights of itself and its shareholders.

Patent management measures:

We have implemented a sub-procedure, "Invention Application and Incentive Award Program", under the Intellectual Property Management Procedure. We have a well-established disclosures, review committee, and incentive program to encourage our employees to turn R&D outcomes into protected intellectual property. The effort will generate momentum for R&D and innovation in products and technologies. We also try to file good patents to build up powerful patent portfolio for the company as a whole and pave the way for the company to compete more effectively in the tech industry.

Trade secret management measures:

Our "Engineering Notebook Management Procedure" is designed to manage the entire intellectual property innovation process. It enables the R&D personnel to record their work outcomes in an easier and more effective manner for easier reference, access to supporting documents, and long term storage. The procedure protects LITEON's R&D results and trade secrets effectively in order to accumulate and pass on the company's entire R&D database and intellectual property. It also helps the company stand out more. The Engineering Notebook is developed by combining LITEON's operating system and approval system. It allows the R&D personnel to record research outcomes on a computer and R&D supervisors to review and approve work electronically. The move from paper to electronic allows recording, approval, and storage without time and space constraints. The company is able to retain complete R&D outcomes more economically.

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.

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.
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

We present one or more intellectual property management report to the board of directors every year. The last report was presented on October 28, 2022.
We have been working hard to develop the intellectual property management plan. Key activities in recent years are as follows:

• We had been building a system for various forms of intellectual property for the company. (The Intellectual Property Management Procedure Version 2, the Invention Application and Incentive Award Program Version I, and the Engineering Notebook Management Procedure Version 1 were revised in 2020.)
  

• We refined our intellectual property management plan. Improvements included the introduction of quality indicators for R&D personnel's patent applications, performance evaluation mechanisms and related reward programs. The objective is to focus on key R&D technologies effectively and generate effective protection for intellectual property rights.
  

• The patent management system was optimized.
  

• Several training sessions were held to raise awareness of basic ideas of intellectual property rights every year.

In summary, our outcomes in intellectual property are the following:

Patents: As of the end of 2021, LITEON has a total of 2,500 patent applications and 2,100 granted patents, including 1,600 utility patents. These patents are spread across a number of major markets and countries and cover main places of manufacture and sale for related products. In particular, the technical field covers our core products, including LITEON's LED products, power supply units, servers and network communication parts, multifunction machines, computer input devices and chassis, automotive electronic parts and other core products. Core technologies included opto-electronics, cloud computing, AI, smart home, network communication, storage, smart lighting, smart automobile, imaging and 5G wireless system. A huge amount of patent data are handled systematically entirely by the LITEON patent database. The process makes it easier to track the status of patent applications and issued patents and subsequent maintenance.

Trademarks: So far LITEON has more than two hundred granted trademarks spread across ten categories and registered in more than forty countries in order to ensure LITEON's products, including opto-electronics, information, automotive, and storage products can be protected by these trademarks. Meanwhile, to enhance the brand image and recognition, we place our trademarks not only on the products and the exterior packaging, but also on business documents, such as product catalogs and income certificates. In addition, we make it ongoing standard practice to use our trademarks in all domestic and international business activities and exhibitions. Furthermore, we organize internal education and training sessions as needed to raise awareness of the correct use of trademarks. Furthermore, to shape and transform LITEON’s brand image, we established the department of Corporate Brand Value Development Division. With a complete brand development strategy, our brand value will be enhanced.

Partnerships: We work with well-known universities around the world in various cooperation programs, such as the R&D center established jointly with National Tsing Hua University. These programs help us secure technologies and patents for key technologies in the business. We also team up with Nanyang Technological University of Singapore to develop more power-efficient technologies for smart grids and smart homes. More than a hundred theses have been published on domestic and international journals under these programs. These partnerships with research institutions, such as National Taiwan University of Science and Technology, attract outstanding talent to join LITEON. We also work actively with upstream/downstream suppliers to develop and facilitate related patents.

To encourage technical innovation and creativity, we have created the Core Competence Center (CCC) to handle primarily innovative product development, aesthetic design, user experience design, and IoT and app integration design. The adoption of digital technologies and environmental policies in recent years extends the responsibilities of ICC further to cover cloud platform integration, augmented reality (AR) application and green packaging design. For example: the success in creating a smart streetlight IoT control panel and its application in large domestic government projects; recycling marine waste and turning marine waste keyboard packages into environmentally friendly board game cards and marine waste mouse packages into card holders in order to raise awareness of marine waste in the next generation through a combination of education and entertainment. The design received an iF Design Award in 2020 and a Red Dot Design Award.

As a subsidiary of LITE-ON Technology Corporation, LEOTEK Corporation actively provides smart transportation solutions, committed to fulfilling the vision of "Roadway Intellimation" (intelligent automation). LEOTEK is proud to be recognized as Gold and Bronze Award by the 2022 Edison Awards in the “Critical Human Infrastructure“ Category for two exciting new technological developments, “Human-Centric Smart Street Lighting System” and “Ecological Conservation Smart Lighting”, respectively. Looking forward, LEOTEK Corporation promises to be the roadway safety guardian, and pioneering a roadway intellimated city for a sustainable world.

Furthermore, to fulfill our corporate social responsibility and drive innovation in Taiwan, LITEON hosts the LITEON Award, which is open to the public, every year. By hosting competitions, campus innovation seminars, and international forums, we continue to call attention to technologies, products, and innovative designs in the Chinese-speaking world. We also provide young creative teams with a platform for exchanging ideas with world-class corporate, academic, technical experts and social resources in Taiwan.

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 ensure LITEON's information assets are adequately protected while following the trend of going paperless and electronic transmission, we have implemented an ISO 27001:2013 compliant information security policy. To prevent hacker attacks and theft of the company's confidential information, we have installed information security monitoring systems and implemented Microsoft Azure Information Protection (AIP). Digital cloud tools, such as Microsoft Office 365, and encryption, identification and authorization rules are utilized to protect confidential business documents. Furthermore, in terms of security in the real world, all of our employees and external parties (including clients, consultants, partners and suppliers) are inside the scope of this policy.

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.