Largan v. AOE
TIP Court Affirms a Large Award in Damages
The long-running infringement suit between the two Taiwanese optical lens giants Largan Co, Ltd. (“Largan”) and Ability Opto-Electronics Technology Co., Ltd (“AOET”) has ended in a second instance ruling by the Taiwan Intellectual Property Court (“IP Court”), affirming a previous ruling in which AOET was ordered to pay TWD 1.52 billion in damages to Largan. The suit began when Largan, the largest aspheric lens producer in the world, filed a complaint for infringement against its s competitor AOET. In 2017, the trial court ruled in favor of Largan that AOET and six individuals were jointly liable for damages up to TWD 1.52 billion (roughly USD 54M). AOET appealed but then lost in the second instance.
Largan complained that two figureheads of AOET – a board member and the CEO – as well as four former Largan employees conspired to steal several schematic drawings beginning at some point prior to 2013. After acquiring Largan’s know-how, the conspirators filed for patents in relation to at least the automatic process of high-end lens manufacture based on those which they had misappropriated. AOET was then granted two utility model patents by the Taiwan Intellectual Property Office (“TIPO”), thereby exposing what were in actuality Largan’s trade secrets to the public.
AOET denied that it had engaged in any theft of intellectual properties, claiming that the drawings in question were not made from misappropriated designs, but were instead made by AOET itself according to general practices in the industry, adding that the four former Largan employees currently in the employ of AOET were not involved in the necessary fields required to create the allegedly stolen know-how such as designing machine structures and reviewing drawings , nor did they have the necessary passcodes to access to said confidential know-how. Moreover, AOET challenged the eligibility of Largan’s supposedly misappropriated technology as protectable trade secrets, claiming that the drawings could have been drawn by any person with sufficient knowledge of automatic manufacture and applied mechanics.
AOET’s claims were rebutted by the Taiwan IP Court, which, acting as the appellate court found that the four former employees used to access or at least had the opportunity to obtain access to the confidential technology. According to the Court’s findings, the four individuals who all subsequently joined AOET admitted to having seen or maintained the patented machine, from programming machine-specific software to testing said machine on the product lines. Thus, the court held that the four former employees of Largan stole Largan’s schematic drawings by means of reproduction and that the schematic drawings were substantially similar to those of Largan. As such, they were considered to have misappropriated Largan’s trade secrets.
As the IP Court found, AOET’s CEO was named as a co-inventor on the patent applications and a board member retained a law office to prosecute the patent applications on behalf of AOET. IP Court hence deemed that they have maliciously misappropriated Largan’s trade secrets jointly in a conspiration. As such, the trial court’s ruling that the two persons were jointly liable for infringement shall stand.
The IP Court also affirmed trial court’s damages award. As per assessment by an accountant, Largan’s fiscal loss amounted to TWD 510,321,123, equivalent to its invested cost in relation to research and development of the misappropriated trade secrets. Largan claimed for TWD 1,522,470,639 plus interest, not exceeding the ceiling of punitive damages, which is up to triple of the aforementioned loss. The IP Court affirmed the claimed damages and awarded them accordingly, which might be the largest award ever for a suit involving trade secret misappropriation.
Short Summary of Statute and Interpretations
In Taiwan, a piece of confidential information is eligible to be a protectable trade secret when the following three elements are met:
1. Secrecy: it is not known by general people engaging in the same field of information.
2. Economic Value: intrinsically it possesses genuine or potential economic value due to the nature of its secrecy.
3. Protective Measures: the owner has adopted reasonable protective measures to safeguard said information.
A precedent case has generally summarized secrets in two types: commercial trade secrets and technological trade secrets. The former are client lists, distribution locations, inventory cost, bottom-line pricing, human resource management, cost analysis, etc., whereas the latter are manufacture know-how, professional process or formula, etc. that are in relation to a specific industry’s research and/or innovation. On the other hand, a piece of know-how that enables to optimize learning curves, reduce likelihood of errors, or improve production efficiency is supposed to possess economic value.
Adoption of reasonable protective measures refers to the idea that, with the optimal human resource and financial capability, by commonly available approach or techniques, the information unknown to general public is controlled to be classified and/or systemized in accordance with different tiers in the organizational hierarchy of business. This benchmark guidance is especially significant in handling IT data in which users are assigned with different levels of authorizations for access. The courts would factor in matters such as the type of secret, scale of business operations, general knowledge among ordinary people, case-specific circumstances in order to analyze whether the information in dispute is easily accessible by a common person availing him or herself of lawful means. However, a reasonable measure does not need to be a degree of so-called “seamless impermeability.” Good examples include, but are not limited to, labeling a note as “CLASSIFIED” or “LIMITED ACCESS” on secured documents, providing stronger locks or passcodes, zoning restricted areas in a building, contracting in the employment agreement specifying confidentiality as a work rule or other sensible measures.
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