Amendment of Taiwan’s Trade Secret Protection Act

01/01/2013

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The Trade Secret Protection Act (“Act”) of the ROC (Taiwan) was, for the first time, enacted and took effect on 17 January 1986, and the Act has been implemented for 16 years without amendment. On 1 January 2013, the Legislative Yuan completed an amendment of the Act (via its 3rd reading procedure). The amended provisions were announced by the President on 30 January 2013 and the amended provisions will take effect on 1 February 2013. An introduction of the old Act and the amendment just passed is provided below.
I.	Major Content of Old Act
	The major points of the old Act are as follows:
	1.	Subject Matters Allowable for Protection and Trade Secret Misappropriation Acts
		According to Article 2 of the Act, the term "trade secret" shall mean any method, technique, process, formula, program, design, or other information that may be used in the course of production, sales, or operations, and also meet the following requirements:(1) it is not known to persons generally involved in the information of this type; (2) it has economic value, actual or potential, due to its secretive nature; and(3) its owner has taken reasonable measures to maintain its secrecy.
		Article 10 of the Act further defines trade secret misappropriation acts as follows: (1) to acquire a trade secret by improper means; (2) to acquire, use, or disclose a trade secret as defined in the preceding Item knowingly or unknowingly due to gross negligence; (3) to use or disclose an acquired trade secret knowing, or not knowing due to gross negligence, that it is a trade secret as defined in Item (1) above; (4) to use or disclose by improper means a legally acquired trade secret; or (5) to use or to disclose without due cause a trade secret to which the law imposes a duty to maintain secrecy. The term "improper means" as referred to in the preceding Paragraph shall mean theft, fraud, coercion, bribery, unauthorized reproduction, breach of an obligation to maintain secrecy, inducement of others to breach an obligation to maintain secrecy, or any other similar means.
	2.	Ownership of Trade Secret
		According to Article 3 of the Act, where a trade secret is the result of research or development by an employee during the performance of his/her job duties, the ownership of such trade secret shall belong to the employer unless otherwise provided for in a contract, and in which case the contract shall prevail. On the other hand, where a trade secret is the result of research or development by an employee, which has nothing to do with his/her job duties, the ownership of such trade secret shall belong to the employee. However, if the trade secret is resulted from utilizing the employer's resources or experience, the employer may make use of such a trade secret in the employer's business after paying a reasonable compensation to the employee. Article 4 of the Act further states that, where a party provides funding and contracts another to conduct research or development that resulted in a trade secret, the ownership of the trade secret shall be determined by the terms of the contract. If the ownership is not specified in the contract, the trade secret shall belong to the contracted party; however, the contracting party shall be entitled to make use of such trade secret within the contracting party's business.
	3.	Remedies Against Misappropriation of Another Person’s Trade Secret
		According to Article 11 of the Act, where a trade secret is misappropriated, the injured party may request for the removal of such misappropriation. If there is a likelihood of misappropriation, an injured party may request for a prevention of such possible misappropriation. When seeking remedy as stated above, the injured party may request for destruction or other necessary dispositions of products generated from the misappropriation or items used exclusively in the misappropriation.
		Article 12 of the same Act stated that a person who intentionally or negligently misappropriates another's trade secret shall be liable for damages. If two or more parties jointly misappropriate, such parties shall be jointly and severally liable. The right to claim for damages as referred to in the preceding Paragraph shall be extinguished if the right is not exercised within two (2) years from the date on which the trade secret owner has become aware of both the act of misappropriation and the identity of the party liable for damages, or within ten (10) years from the act of misappropriation, whichever is earlier.
		Article 13 of the Act sets out the methods for calculating damages suffered because of misappropriation of trade secret as follows:
		(1)	To make a claim based upon Article 216 of the Civil Code. However, if the injured party is unable to prove the amount of damages, the party may take as damages the amount of profits normally expected from the use of the trade secret minus the amount of profits earned after the misappropriation; or
		(2)	To request for the profits earned through the act of misappropriation from the one who misappropriated. However, if the one who misappropriated is unable to prove the costs or the necessary expenses, the total income gained from the act(s) of misappropriation shall be deemed the profits.
		Where an act of misappropriation is found to be intentional, the court may, at a request by the injured party and by taking into consideration the circumstances of the misappropriation, award an amount greater than the actual proven damage, provided that such awarded amount shall not exceed three times the amount of the proven damages.
	4.	Trial of Trade Secret Suits and Secrecy Protection Orders
		According to Article 14 of the Act, for handling trade secrets suits, the court may establish a special tribunal or appoint a designated person(s) to administer the case. If assertions or defenses raised by a party to a suit involves trade secrets, the court may, based on a request by the concerned party and as it deems appropriate, close the trial to the public and/or restrict access to the files of the litigation related information.
