Contributed By Tai E International Patent & Law Office
In Taiwan, the Trade Secret Act (TSA) was enacted in 1994, and since then has been amended twice, respectively in 2013 and 2020. The current TSA mainly governs the following items:
In addition, other laws relating to the protection of trade secrets may apply concurrently, including the Civil Code, Code of Civil Procedure, Criminal Code, Code of Criminal Procedure and Intellectual Property Case Adjudication Act (IPCAA). The Civil Code and Criminal Code generally provide for the tort law, obligations of contract and criminal penalties applied to disclosure of commercial or industrial secrets of others without a justifiable reason. The IPCAA specifically governs the adjudication of intellectual property disputes. The TSA and IPCAA prevail over the Civil Code, the Code of Civil Procedure, the Criminal Code and the Code of Criminal Procedure in trade secret litigations when there are issues of concurrency. There is no difference in the protection of trade secrets at national and local levels in Taiwan.
In Taiwan the information that can be protected under the TSA is defined as “any method, technique, process, formula, programme, design, or other information that may be used in the course of production, sale or operation” and must meet the following requirements:
A trade secret can be technical or business information, as long as it meets the definition provided by Article 2 of the TSA. Some examples of technical information are manufacturing processes, formulations or compositions of chemicals, computer software, design drawings, manufacturing parameters and testing reports or data. Examples of business information include a company’s customer list, distribution locations, product prices, purchase costs, transaction reserve prices, personnel management, cost analysis, and other business-related information.
The three required elements of trade secret protection are explained as follows.
It is required for a trade secret-owner to show that reasonable measures have been taken to protect the secrecy of the information. The reasonable measures include that the trade secret-owner intends to protect the information, and actively maintains its confidentiality, such that other people could know that the information currently is and should be kept a secret. According to the courts, examples of reasonable measures are "marking on the document" remarks such as "Confidential" or "Restricted Access," locking the information of trade secrets or setting a password.
Disclosure of a trade secret to employees under neither confidentiality clauses in the employment agreement nor internal governing rules may not meet the secrecy requirement. Disclosure of confidential information to employees should be based on the standard of “who needs to know.” If an employee can acquire the confidential information from the employer without restriction, the court may consider that the owner did not take reasonable measures to maintain the secrecy.
According to the legislative grounds of Article 10 of the TSA, if a third party knows the confidential information in an object through independent discovery or reverse engineering, such behaviours would be considered lawful methods under the TSA.
There is no specific law particularly governing the protection of trade secrets of computer software and technology. Computer software and technology are considered as trade secrets if the three statutory requirements (secrecy, economic value and reasonable measures) of a trade secret are satisfied.
The term of protection for a trade secret is not limited as long as the secrecy is kept. Accidental disclosure may be considered as not taking reasonable measures. When disclosure of trade secrets to employees, agents or subcontractors is inevitable in the operation of business, the controlled disclosure of trade secrets under the confidentiality clauses in a contract or non-disclosure agreement (NDA) is crucial to maintain the secrecy.
A trade secret-owner is entitled to grant a licence to a third party for use of the trade secret (Article 7 of the TSA). Licensing a trade secret to a third party does not affect the existence of the trade secret as long as the secrecy is maintained. Thus, confidentiality clauses in licensing agreements or NDAs are crucial for licensing.
In Taiwan, trade secret protection differs from other IP rights in terms of the following aspects.
If a trade secret is kept confidential in an oral or written form, the oral or written expression may also be eligible for copyright protection. In local practice, copyright claims were frequently filed in a litigation substantially for trade secret disputes before the TSA was enacted in 1994.
Besides, a company may use comprehensive IP strategies to protect products or methods of high commercial value. If the information can be easily known to the public through reverse-engineering, such as the structure of an object, a patent right could meet the demands for protection. However, a better version of a patented object or an improved manufacturing process through continual development is usually subject to trade-secret protection. It is possible for a plaintiff to assert the trade-secret right in combination with other IP rights, such as copyrights or patents.
The Civil Code provides the general obligations of employment. An employee should treat as confidential the information which he or she knows or possesses during the employment. If an employee discloses the confidential information without a justifiable reason, it is possible for the employer to bring a claim for breach of contract.
