1. Intellectual Property Management Strategy

Our company actively promotes a dual-axis transformation, establishing Display Technology, Mobility Solutions, and Vertical Solutions as our three main operational pillars. We continuously leverage innovation as the driving force and a key capability for achieving excellence. Therefore, intellectual property rights are regarded as one of our most valuable assets.

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In addition to valuing our own intellectual property, we also respect the intellectual property rights of others. Our intellectual property strategy blueprint focuses on four key areas: "Patent Management Measures," "Innovation Environment Construction," "Trade Secret Management," and "Risk Management Mechanisms." Since 2友達(dá)23, we have introduced the "Taiwan Intellectual Property Management System (TIPS)," utilizing internal audits and external certification processes to continually improve our intellectual property management practices. This aims to maximally safeguard the rights of employees and shareholders, optimize our competitive advantages, and enhance corporate profitability.

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Regarding patent management measures, we implement expert advisory meetings to make strategic decisions aimed at maximizing asset value. For innovation environment construction, we have established a comprehensive intellectual property system and platform, with programs such as education, training, and awareness campaigns, as well as incentives for intellectual property innovators, to encourage employee innovation and the creation of high-quality IP assets. In trade secret management, we enforce document and information classification and grading policies to protect innovative results in the most effective manner. For risk management mechanisms, we continuously monitor intellectual property risks and opportunities, executing risk assessments and management to reduce infringement risks and mitigate frivolous litigation.

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All of these strategies are executed in accordance with our "Intellectual Property Management Guidelines," "Innovation, Patent, and Trade Secret Management Regulations," and "Employee Innovation Proposal and Reward Policies," ensuring effective management of our patents and trade secrets throughout their acquisition, protection, maintenance, and utilization.

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In recent years, in response to rapidly evolving display technologies, our company has actively developed Micro LED display technology, including cross-domain applications such as large-scale and transparent displays. A primary R&D focus has been to overcome yield limitations. To effectively manage know-how related to these advanced technologies with potential economic value, we have listed "Trade Secret Management" as one of our strategic blueprints. In 2友達(dá)23, we revised the trade secret proposal mechanism, adding a dedicated submission portal to support and encourage our innovative personnel to continuously develop high-value technological innovations. Additionally, through our trade secret bonus system, we motivate innovators to document know-how, promoting a systematic and comprehensive management of trade secrets.

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Furthermore, to address geopolitical, international trade, or global M&A uncertainties that could significantly impact R&D and manufacturing strategies, our company continuously monitors current developments and adjusts our global patent portfolio accordingly. For example, we have expanded patent filings to ASEAN countries and Europe, enabling us to maintain a flexible and resilient intellectual property strategy that responds swiftly to market changes.

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2. Patent Management Measures

The following procedure shall be followed if the innovation is determined to be protected by filing patent applications:

1. Applying for the patent in various countries based on the decision of the Innovation Proposal Evaluation Committee.
2. During the patent prosecution procedure, adequately controlling the process and doing the best to acquire the most appropriate scope of patent protection.
3. If withdrawal of any patent application becomes an option because of the denial by the authority or any other reasons, the decision of withdrawal shall be made in the meeting in which at least three supervisors of the Intellectual Property Department should be present.

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After a patent is granted, the following measures shall be adopted:

1. The Intellectual Property Department shall follow the maintenance procedure and pay fees pursuant to the regulations of the patent offices of relevant countries.
2. Conducting evaluation on patent assets and producing patent rating analysis report. The Intellectual Property Department shall arrange a patent asset evaluation meeting to review the rating.
3. Planning the project for exploitation of patent assets and effective disposition of patent assets based on the overall demand of patent asset management.

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3. Trade Secret Management

Confidentiality measures shall be adopted on the company documents and information which have been classified as confidential. If any innovation is determined to be protected by trade secret, the following measures shall be taken:

1. Arranging said innovation, marking said innovation as confidential and managing said innovation as confidential documents.
2. Signing a trade secret agreement concerning said innovation with the proposer of said innovation and informing the proposer that said innovation is the valuable confidential information of the company which shall be managed based on the confidentiality policy.

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4. Creation of an Innovative Environment

A proper mechanism in compliance of the related regulations should be implemented for providing information of IP risk and opportunity monitoring, and the mechanism should also provide the criteria to the decision makers for determining the value/risk of the related IP matters.

1. The Intellectual Property Department shall be responsible for providing the system and platform relating to innovations, patents and trade secrets, the functions of which shall include: track on the number of innovation proposal, statistics and analysis, patent application, patent management and trade secret management.
2. The Intellectual Property Department shall be responsible for education, training and propaganda of topics relating to intellectual property rights. The courses of intellectual property rights shall be divided into compulsory courses and elective courses based on the positions of the employees and actual demand.
3. The Intellectual Property Department shall hold intellectual property innovation activities and provide rewards to the innovator of each intellectual property right, including patent reward, trade secret reward and reward for publication of a copyrighted work.
4. The Intellectual Property Department shall be responsible for the deployment of intellectual property rights and the analysis of patent portfolio reports, providing information to the company's top management for making decisions on business strategies and R&D directions. Based on these decisions, the Intellectual Property Department collaborates with R&D personnel to implement integrated technology development projects, ensuring that the patent portfolio planning aligns with the company’s business strategies and R&D directions.

