Taiwan Amends Its Trade Secret Act

Job-hopping by employees who possess knowledge of key technologies of companies aroused great concern after a series of job-changing incidents by employees from Taiwanese companies (particularly in the IT industry) to major competitors in other jurisdictions. In response to urging by the IT industry, the Taiwan Legislative Yuan (Congress) passed an Amendment to the Trade Secret Act (hereinafter “the Amendment”) on January 11, 2013. Companies such as AU Optronics, TSMC, MediaTek and Corning voiced their opinions in public hearings and during law amendment discussions.

In an effort to deter economic criminal activity and using the U.S. Economic Espionage Act of 1996 (“EEA”) as a reference, the Amendment increased the severity of criminal penalties for engaging in the misappropriation of trade secrets as follows:

1.                    A person(s) found guilty of a domestic misappropriation intended for an illicit gain or for inflicting loss on the trade secret holder will be sentenced to up to five years imprisonment, while a person(s) found guilty of a misappropriation of trade secrets outside of Taiwan, including China, Hong Kong or Macau, will be liable for a statutory sentence of between at least one year and a maximum of ten years.

2.                    In addition to imprisonment, a fine between NT 1 million and NT 10 million may be imposed for a domestic trade secret offense, while an offense outside of Taiwan may involve a fine of at least NT 3 million to a maximum of NT 50 million.

3.                    In case a fine is to be imposed, if the offender has reaped a monetary gain that exceeds the maximum fine, the fine may be increased by up to three times the gain for a domestic violation, and two to ten times the gain for a violation in a foreign jurisdiction.

Despite the severe criminal liability imposed for offenders of domestic trade secret misappropriation, prosecution for a domestic offense can only be instituted by a complaint. As a result, if there is no complaint, no criminal prosecution will follow. On the other hand, an extraterritorial economic offense is an indictable offense and no withdrawal of a complaint is possible.

In addition, due to the difficulties faced in proving an act of trade secret misappropriation, it is possible for a case to remain unresolved even after a significant amount of time in litigation. It was therefore strongly suggested by many companies to shift the burden of proof to defendants of alleged trade secret crime. However, the Amendment eventually did not adopt such a provision considering the balance of harms between plaintiffs and defendants at issue.

The Amendment of the Trade Secret Act is an effort by the government to deter economic crimes so as to maintain fair trade activities in the marketplace.