A third party who has induced an employee to breach his or her contract with the employer may be jointly liable for the damage arising therefrom under the tort provisions in the Civil Code. If the third party is an enterprise as defined in Article 2 of the Fair Trade Act (FTA), a trade-secret owner may also seek remedies or bring claims under the FTA.
The TSA provides civil remedies and criminal penalties for trade-secret misappropriation. It is allowable for a trade secret-owner to pursue both civil and criminal claims. A person should be liable to criminal penalties under the following circumstances:
a) acquiring a trade secret using wrongful means, such as an act of theft, embezzlement, fraud, threat or unauthorised reproduction;
b) disclosure or use of the trade secret acquired by wrongful means;
c) committing an unauthorised reproduction, usage, or disclosure of a trade secret known or possessed;
d) failing to delete or destroy a trade secret at the request of the trade secret-owner; and
e) use of the trade secret acquired from a third party who obtained the trade secret illegally.
Offenders shall be liable on conviction to imprisonment and fines under the TSA. If an offender intends to use a trade secret illegally in Taiwan, the offender should be liable on conviction to imprisonment for a term not exceeding five years, and, if any, a fine between TWD1 million and TWD10 million. As to the illegal use of the trade secret outside Taiwan, the offender should be liable on conviction to imprisonment of between one year and ten years, and, if any, a fine of between TWD3 million and TWD50 million.
The criminal penalties are applicable to both natural and juristic persons. In addition, the employer (a natural or juristic person) may also be imposed a fine if his or her employee, agent or staff commits a crime under the TSA, unless the employer (or the representative of the juristic person) has done his or her utmost to prevent a crime from being committed.
If either the illegal acts or the results arising from such acts take place in Taiwan, bringing a claim in Taiwan based on misappropriation occurring in another country is possible.
Article 10 of the TSA provides for the definition of misappropriation of a trade secret. The types of misappropriation include acquisition, use and divulging of a trade secret by unlawful means. The term “unlawful means” refers to theft, fraud, coercion, bribery, unauthorised reproduction, breach of an obligation to maintain secrecy, inducement of others to breach an obligation to maintain secrecy, or other similar acts. Parties in interest in a litigation bear the burden of proof with regard to the facts favourable to their allegations (Article 277 of the Code of Civil Procedure). If a trade secret-owner asserts unlawful acquisition of a trade secret, such as theft, it is necessary to show evidence to prove that the defendant acquired the trade secret through theft. If the trade secret-owner alleges unlawful use of the trade secret, showing that the defendant actually used the trade secret is required.
Whether misappropriation involves an employee of a trade secret-owner will not affect a trade-secret misappropriation claim. If an employee breaches his or her employment agreement due to trade-secret misappropriation, the employee shall be liable for the damage incurred as a result of that illegal act.
There is no specific legal provision directed to the obligations between joint ventures in Taiwan. A joint-venture agreement with confidentiality and compensation obligations, or a separate NDA, is essential to maintain the secrecy of a trade secret.
In Taiwan, there is no specific act or law directed to industrial espionage. Acts of industrial espionage are subject to the criminal penalties and civil claims that the Criminal Code and the TSA provide.
In Taiwan, in 2019, the Intellectual Property Office published the “Handbook of Teaching the Practice for the Trade Secret Protection (version 2)”. The Handbook is quite helpful and applicable to all industries. The Handbook suggests that a company should establish clear policies for the management of trade secrets and adopt the following strategies as the best practices for safeguarding trade secrets:
Common examples are signing an NDA or confidentiality clause with persons who need to know a trade secret (such as employees, consultants, subcontractors), remarking “confidential” on documents, emails, any physical media, restricting access to confidential information, access control of production sites or the offices, preservation of R&D records, cyber security or fire-wall of computer and network systems, and conducting an exit interview with employees.
To the best of current knowledge, the exit process of a departing employee in Taiwan usually includes the following steps:
In Taiwan, it is also common to request that a departing employee submit a written assurance that the employee knows his or her confidential duty actually and fully.
It is inevitable that inquiries will be made about the employee's reasons for leaving and future employment in an exit interview. In most cases, a departing employee is reluctant to talk about his or her new position during the interview.
