Protection

Legislation and legal definition

What legislation governs the protection of trade secrets in your jurisdiction? How is a ‘trade secret’ legally defined?

The Trade Secrets Acts is the main legislation governs the protection of trade secrets in Taiwan. The Criminal Code also has some relevant articles. ‘Trade secret’ usually means any method, technique, process, formula, program, design or other information that may be used in the course of production, sales or operations of trade and meets the following requirements:

  • it is not generally known to persons involved in the information of this type;
  • it has economic value, actual or potential, due to its secretive nature; and
  • its owner has taken reasonable protective measures to maintain its secrecy.
Ownership

How is ownership of a trade secret established?

Registration is not required under the laws for trade secret protection. But some owners register with some institutes to assist the proof of the trade secret ownership as well as the content thereof. As long as the owner can prove it created the trade secret, it can declare the ownership of that trade secret. Furthermore, the contract between parties can also establish the ownership of a trade secret between parties. If the trade secret is the result of research or development conducted by an employee for the performance of work, the trade secret shall belong to the employer unless otherwise provided in the employment contract. If a trade secret is the result of research or development by an employee other than during the performance of employment, but is the result of utilising the employer’s resources or experience, the employer may make use of such a trade secret in the employee’s business after paying a reasonable compensation to the employee. If a party engaged another (non-employee) 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 engagement contract. If the ownership is not specified in that contract, the trade secret shall belong to the engaged party; however, the engaging party shall be entitled to make use of such trade secret within his or her business scope.

Secrecy

What criteria are used to establish the state of secrecy of a trade secret before misappropriation or disclosure?

The state of secrecy of a trade secret may only be established if it is not generally known to persons in the same field of business. According to the practice in Taiwan, trade secrets can further be divided into two categories (ie, the ‘commercial information’ and the ‘technical information’). The ‘commercial information’ usually refers to the information such as client lists, points of sales, costs of goods purchased, cost analysis, and the ‘technical trade secrets’ usually refer to technics, skills, manufacturing process or formulae.

In principle, the state of secrecy of the commercial information can be established if the information is acquired through considerable investments in manpower, funding or time, and the business may obtain a competitive edge through such information. It is not a requirement that other business in the same field should have no access or knowledge to such information. However, the right holders of technical information usually have to prove its exclusive knowledge of the technical information in order to establish the state of secrecy.

Commercial value

How is the commercial value of a trade secret established?

In principle, the commercial value of a trade secret can be established where the said trade secret may be used in the course of production, manufacture, sales or operations of trade and, therefore, create economic benefit or business value. In addition, if proved, the commercial value may be established even if the trade secret has not yet been put into use. In a civil judgment rendered by the Intellectual Property Court (IP Court, Case No: 107-Ming-Yin-Shang-2), the IP Court confirmed that a client list will have potential commercial value if such list contains client's special need, background, preferences that cannot be acquired from Internet or general public channels. Regarding the exact amount of the commercial value, it shall be decided by the court on a case-by-case basis. In some cases, the independent surveyer may assist in assessing the amount of commercial value.

Protective measures

What criteria are used to determine whether the rights holder has adopted reasonable protective measures to prevent disclosure and misappropriation of trade secrets?

The reasonable protective measures usually will be required to be sufficient to demonstrate that subjectively, the right holder of a trade secret has the intention to protect such trade secret and objectively, a third party is unable to access such trade secret with ease. However, there is no clear line on what constitute reasonable protective measures and therefore shall be decided by the court on the case-by-case basis and the standard may differ depending on the type of secret, the actual operation of the business and the general social consensus. That being said, court precedents have provided some examples of what may be considered as reasonable protective measures, such as the signing of non-disclosure agreements, classification of documents as ‘confidential’ or ‘restricted’, or the setting of passwords or similar security measures. The rights holders should divide the trade secrets into different groups or levels depending on their confidentiality degrees, and should not take same measures for all matters where the court could consider there is no difference between secret matter and non-secret matter and as no reasonable protective measure.

Best practices

What best practices and internal policies should rights holders consider to ensure maximum protection of their trade secrets?

Under local practice in Taiwan, below might be the internal policies that rights holders may consider taking so as to reasonably protect his or her trade secrets:

  • keep trade secrets at a special place, which can only be accessed by authorised persons;
  • ensure that only employees that have their job need to access the trade secrets;
  • adopt visitor management system, so as to monitor or control visitors entering into the company;
  • adopt lock or password for trade secrets;
  • adopt policies or procedures for employees’ reviewing or return of trade secrets;
  • adopt management system for employees usage of mobile or portable device (such as USB, mobile hard disc);
  • divide company documents into different groups depending on the degrees of their secrecy or confidentiality;
  • sign confidential agreements with each employee;
  • publish internal rules with regard to confidential obligation;
  • Signing the non-disclosure agreement before any dealing, presentation or M&A;
  • adding ‘confidential’ or similar remark on any documents and media involving trade secret before any presentation or delivery of such documents to government or third parties; and
  • other required safety policies.

Law stated date

Correct on

Give the date on which the information above is accurate.

14 August 2020.