TIPS^®  Taiwan Intellectual Property Special

Departing Employee Should Pay Damages for Breach of Covenant not to Compete.

Ming-Shin Su, a former assistant researcher in Prodisc Technology, Inc (Prodisc) moved to Ritek Corporation (Ritek) as an associate engineer. Prodisc, as plaintiff sued Ming-Shin Su for violation of the covenant not to compete in the employment contract and infringement of trade secret, asking NT$ 1,000,000 (about DS$ 30,000) for damages.

The judge delivered the following opinion that, in order to prevent competitors from bad faith raiding on others’ employees, the covenant not to compete for certain period after termination of the employment shall be held valid if not unreasonable or not contrary to the good faith and public order. Moreover, the confidential agreements and employment contracts between employers and employees are not contradict to the Constitutional Right to Work. Therefore, Ming-Shin Su’s departing and moving to work in Prodisc’s competitor, Ritek, of course caused damages to Prodisc. At the judge’s discretion, Ming-Shin Su was ruled to pay damages equal to 5 months of his salary at the time of departing, in the total of NT$ 152,500 (about US$ 4,580) with interests at 5% from November 29, 2001.

Covenant not to compete is a controversial issue in Taiwan for many years. Although the defendant, Ming-Shin Su, can appeal, this decision is a warning on the high-tech community, such as electronic industry’s prevailing raiding practice.