In Taiwan, the doctrine of “inevitable disclosure” was first recognised in a judgment in 2013. However, the issues as to the distinction between an employee’s general knowledge/skills and protectable trade secrets are still points of argument in lawsuits. In the 2013 judgment, the court adopted a strict standard for applying the doctrine of “inevitable disclosure”, because the doctrine may affect the constitutional right to work (Article 15 of the Constitution) of a former employee. If an employer intends to assert the doctrine of “inevitable disclosure” in Taiwan, powerful grounds are required to convince the court.
Before hiring an individual, it is necessary for an employer to ascertain the following:
If an enterprise is suspected of being involved in unlawful employee-poaching, the enterprise and its representative will be subject, apart from civil claims, to the criminal penalties and claims under the Criminal Code, the FTA and the TSA. During the process of bringing an employee on board, an employer may enter into an agreement with an individual to be hired that the individual will not supply any commercial or industrial secrets of his or her former employer.
There are no prerequisites before a civil lawsuit is filed in Taiwan. It is notable that, under the laws, some specific civil disputes are subject to mandatory mediation by the court before litigation. The Code of Civil Procedure (Article 403) provides that some types of disputes are generally subject to mediation by the court before an action is initiated, where “disputes arising from an employment contract between an employer and an employee”; “disputes arising from a partnership between the partners, or between the undisclosed partners and the nominal business operator” and “other disputes arising from proprietary rights where the price or value of the object in dispute is less than TWD500,000” may result from trade-secret issues. The Labour Incident Act (Article 16) further provides that all labour cases, including non-competition disputes, are generally subject to mandatory mediation by the court before initiating litigation.
A right to claim damages for a trade secret will be extinguished under any of the following conditions (Article 12 of the TSA):
A written complaint, evidence and litigation fee should be submitted to the court to initiate a lawsuit. According to Article 244 of the Code of Civil Procedure, a written complaint should specify the following matters:
Further, a notarised and certified power of attorney is required if a trade secret-owner is a foreigner or foreign enterprise.
In order to enhance the quality of trials in intellectual property litigation, the specialised Intellectual Property Court (IP court) was established on 1 July, 2008. During the past 12 years, the IP court has been playing an important role in promoting the evolution of IP practices. Most IP right-owners prefer to bring their claims to the IP court. According to the Labour Incident Act, enforced from 1 January 2020, trade-secret disputes involving non-competition agreements with an employee may be tried in the district court where the employee resides, upon the request of the employee.
The Code of Civil Procedure provides that a written complaint should explain the claim and the transaction or occurrence giving rise to that claim, mandating that a plaintiff must assert detailed facts that underlie his or her claim.
It is usually difficult for a trade secret-owner to supply sufficient evidence when initiating a lawsuit. In local practice, a trade secret-owner could allege facts before he or she has concrete evidence of misappropriation. It is not necessary to have hard evidence before bringing a claim, according to local practice.
In Taiwan, a trade secret-owner is allowed to file a civil motion for preservation of evidence for seizing accused products or other evidence ex parte before initiating a lawsuit (Article 369 of the Code of Civil Procedure). The judge who grants the motion will take charge and carry out the preservation of evidence procedure.
In Taiwan, there is no discovery system to assist both parties to collect evidence during litigation. However, both the Code of Civil Procedure and the IPCAA provide several methods for an IP-owner to obtain evidence. The fact-gathering activities may take place depending on the time when a lawsuit is filed.
The Code of Civil Procedure and the IPAA provide several ways to maintain the secrecy of a trade secret at issue or any evidence involving a third party’s trade secret. It is possible to conduct fact-gathering on a confidential basis. The ways to maintain secrecy include the following.
The following defences are common and may be taken in combination in trade secret litigations, as long as any of these defences are considered sufficient to refute a trade secret-owner/plaintiff’s assertion:
In Taiwan, there is no “Dispositive Motions” system.
Under the Code of Civil Procedure (Article 249), if a plaintiff’s claim is manifestly without legal grounds, the court may, without oral argument, issue a judgment dismissing the action with prejudice.