	5.	Reciprocal Protection Available for Foreigners
		According to Article 15 of the Act, where a trade secret is owned by a foreigner, such trade secret will not receive protection in the R.O.C., provided that the foreign national's home country has not signed a bilateral trade secrets protection treaty or agreement with the R.O.C., or does not provide protection to trade secrets owned by R.O.C. nationals according to the laws and regulations of the foreign national's home country.
II.	Concerning the Amendment Passed on 12 January 2013
	Considering the fact the international commercial and business activities become more sophisticated, laws regarding trade secret protection in a number of countries have been amended, and it is a trend to include and/or increase criminal liabilities for trade secret misappropriation. Recently, there has been some disputed involving stealing or disclosing employers’ trade secret by ex-employees or illegal misappropriating trade secret of employers, which not only caused serious damages to industries’ R&D innovations but also significantly affect fair competition order. It is also heard, from time to time, about trade secret misappropriations involving third countries. Since the Trade Secret Act currently in effect cannot effectively provide basis to resolve such trade secret misappropriation acts, the Intellectual Property Office (IPO) of the Ministry of Economic Affairs started to draft an amendment bill in early 2012, which was later passed by the Ministry of Economic Affairs and Executive Yuan. On 12 January 2012, the Legislative Yuan passed, via its 3rd reading, passed the amendment bill. The major amendment is as follows:
	1.	Imposing Criminal Liabilities for Trade Secret Misappropriation (Article 13-1)
		Prior to amendment, there is no criminal liability prescribed in the Act for trade secret misappropriation. However, through the amendment, criminal liability will become available under the Act. A person committing any of the following acts for the purpose of receiving illegal gain for himself/herself or for a third person, or causing damages to a trade secret owner shall be punished with a maximum of 5 years’ imprisonment and, in addition thereto, he/she may be imposed with a fine between NT$1 million and NT$10 million:
		(1)	To acquire a trade secret by an act of theft, embezzlement, fraud, threat, unauthorized reproduction, or other wrongful means, or using or disclosing such trade secret so acquired;
		(2)	To commit an unauthorized reproduction, use or disclosure of a trade secret known or possessed thereby, or to conduct any of the above acts beyond the original authorization scope;
		(3)	To possess another person’s trade secret and fail to delete or destroy such possessed trade secret as the trade secret owner asks for deletion or destruction;
		(4)	To knowingly acquire, use or disclose a trade secret known or possessed by another person as stated in any of Items (1) through (3) above.
		An attempt to commit a crime as stated in Items (1)-(4) above is punishable. In case a fine is to be imposed, if the illegal gain obtained by an offender exceeds the maximum fine, such fine may be increased with a maximum amount of 3 times of the gain from the misappropriation.
	2.	Higher Criminal Liability for Misappropriation Involving Foreign Jurisdictions (Article 13-2)
		A person committing a crime prescribed in II. 1. (1)-(4) above for the purpose of using the injured trade secret in foreign jurisdictions, mainland China, Hong Kong, or Macau shall be punished with an imprisonment from 1 to 10 years and, in addition thereto, he/she may be imposed with a fine between NT$3 million and NT$50 million. In case a fine is to be imposed, if the illegal gain obtained by the offender exceeds the maximum fine, the fine punishment may be increased to from 2 to 10 times of the illegal gain.
	3.	Crimes Prosecuted Upon Complaints and Separation of Legal Effects against Multiple Offenders (Article 13-3)
		Prosecution of any of the crimes as stated in Item II.1 above shall be instituted only upon a complaint filed by the injured party. The effect of filing or withdrawal of a complaint against any co-offenders shall not apply to any other co-offender. Where a civil servant or a former civil servant, who knows or possesses another person’s trade secrets due to his/her job duties, intentionally commits a crime as stated in Item II.1 & II.2 above shall be imposed with a punishment by increasing it up to one half of the originally prescribed liability.
	4.	Joint Criminal Liability (Article 13-4)
		Where, in the course of conducting business activities, a representative of a juristic person, an agent of a juristic person or a natural person, or an employee or any other staff of an employer commits any of the crimes prescribed in Item II. 1 & Item II. 2 above, in addition to imposing punishments on the individuals committing the crime, the concerned juristic person or the natural person shall be also punished with the fine prescribed in Articles 13-1 & 13-2. However, if the concerned representative of a juristic person or the concerned natural person has done its/his/her best efforts to prevent a crime from being committed, it/he/she shall not be imposed with punishment.
Lee and Li will continue watching the development of the amendment of Trade Secret Act and provide further reports for reference by readers of our Bulletin.