Complete Infiltration? Crucial points for plaintiffs and defendants of trade secrets cases.

Author: Derek Sun, Managing Partner

The media reported earlier that the third-generation semiconductor unicorn company, which is jointly invested by the Industrial Technology Research Institute and Hermes Epitek was discovered to have filed for liquidation in Taiwan, but was reestablished in China. The identity of the company changed from being Taiwanese to becoming foreign owned, raising doubts about whether Taiwan’s semiconductor industry has been infiltrated by China and the potential theft of semiconductor trade secrets. As Taiwan’s scientific and technological strength has attracted global attention, attention in turn needs to be paid to the country’s laws. Understanding Taiwan’s Trade Secrets Law –  how companies can ensure R&D efforts remain secret and how high level talent can switch jobs throughout the industry without breaking the law is of paramount importance. 

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Taiwan’s judicial practices make civil litigation no longer an appropriate way for companies to protect trade secrets. Compensation is too low, obtaining evidence as a plaintiff is extremely difficult and the burden of proof that they face in courts is relatively high. Instead, Companies turn to criminal prosecutions. They work with the prosecution to collect additional evidence, conduct search and seizures, and seek compulsory sanctions which ensure that the involved person is prohibited from working at their rival companies. This, in conjunction with initiating a criminal case against the rival company and those responsible for handling the case, is a smarter, more experienced way to handle such a matter.

It should be noted that when dealing with trade secrets litigation, contrary to the mantra of three essentials that promulgated by many experts – secrecy, economic value and reasonable confidentiality measures – the key lies in meticulous legal planning before and after any incident.  Early planning means that companies should sign clear confidentiality clauses with their employees which directly outlines the technical or commercial secrets or information that the company wants to protect.  Additionally, relevant technology should be set up which helps to understand how confidential information flows within the organization. After an incident, presenting a coherent legal picture is essential. The company should work with experienced lawyers on evidence collection and forensic processes to ensure that the complete ‘story’ is made clear to the courts. This should include illustrating R&D processes and costs taken by the company, actions taken by the individual that was involved in the theft of trade secrets, the economic and commercial impact on the entity, amongst other things. This will allow the courts to understand the seriousness of the situation and take appropriate measures such as compulsory sanctions and search and seizures. 

On the other hand, how scientific and technological talents can avoid being trapped in a quagmire of legal battles is a question for consideration. It is important to ensure that their knowledge and skills remain valuable and marketable commodities in the market. The key lies in understanding whether the knowledge and skills of the employees are the accumulated learning results of the employees themselves. 

Jurisprudence holds that the knowledge and practice experience developed and accumulated during an employee’s tenure while accepting work assignment from the company are assets internalized by the employee. How their skills improve through labor in the general work environment means that such knowledge and experience cannot be protected as the employer’s trade secrets by non-competition or trade secrets protection clauses.

After the termination of an individual’s labor contract. the person has no obligation of loyalty to the employer. Of course, they will want to continue to use their knowledge in their own individual economic and professional pursuits. In order to ensure their competitiveness in the labour market, individuals must ensure that they pay attention to whether their knowledge and skills belong to the employer’s ‘trade secrets from research or development on the job,’ or whether their skills are the result of their individual accumulated learning. 

Finally, the globalised flow of scientific and technological talent means that companies looking to protect trade secrets should be wary of cross border disputes. If the relevant individual and their assets are not located in Taiwan, decisions will need to be made whether the legal battle should take place abroad, or whether the battlefield should be brought back to Taiwan’s courts. This will depend on whether the party has sufficient resources for cross border litigation, and whether the overseas regions have legal systems that respect trade secrets. Complete planning ahead can help in such a situation. Clearly agreeing with employees that Taiwan shall be the court of jurisdiction for civil disputes, ensuring that confidential storage sites (such as servers) are housed in Taiwan sothat Taiwan will be the place  where criminal conduct takes place and therefore has jurisdiction, will help ensure that the case is handled in Taiwan in a smoother fashion. 

How companies protect trade secrets on the offence as well as the defensive end is very dynamic. Enterprises should have full time personnel that pay attention to the protection status of trade secrets at all times, and individuals should better understand legal boundaries and the implications of their own actions to prevent disputes from arising in the future.