Trade Secrets 2021

Last Updated April 28, 2021

Taiwan

Law and Practice

Authors



Tai E International Patent & Law Office has matured into a major international IP law firm in Taiwan over the past 60-plus years. Today, Tai E provides a high level of quality legal service to its clients from every corner of the world. With their support and trust, Tai E takes great pride in being referred to as one of the pioneering IP law firms in Taiwan. Tai E employs more than 280 professionals, including attorneys at law, patent attorneys, trade mark agents, technical specialists and legal consultants, in four Taiwan offices. With every effort made on both international and domestic IP prosecution and protection, Tai E is familiar with scenarios of the IP markets, from global giants to individual inventors as well as particular changes of local IP practice and trends of current international IP harmonisation, based upon its accumulated abundant professional experience in different IP jurisdictions.

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:

  • the required elements of a trade secret;
  • ownership of a trade secret;
  • the licensing of a trade secret;
  • misappropriation of a trade secret;
  • the civil remedy and criminal penalty for the misappropriation of a trade secret;
  • the issuance of a protective order during criminal investigation.

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:

  • secrecy;
  • economic value; and
  • reasonable measures to maintain secrecy (Article 2 of the TSA).

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.

  • “Secrecy” requires that a “trade secret is not known to the persons generally involved in the information of this type.” This required element differs from the absolute novelty requirement for patents. The determination of secrecy is based on the industry standards. If people in the relevant field are aware of the information, the secrecy requirement of such information would not be satisfied. 
  • “Economic value” requires that a trade secret be of actual or potential economic value, including technical information at the research stage. For example, unsuccessful experimental data would be considered to be of economic value since it could save time or costs for competitors.
  • “Reasonable measures” require that a trade secret-owner should have taken reasonable measures to maintain secrecy in the first place. If a third party could easily acquire the information from the trade secret-owner, that information would not be considered as a trade secret.

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.

  • Term of protection – the duration of protection for trade secrets is not limited if the secrecy is kept. Other IP rights, including patents, economic copyrights, integrated circuit layouts and plant varieties, are only in force for a specific length of time;
  • Registration – except for trade secrets and copyrights, registration is required to acquire a patent, trade mark, integrated circuit layout or plant variety. Trade-secret protection has an immediate effect without any registration process;
  • Disclosure – disclosure to the public is necessary for a patent, trade mark, integrated circuit layout or plant variety right before or upon registration, so that any third party will be able to know the relevant information. A trade secret does not imply any disclosure to the public.

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:

  • the person intends to gain benefits illegally for himself or herself or a third party, or inflicts a loss on the trade secret-owner; and
  • the person’s act falls into any of the following categories:

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:

  • preparation of an inventory of confidential information, and further classification and labelling of the confidential information;
  • establishment of a working code for the protection of trade secrets;
  • management of employment for new employees and resignation;
  • information and security control management;
  • computer system management;
  • an alarm system for abnormal use of confidential information and audit procedures; and
  • on-the-job training to strengthen the employees’ attention to 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:

  • checking the employee’s access to the confidential information prior to resignation and inquiring into any abnormalities; 
  • reminding the employee of and reiterating the duty of confidentiality in the employment agreement;
  • supervising the employee’s return or destruction of materials containing confidential information; and
  • signing a non-competition agreement under proper circumstances.

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:

  • whether there are non-compete or confidentiality clauses in the employment agreement between the individual and his or her former employer and, if any, what the contents of those clauses entail; and
  • whether the individual has to abide by a revolving-door clause or law and, if any, the specific obligations under that clause or law.

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 trade secret-owner fails to exercise its right within two years from the date when the trade secret-owner knew of an act of misappropriation and the identity of a party who should be liable for the damage;
  • within ten years from an act of misappropriation.

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:

  • the parties and their statutory agents;
  • the claim and the transaction or occurrence giving rise to that claim; and
  • the demand for judgment for the reliefs to be sought.

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.

  • Before filing the lawsuit – in local practice, a trade secret-owner may file a motion to preserve evidence such as samples, design drawings, accounting documents, or any information stored as electronic files. Whether a motion for preservation of evidence is allowable is at the judge’s discretion. The judge has full power to determine how to conduct preservation of evidence proceedings. If necessary, the judge will allow an inspection on the defendant’s site to preserve evidence, such as manufacturing processes. If evidence could be obtained by the trade secret-owner or through an investigation during the trial, the judge would not grant preservation of evidence.
  • After filing the lawsuit – the common investigation of evidence relating to IP disputes includes the examination of a witness, a motion to produce documentary evidence and a petition of inspection. The witness referred to herein is a fact witness, not an expert witness. Once a motion to produce documentary evidence is granted, if an opposing party does not produce those documents without a justifiable reason, the court may, at its discretion, hold that the trade secret-owner’s allegation based on documents ordered to be provided is true. As to an inspection, a party in interest may request the inspection of an object or manufacturing process using video recording or photography outside the court, such as on the defendant’s or a third party’s premises.

