Taiwan suppliers in a US patent investigation: who pays the defense costs?

CNA reported on October 11, 2026 that a US patent investigation involving server power technology names Taiwan companies including Hon Hai, Delta Electronics and Quanta. The US International Trade Commission's October 9 notice confirms that it opened the investigation without deciding the merits. CNA also reported that Quanta would ask the relevant component suppliers to respond to the dispute.

For a US procurement team, that response raises a question about its own supply agreement: does the supplier promise to fund a defense when a claim arrives, or pay only if infringement is established? Legal bills can arise while that distinction remains unresolved. A company's public statement does not reveal the terms of its private contracts.

The law governing the payment promise

Taiwan law does not govern a supply agreement merely because the vendor is based there. Article 20 of Taiwan's choice-of-law statute gives effect to the parties' choice for the formation and effect of contractual obligations. Where there is no valid express choice, it applies the law most closely connected with the transaction, with statutory presumptions for identifying that connection.

Where Taiwan law governs, Civil Code Article 199 permits a creditor to demand performance from its debtor. The buyer therefore needs an identified obligation owed by the supplier. A purchase invoice and a patent complaint do not, by themselves, establish a promise to pay every expense the buyer incurs.

The Taiwan contract question concerns the allocation of costs between the commercial parties. Whether the products infringe a US patent, and how to defend the US proceeding, requires separate US legal analysis.

A claim and a final finding are different triggers

Civil Code Article 98 requires interpretation to seek the parties' true intention rather than stop at the wording used. The signed terms and relevant negotiation records matter when the parties disagree about what their promise covers.

Consider two hypothetical clauses. One covers reasonable defense costs arising from a third-party patent claim; the other reimburses losses following a final infringement finding. They address different events. The first may operate before the merits are resolved, subject to its notice, consent and other conditions. The second does not necessarily provide funding during the investigation. Neither example describes the contracts of the companies in the news.

A heading such as “intellectual property indemnity” leaves many details unanswered. The clause may distinguish the supplier's component from a system designed by the buyer, limit the relevant territories, or exclude modifications. It may also assign control of the defense and require consent to a settlement. Those provisions affect the requested reimbursement and cannot be replaced by an assumption that the component manufacturer bears all patent risk.

Funding a response while liability remains disputed

Attorney fees, technical analysis, replacement components and a settlement payment are different costs. An agreement covering one category may leave another open. A buyer preparing a reimbursement request can connect each expense with the relevant clause, the affected product and any required approval, so the disagreement concerns identifiable amounts and promises.

The parties may instead negotiate an interim funding arrangement. It can state which costs will be advanced, who approves them and whether the allocation will be revisited after the dispute ends. Such an arrangement needs its own agreed terms; it should not be inferred from a supplier's willingness to attend a technical meeting.

Contractual limits also have legal boundaries. Civil Code Article 222 prohibits an advance exemption from liability for intentional conduct or gross negligence. A broad exclusion therefore needs more analysis than simply locating it in the signed agreement.

Fictional scene

Sources

• CNA, October 11, 2026: investigation and the companies' reported responses.
• US International Trade Commission, October 9, 2026: institution of the investigation and absence of a merits decision.
• Act Governing the Choice of Law in Civil Matters Involving Foreign Elements, Article 20.
• Civil Code Articles 98, 199 and 222.

Sources checked: October 13, 2026. The cited Taiwan provisions are in force. This is general Taiwan-law information, not an assessment of any respondent's liability or advice on US patent proceedings.