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 Act is the main legislation governing the protection of trade secrets in Taiwan. The Criminal Code also has some relevant articles. Moreover, when there is an intellectual property lawsuit or a commercial lawsuit that involves trade secrets, the Code of Civil Procedure, Commercial Case Adjudication Act and Intellectual Property Case Adjudication Act also contain several articles to protect trade secrets in the litigation process. ‘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 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 law for trade secret protection. But some owners register with some institutes to prove trade secret ownership as well as the content thereof. As long as the owner can prove it created the trade secret, it can declare ownership thereof. Further, 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 for in the employment contract. If a trade secret is the result of research or development by an employee outside 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 its business after paying a reasonable compensation to the employee. If a party engages another party (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, ‘commercial information’ and ‘technical information’). ‘Commercial information’ usually refers to information such as client lists, points of sales, costs of goods purchased, cost analysis, and ‘technical information’ usually refers to technical 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 if the business may obtain a competitive edge through such information. It is not a requirement that other businesses in the same field should have no access to or knowledge of such information. However, the rights holders of technical information usually must prove their exclusive knowledge of said information to establish the state of secrecy.

Moreover, if such information only indicates the name, address, or other basic contact information of the client but does not involve the client’s preferences, special needs, backgrounds, or any internal information, and such information also can be obtained in a certain way in the market, then it is possible to be rejected by the court as a trade secret to be protected.

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 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. Also, 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 information on the client’s special needs, background or preferences that cannot be acquired from the 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, an independent surveyor may assist in assessing the 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?

Reasonable protective measures usually are required to be sufficient to demonstrate that subjectively, the rights holder of a trade secret has the intention to protect such trade secret, and that objectively, a third party is unable to access such trade secret with ease. However, there is no clear line on what constitutes reasonable protective measures, and therefore they shall be decided by the court on a case-by-case basis, and the standards 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 reasonable protective measures, such as the signing of non-disclosure agreements, classification of documents as ‘confidential’ or ‘restricted’, or the setting of authorisation accounts, passwords, access restrictions or similar security measures to protect computer information. The rights holders should divide the trade secrets into different groups or levels depending on their degree of confidentiality, and should not use the same measures for all matters since the court might consider that there is no difference between a secret matter and a non-secret matter, and thus no reasonable protective measures are taken.

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 are the internal policies that rights holders may consider taking to reasonably protect his or her trade secrets:

  • keep trade secrets in a secure location, which can only be accessed by authorised persons;
  • ensure that trade secrets may only be accessed by employees who need such access for their jobs;
  • adopt a visitor management system, to monitor or control visitors to the company;
  • adopt a lock or password for trade secrets;
  • adopt policies or procedures for employees’ reviewing or return of trade secrets;
  • adopt a management system for employees’ usage of mobile or portable devices (USB, mobile hard disc, etc);
  • enhance security equipment (eg, strengthen the internet firewall);
  • divide company documents into different groups depending on the degree of their secrecy or confidentiality;
  • sign confidential agreements with each employee;
  • publish internal rules regarding confidential obligations;
  • sign a non-disclosure agreement before any dealing, presentation or mergers and acquisitions; and
  • add ‘confidential’ or a similar remark on any documents and media involving trade secrets before any presentation or delivery of such documents to the government or third parties; and implement other necessary safety policies.