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.

  • Non-public hearing – civil hearings are usually held in public. If a party’s defence or attack involves a trade secret or privacy of the party, the court will hold a closed trial and restrict third parties from accessing the hearing or dossiers.
  • Protective order – a party in interest or a third party who submits confidential materials to the court may file a petition for a protective order. The persons subject to the protective order shall use the trade secret only for purposes of the litigation. It is not permissible to disclose those trade secrets to others not subject to the protective order. If in violation of the protective order, the persons subject to a protective order shall be liable to criminal penalties. In principle, the pleading, evidence materials or ancillary documents that record confidential information are handled in a manner to ensure proper concealment or confidentiality. Only the judge, clerk, or technical examiner officer can legally access the foregoing confidential information. Other personnel in the court are not permitted to access those materials.

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:

  • the trade secret asserted by a plaintiff is known to the public or easily acquired from the public;
  • the trade secret asserted by a plaintiff can be acquired through reverse engineering;
  • the trade secret-owner has not taken reasonable measures to maintain its secrecy;
  • the plaintiff is not the owner of a trade secret at issue;
  • the defendant does not use a trade secret asserted by a plaintiff.  Examples include i) the information used by the defendant differs from the trade secret, and ii) the technology used by the defendant was invented by independent discovery; and
  • use of the confidential information is within the scope of the permitted use.

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:

  • the existence of the legal relation in dispute;
  • the likelihood of success of the applicant in the principal case in the future;
  • whether the granting or rejection of the application will cause irreparable harm to the claimant or opposing party; and
  • evaluation of the balance on the degree of damage to both parties and the impact on public interest.

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:

  • the injury actually suffered;
  • the lost interests;
  • the amount of profits normally expected from the use of the trade secret minus the amount of profits earned after the misappropriation;
  • to request the profits earned through the act of misappropriation from the person who misappropriated. If the defendant is unable to prove the costs or the necessary expense, the total income gained from the act of misappropriation shall be deemed as the profits.

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 permanent injunction;
  • the destruction or necessary disposition of the accused products; and/or
  • the destruction or necessary disposition of the items used exclusively in the misappropriation.

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:

  • the litigation fees for filing the lawsuit and appeals; and
  • fees for photocopies, video recording, transcripts, translation of litigation documents, daily fees, travel expenses of witnesses and experts, and other necessary fees and disbursements.

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 contents, ownership, features and estimated value of the trade secrets;
  • measures and methods that have been adopted to protect the trade secret; and
  • information on the offender and infringement approach.

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.

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Formosa Transnational Attorneys At Law is one of the largest law firms in Taiwan. Formosa Transnational plays a leading role in Taiwan’s IP community. The firm's technology and law department consists of experienced litigators, transactional attorneys, and patent engineers, knowledgeable in various areas of law and technology and who have multilingual capabilities and multi-jurisdictional experiences. Specifically, the firm has Japanese-speaking attorneys and engineers and is capable of handling cases in either Japanese or English, or both. Since the establishment of Taiwan’s specialised Intellectual Property Court in 2008, the team has been widely recognised as one of the most successful in patent litigation. The firm has a group of experienced trial lawyers and patent engineers working closely together in patent-related cases, which is the key to the successes of its patent clients. In addition to the IP dispute resolution practice, the firm handles a large volume of patent and trade mark matters, including filing and prosecution and all other aspects of trade mark and patent usage and protection.

Taiwan’s Trade Secrets Act (the Act) has been the basis upon which the owners of trade secrets have relied for protection of their confidential information or other technologies that those owners seek to keep confidential from their competitors. Owners can seek legal protection from the Act as long as they can establish that their secrets meet the three requirements as set forth by the Act:

  • secrecy – the secret is not generally known to persons in the same field;
  • commercial value – the owner of the secrets enjoys a certain level of commercial benefit because the secret is not known by the public;
  • reasonable protective measures – the owner has taken reasonable measures to ensure the secrecy. 

When the Act was enacted in 1996, it only provided owners of secrets with civil remedies (monetary compensation and or injunctive relief) for any misappropriation of their secrets. At that time, owners of secrets had to rely on Taiwan’s Criminal Code if they wanted to pursue criminal liabilities for those who stole their secrets.

