As business competitions grow beyond national boundaries, trade secret protection has become a major concern for industry and national security. In view of the increasing international corporate espionage and theft of industrial trade secrets by former employees, Taiwan’s newly amended Trade Secret Act, implemented on January 30, 2013, has introduced criminal liability and fines for offenders. The new law also imposes aggravated penalties for those who misappropriate trade secret for the purpose of using them abroad. Meanwhile, the Taiwan Ministry of Justice promulgated a set of guidelines for the investigation of major trade secret cases, together with a categorized questionnaire form of critical legal requirements and infringement issues for the complainant to fill in, in the hope of effectively streamlining investigation proceeding of trade secret disputes.
The increased momentum to trade secret protection also reflects on the growing number of court decisions of high damages awards to trade secret owner. One of the recent examples is the Taiwan IP Court’s first-instance decision dated December 6, 2017 on a trade secret controversy between two major photo-electronics technologies companies both headquartered in Taiwan, wherein the Court awarded the plaintiff over NTD1.5 billion (roughly US$50 million) for damages incurred by the asserted trade secret infringement (102 Min-Ying-Su 6 2017 IP Court). According to IP Court’s press release, four former employees of the plaintiff were found to have misappropriated the plaintiff’s secret know-how to join the defendant in 2011 so as to help it develop automated manufacturing processes for camera lens. The defendant further patented two (utility model) patents on the trade secrets, resulting in the plaintiff’s eternal loss thereof to the public at large, said the court’s press release. The defendant, its legal representatives and said employees were thus held jointly and severally liable for the damages arising from the infringements. The court decision itself is not available to the public due to the case’s confidential nature, so the defendants’ counter-arguments are unclear; yet to our knowledge they have appealed.
This decision of high damages award is impactful also due to the “R&D cost approach” the IP Court adopted therein for the basis of damages calculation. According to the IP Court, the trade secrets the plaintiff lost due to the defendant’s acts should have a value (and hence the plaintiff’s damages) of no less than its total R&D costs, especially in view of the plaintiff’s proven commercial success and high market share in the industry. Further, considering the defendant’s willfulness, the court increased the damages to three times upon the plaintiff’s motion, which is the ceiling for punitive damages under the Taiwan Trade Secret Act.
In order to prepare for the challenges ahead concerning trade secret dispute, corporations are recommended to establish well-rounded control systems, including contract management protocols with employees and vendors, information security policies, and trade secret portfolio management systems, so as to safeguard the trade secrets and fulfill the legal requirements once the need to litigate arises.