A trade secret-owner usually brings monetary and permanent injunction claims in trade-secret litigation. A litigation fee for the monetary claim is about 1.1% of the amount of a claim for the first instance, and about 1.65% for the second/third instance. It is not easy to calculate the claim value of a permanent injunction. The litigation fee regarding the permanent injunction is determined by the court in accordance with the nature of each case. The remaining expense of litigation may include fees for photocopies, video recording, or travel expenses of witnesses. Litigation financing is not available in Taiwan.
In Taiwan, there is no jury trial system. All cases are examined and tried by professional judges.
All criminal cases should be tried in a competent district court for the first instance. The criminal cases could be appealed to the IP Court for the second instance. The plaintiff may choose to bring civil claims to either the IP Court or, under certain legal conditions, to a district court for the first instance. The IP Court shall handle the civil appeal process (the second instance), no matter which court the cases were filed with for the first instance. If a plaintiff first brings trade-secret civil claims to the IP Court, the IP Court will have judicial powers for the trials in the first and second instances. The Supreme Court is responsible for a civil or criminal trial in the third instance.
The judges in the first and second instances will examine both factual and legal issues of the case. Both parties may present their assertions in the pleadings and the oral hearings and request investigation of evidence during the trial of the first and second instances. The courts responsible for the trials of the first and the second instances must hold oral arguments. In the third instance, the Supreme Court only considers legal issues and renders a final and binding judgment. No further appeal is permitted.
To speed up the examination of IP cases, the judge would set a trial plan for each case. Each party should follow the trial plan to raise their assertions, and request the investigation of evidence. If a party in interest delays presenting an attack or defence in a timely manner, the court may deny the means of attack or defence.
According to the IP court’s report in 2019, the average trial pendency of trade secret litigation for the first and the second instance is around 300 days.
In Taiwan, the Code of Civil Procedure provides for expert testimony as an evidence-taking method. An expert witness shall be appointed by the court or agreed by both parties, according to Article 362 of the Code of Civil Procedure. The expert witness is responsible to the court instead of either of the parties in interest.
There were debates on whether the expert witness testimony for either of the parties in interest should be introduced into civil litigation in Taiwan. In local practice, a written testimony for either of the parties in interest is allowable to be submitted at trial. However, the court may not consider such an expert testimony at trial because neither the Code of Civil Procedure nor the IPCAA provides a legal basis for an expert witness as support for either of the parties in interest. Therefore, the services of expert witnesses have been engaged in very few IP cases in Taiwan. Besides, there is no specific process or rules for the parties in interest to prepare or use expert testimony. Whether an oral presentation at trial of an expert witness is allowable is at the judge’s discretion. The cost of an expert witness testimony varies a great deal, depending on the agreements between the party in interest and the expert witness.
It has recently come to light that an expert witness testimony for either of the parties in interest has just been introduced into the Commercial Case Adjudication Act, to be effective from 1 July 2021, albeit seemingly regardless of trade-secret disputes.
In Taiwan, preliminary injunctive relief is available according to Article 22 of the IPCAA. Whether the preliminary injunctive relief is allowable will be based on the following factors:
Generally, the effect of preliminary injunctive relief can last until a final and binding judgment, and the claimant shall pay a monetary bond for the preliminary injunction. The amount of the bond depends on various factors of the case, and is determined at the judge’s discretion.
In Taiwan, calculating damages for a trade-secret infringement is difficult, since the loss of the trade secret-owner is not easy to prove. Thus, Article 13 of the TSA provides several methods for calculating damages:
Among the foregoing, calculation of the total income gained from the act of misappropriation can notably reduce the burden of proof of a plaintiff as long as the plaintiff acquires the information relating to the sale amount and prices of the infringing products. If a party has proven the damage but not the exact amount, the court shall, taking into consideration all circumstances, determine the amount by its conviction according to Article 222 of Code of Civil Procedure.
If an act of misappropriation is found to be intentional, the court may, at the request of the trade secret-owner, award damages greater than the actual damage. The amount shall not exceed three times the amount of the proven damage.
According to Article 11 of the TSA, it is allowable to claim the following in the litigation:
A necessary disposition includes the recall of the accused products by the respondent itself or through enforcement by the court. Due to the right to work under the Constitution, the court will adopt a strict standard to determine whether an injunction is issued to an employee unless a non-compete clause of the employment exists. The statutory limitation period to institute a permanent injunction is 15 years, based on Article 125 of the Civil Code.