In 2013, the Act was amended to impose criminal liabilities upon those who misappropriated trade secrets. In particular, the 2013 Amendment provides increased penalties for those who misappropriate trade secrets with the intention of using those secrets in a foreign country (including China). Moreover, under the 2013 Amendment, employers may face criminal liabilities if their employees misappropriate trade secrets during the course of the employees’ performance of their duties to the employers; the employers may be exempt from the same criminal liabilities only if the employers can establish that the employers have taken all possible measures to prevent their employees from misappropriating others’ trade secrets.

In 2020, the Act was further amended to enable prosecutors to issue protective orders for any materials that are subject to their investigations on a potential offence of the Act. The 2020 Amendment also explicitly acknowledged that a foreign secrets-owner shall enjoy legal protection from the Act in just the same way as a Taiwanese individual or entity; foreign companies may file criminal complaints with Taiwan’s enforcement authorities once they discover that their trade secrets have been misappropriated in Taiwan.

A Trend: More Owners of Trade Secrets Are Willing to Take Action to Enforce Their Trade Secrets' Rights

Many high-profile cases, both civil and criminal, have been reported since the Act’s 2013 Amendment. Prior to the 2013 Amendment, it was difficult for secrets' owners to enforce their rights to their trade secrets upon finding misappropriation. Rather, companies often utilised patents, trade marks, or copyrights to protect their intellectual properties; they would consider enforcing their rights to their trade secrets only if no alternatives were available to them. The 2013 Amendment substantially changed the situation. A trend of increasingly more trade secrets' owners being willing to enforce their rights in and to their trade secrets has been observed in Taiwan after the 2013 Amendment.

According to the statistics published in 2020 by the Taiwan Intellectual Property Court (IP Court), a judicial body hearing exclusively IP-related matters, the IP Court received four and three civil complaints filed by trade secrets' owners claiming misappropriation of trade secrets in 2011 and 2012, respectively. The number of new trade secrets complaints being filed with the IP Court in 2013 and 2014 then increased to seven. The number of new cases reached 11 in 2015 and 13 in 2016. These statistics do not include civil cases in relation to trade secrets being heard by other courts. This data also does not include the number of criminal cases. The increase of the IP Court’s docket for these trade secrets cases illustrates that owners of intellectual property in various industries now have a greater recognition that trade secrets' rights are enforceable and afforded legal protection.

The Landmark Case

It is believed that several landmark cases where trade secrets' owners successfully obtained protections from courts made considerable contributions to this trend. One cannot disregard the Largan case, in particular, when discussing the development of trade secrets law in Taiwan. In December 2017, the IP Court awarded enhanced damages of approximately USD50.7 million to Largan Precision Co Ltd. (Largan) in a trade secrets' misappropriation case, in which Largan alleged that four of its former employees, as well as their next employer (the defendants, collectively), jointly misappropriated Largan’s trade secrets in relation to Largan’s confidential technologies for optical lenses. In February 2021, the appellate division of the IP Court sustained the IP Court’s 2017 enhanced damages award, dismissing the defendant’s appeals requesting that the aforementioned award be set aside.

The Largan case is a landmark case in Taiwan trade secrets law for many reasons. First, the amount of the enhanced damages award is the highest damages award granted by the IP Court. According to the IP Court’s 2017 ruling, the granted amount was three times the established amount of damages; the IP Court granted that enhanced damages award of three times the established damages amount because the IP Court found that the defendants infringed Largan’s trade secrets wilfully. This judgment sent the signal that the Act’s enhanced damages provision, under which a court may award a secrets' owner enhanced damages up to three times the actual amount of damages suffered by the secrets' owner, will be applied when the court finds wilful infringement.

In addition, when determining the amount of actual damages, the IP Court accepted Largan’s argument and took into consideration the costs and expenses that Largan had invested in developing and researching Largan’s secret technologies involved in this case. This is because, as Largan argued, Largan has never considered selling or licensing its manufacturing technologies to any third parties, and it would be difficult for Largan to prove the actual value of the secret technologies by referring to any transactions.  The IP Court’s holding in this regard gives inventors an incentive to invest more resources on technologies that the inventors would like to keep confidential from any other competitors.