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5. Risk Management Mechanism

A proper mechanism in compliance of the related regulations should be implemented for providing information of IP risk and opportunity monitoring, and the mechanism should also provide the criteria to the decision makers for determining the value/risk of the related IP matters. AUO has designated personnel to promptly assess and respond to intellectual property disputes, with the primary principle of protecting the company, customers, and shareholders while formulating dispute resolution strategies to minimize uncertainty in business operations. Specific cases, such as the litigation or non-litigation events disclosed on page 76 of AUO's 2友達(dá)24 annual report, illustrate this approach.

The Intellectual Property Department will reports the implementation status regarding the intellectual property rights to the Board of Directs in the first Board meeting each year. The Intellectual Property Department will also take appropriate measure and adjustment according to the suggestions received in the Board meeting.

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The Intellectual Property Department will continuously devote its dedication to the intellectual property management plan. The implementation status of the plan is as follows:

1. “Intellectual Property Management Policy” has been prescribed and implemented, which contains clear regulations regarding intellectual property policy, the protection scope and ownership of intellectual property rights, intellectual property management and rewards.
2. “Innovation and Patent & Trade Secret Management Rule” has been prescribed and implemented, which contains sufficient explanations on the grounds for management, organization, scope of duty, and clear regulations regarding innovation management, patent management, trade secret management and creation of an innovative environment.
3. “Rule of Rewards on Innovation Disclosure” has been prescribed and implemented, under which an evaluation committee is formed to evaluate any innovative proposal and sets out the principle to classify the patent assets and the trade secrets. Adequate rewards are also provided to relevant employees who contribute to the innovative proposals, patent assets and trade secrets based on the outcome of relevant meetings.

To this date, the result and list of intellectual property rights are as follows:

1. Patent: Until the end of December 2友達(dá)24, the total number of our global patent applications has reached 32,友達(dá)友達(dá)友達(dá) while the total number of our patents granted in the world has reached 24,7友達(dá)友達(dá). In 2友達(dá)24 (until the end of December), we have been granted over 46友達(dá) patents in Taiwan as well as over 75友達(dá) patents global patents. In 2友達(dá)23, passed the TIPS AA certification of Taiwan's intellectual property management regulations. The certificate is valid until 2友達(dá)25/12/31.
2. Trade Secret: Each unit of the company manages the confidential information according to its function and business nature; there are about 1,5友達(dá)友達(dá) trade secrets related to technology research and development inventions each year.

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Contributions of Intellectual Property Rights to Business Operations and Revenue:

Our company regularly holds a Technology Advisory Committee meeting at the beginning of each year, and during mid-year we conduct a phase-by-phase results review meeting. In addition, the Intellectual Property Office provides industry IP analysis reports on targeted technologies to facilitate discussions and alignments among sales, R&D teams, experts, and management. This process ensures consistency in organizational operations, technology development, and IP strategic planning.

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Taking our Mobility Solutions, one of our three main operating pillars, as an example: organizationally, we officially acquired Germany’s BHTC in April 2友達(dá)24. In terms of technology, R&D, and IP deployment, we continue to strengthen our capabilities in the field of mobility technologies. Notably, our patent applications for mobility technologies in Taiwan in 2友達(dá)24 doubled compared to 2友達(dá)23. By the end of December 2友達(dá)24, our global portfolio of patents related to mobility technologies exceeded 2友達(dá)友達(dá) assets.

Focusing on advanced display technologies and leveraging the strength of BHTC as a Tier 1 supplier, our IP strategy and organizational operations have reflected positively in our revenue performance in 2友達(dá)24. According to pages 2–3 of our 2友達(dá)24 Annual Report, revenue from our original Mobility Solutions business group grew by 18% compared to 2友達(dá)23. After integrating BHTC, the combined revenue growth reached as high as 63%.

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After AUO obtains patent certificates for its patent applications, the dedicated intellectual property department collaborates with relevant units to classify the granted patents, fully understanding the asset value and status of its intellectual property rights. In cases where a third party infringes upon the key technologies of patents held by AUO, appropriate legal measures will be taken after gathering relevant evidence to protect AUO's intellectual property rights and market position. The patents held by AUO not only serve as a tool to combat infringers but can also be the subject of cross-licensing agreements. Details regarding the company’s patent licensing or cross-licensing agreements are disclosed on page 7友達(dá) of AUO's 2友達(dá)24 annual report.