In Taiwan, whether a party in interest appoints an attorney as advocate in the first or second instances is arbitrary. Thus, attorney fees shall be borne respectively by the party who instructs for legal services. Since it is necessary to appoint an attorney as the advocate in the third instance, the court of the third instance shall determine in the judgment an award of the attorney’s fee. Based on the current practice, the award is relatively low. If a plaintiff would like to seek an award of attorney’s fee, the plaintiff may claim it in the pleadings. Whether the claim for the attorney’s fee is permitted is at the judge’s discretion.
The losing party will bear the litigation fee incurred during the litigation. The possible recovery of court costs will include:
After the judgment becomes enforceable, the court of the first instance shall, upon a motion, fix the amount by a ruling (Article 91 of the Code of Civil Procedure). It is possible for the respondent to recover the litigation fee paid during the litigation.
If the losing party is dissatisfied with the outcome of the first instance, the losing party must file an appeal with the original court of the first instance within 20 days after receiving the judgment. Also, the litigation fee for appeal should be paid. If the losing party is not satisfied with the outcome of the second instance, the losing party must file an appeal with the original court of the second instance within 20 days after receiving the judgment of the second instance. In addition, the litigation fee for the third instance and a power of attorney must be submitted. Then, the court of the second instance will transfer the appeal case to the Supreme Court. The appeal process does not differ, no matter which court the case was filed with.
Furthermore, where one of the grounds of attack or defence is presented separately for decision, the court may enter an interlocutory judgment (Article 383 of the Code of Civil Procedure). Filing an appeal for the interlocutory judgment is not permissible. In trade-secret litigation, the judge may render an interlocutory judgment regarding the infringement issues, and then examine the damage issue. If the defendant is dissatisfied with the interlocutory judgment, the defendant cannot file an appeal at this stage and must wait until the final judgment is rendered.
In Taiwan, the court of the second instance will consider both factual and legal issues. Therefore, the court of the second instance will review the case de novo. The parties in interest may present a new attack/defence or request investigation of evidence in the second instance to support their assertions further. If the new attack/defence or the investigation of evidence will delay the close of the oral argument, the judge may reject them. An appellant may choose which issue is waived or preserved prior to filing an appeal, and will be precluded to claim again a waived issue if the waived issue has been recorded on the record of hearing. Further, the court of the third instance (the Supreme Court) only considers legal issues. In general, the Supreme Court examines the appeal on paper. If necessary, the Supreme Court will hold an oral hearing.
It is necessary to institute a criminal investigation upon filing a complaint unless the crime is related to the use of a trade secret outside Taiwan. The criminal penalties are different, depending on the territory where the trade secret is unlawfully used. After the criminal investigation is instituted, the public prosecutor will request the trade secret-owner to fill in a “case explanation form” to illustrate briefly the following information:
The case explanation form can assist the public prosecutor in understanding the case in order to initiate a seizure action and conduct the investigation of trade-secret misappropriation. If needed, the trade secret-owner, including its employees, shall elaborate the information given in the case explanation form, with the public prosecutor in attendance. In principle, the defences against misappropriation of trade secrets are the same as those in a civil case.
Mediation and arbitration are common alternative dispute resolutions (ADR) for civil disputes. In Taiwan, there is no specific law relating to the resolution of IP disputes through an ADR mechanism.
Mediation in the court can save many of the costs. In Taiwan, the court will question parties in interest about their intentions to conduct mediation after the plaintiff files a suit. If a case is not complicated, both parties may reach a settlement through mediation.
If a case is complicated, the trade secret-owner usually prefers filing a criminal complaint and subsequently institute a civil action. The reasons to institute a criminal litigation may include acquiring favourable evidence, imposing pressure on an infringer, and maintaining secrecy of confidential information. In order to avoid a criminal penalty on conviction, it is common for a defendant to reach a settlement with a trade secret-owner before the oral argument of the criminal trial in the first instance is closed.
To the best available understanding, it is not common to resolve a trade-secret dispute through arbitration.