Moreover, it is noteworthy that in order to prove the actual costs and expenses that Largan invested in researching and developing the secret technologies, Largan produced an expert report by a forensic accountant.  The IP Court looked into the report, as well as the testimonies given by experts (both from forensic accountants) appointed by the two parties. The IP Court based its opinion in this regard substantially on the testimonies of both expert witnesses. The Largan case is thus a good example of expert witnesses assisting the court (or a fact-finder) to understand better the issues with which the court may otherwise be unfamiliar, due to the lack of expertise in a particular field.

Proper Management of/Restrictions on Talent Flow

Most trade secrets cases share a similar scenario: the flow of talent — where a former employer has accused its former employee (sometimes, along with the employee’s current employer) of misappropriating the former employer’s trade secrets. As previously noted, the Act imposes upon an employer criminal liabilities when its employee misappropriates someone else’s trade secrets in the course of that employee’s performance of his or her duties to the employer. In some court cases, criminal sanctions were imposed upon companies whose employees misappropriated their former employers’ trade secrets because the companies failed to take proper management measures to prevent their employees from using confidential materials obtained by their employees from their employees’ former employers.

This has caused the relevant industries to explore further how to manage the flow of talent better. In particular, when a company is considering hiring an excellent candidate, the company must consider whether it needs reject this candidate because the candidate recently completed his or her work at a competitor firm. Moreover, when hiring someone who has just left a job with a competitor, companies would have to determine whether it is sufficient to clear the trade secrets concern by merely asking the employee to sign a document representing that he or she will not use any confidential materials obtained from his or her former employers. If the answer to this question is no, the company still needs to oversee every movement that this employee takes when he or she performs his or her job duties for the company. A company’s close scrutiny of an employee’s everyday life will absolutely trigger a debate on whether an employee should still enjoy a certain level of reasonable expectation for privacy in his or her working environment. Companies thus are wondering whether there is any precise standard that they should follow in order to avoid unnecessary disputes. Also considered for evaluation is the issue of whether there exists a safe labour provision, similar to the notice-and-take-down clause in copyright law, which could properly address this concern.

The aforementioned issues discussed remain, however, unsettled, and will be the subject of future developments in case law in this regard. Companies doing business in Taiwan, nonetheless, should pay great attention to their internal policies in relation to the recruitment of employees and to information security.

Future Direction of Amendments of the Act

Opinions have been stated that Taiwan should amend the Act further, along with other statutes, to prevent core/sensitive technologies from being leaked to competitors in foreign countries. In particular, these opinions have been voiced due to the concern that certain technologies are key to Taiwan’s continuing economic development and that society as a whole will be in imminent peril if those technologies become known to competitors in foreign countries (and or by hostile political powers).

Counter-arguments have been made, at the same time, that the current content of the Act is sufficient to address this concern and that national security should not be a concern addressed by the Act. The debate is still ongoing, and close attention to future developments is prudent.

Formosa Transnational Attorneys At Law

13F, Lotus Building
136 Jen Ai Road Section 3
Taipei 106
Taiwan

886 2 2755 7366

886 2 2708 435

yulan.kuo@taiwanlaw.com www.taiwanlaw.com
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Law and Practice

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Tai E International Patent & Law Office has matured into a major international IP law firm in Taiwan over the past 60-plus years. Today, Tai E provides a high level of quality legal service to its clients from every corner of the world. With their support and trust, Tai E takes great pride in being referred to as one of the pioneering IP law firms in Taiwan. Tai E employs more than 280 professionals, including attorneys at law, patent attorneys, trade mark agents, technical specialists and legal consultants, in four Taiwan offices. With every effort made on both international and domestic IP prosecution and protection, Tai E is familiar with scenarios of the IP markets, from global giants to individual inventors as well as particular changes of local IP practice and trends of current international IP harmonisation, based upon its accumulated abundant professional experience in different IP jurisdictions.

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Formosa Transnational Attorneys At Law is one of the largest law firms in Taiwan. Formosa Transnational plays a leading role in Taiwan’s IP community. The firm's technology and law department consists of experienced litigators, transactional attorneys, and patent engineers, knowledgeable in various areas of law and technology and who have multilingual capabilities and multi-jurisdictional experiences. Specifically, the firm has Japanese-speaking attorneys and engineers and is capable of handling cases in either Japanese or English, or both. Since the establishment of Taiwan’s specialised Intellectual Property Court in 2008, the team has been widely recognised as one of the most successful in patent litigation. The firm has a group of experienced trial lawyers and patent engineers working closely together in patent-related cases, which is the key to the successes of its patent clients. In addition to the IP dispute resolution practice, the firm handles a large volume of patent and trade mark matters, including filing and prosecution and all other aspects of trade mark and patent usage and protection.

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