Court Awards USD 50 Million Damages Highest Ever in Trade Secret Infringement
In December 2017, the Taiwan Intellectual Property Court rendered the judgment 2013-CivilTradeSecretLitigation-No. 6 as the 1st instance ruling that an optical lens manufacturer Ability Opto-Electronics Technology (“AOET”) along with other six (6) accused individuals shall jointly indemnify Largan Precision (“Largan”) for more than NTD 1.52 billion (approximately equivalent of USD 50 million) resulting from trade secret infringement.
AOET and Largan are both publicly traded companies listed on the Taiwan Stock Exchange (TWSE). On the day following the release of the judgement AOET’s share price fell precipitously. AOET was forced to halt its plan of issuing new common stock for cash and thus refunded all subscription payments to shareholders unconditionally.
Largan complained that four of its former engineers joined AOET within a short period of time one after another from May to June 2011. They misappropriated from Largan seven (7) major projects containing confidential technology, which improved AOET’s research capacity and successfully led to the maturation of automation process for lens manufacture. Moreover, AOET further filed utility model patent applications for the allegedly misappropriated technologies stolen by the former employees. The Taiwan Intellectual Property Office later granted patents Nos. M438320 for the dispensing needle head structure and M438469 for the light-shielding sheet feeding mechanism, respectively. The grant of these patents thus exposed Largan’s confidential technology to the public domain, an action that caused severe harm to Largan’s trade secrets and proprietary copyrights.
Largan filed for permanent injunction, a declaration of genuine ownership for the two patents, and a damage claim in the amount of NTD 1.52 billion (equivalence to about USD 51 million) against AEOT and its representative, former general manager, and the four former employees.
The court has attempted to bring the two parties to a settlement after making an intermediate judgment, but this attempt eventually failed. A final judgment was then rendered to support Largan’s claims for permanent injunction and ownerships over almost all asserted confidential technologies.
Notably, the court in assessing Largan’s damage claim, based its ruling significantly on an equitable rationale. Due to the confidential nature of a trade secret, a trade secret will be deprived of exclusiveness upon being exposed to the public. Any subsequent dissemination or utilization of the same will be no longer of the original owner’s control. That is, the owner’s foregoing investments are all in vein with nothing in return. The infringing party who unlawfully misappropriated the secrets received profits out of the owner’s production of efforts at little or no cost to the infringing party. There is clear causation between the damages incurred by an owner and the gain reaped by the infringing party.
The costs of the research and development incurred by Largan over the years amount to more than NTD 0.6 billion. In view of the fact that Largan holds a market share and profit margin far larger than that of its competitors- including that of the defendant company- the value of Largan’s trade secret, should it have not been infringed upon by AOET, would have generated Largan enough revenue so as to exceed the cost of its investment in research and development. Largan could have sought for a punitive damage in triple of NTD 0.6 billion. Since the claimed amount is NTD 1.52 billion which does not exceed the punitive damages, the court supported the amount in full.
According to public record, AOET’s total equity is roughly NTD 1.03 billion. The indemnity of NTD 1.52 billion that has been awarded to Largen is equivalent to 1.5 times AOET’s share capital. AOET was adamant that it will seek an overturn in the appellate level. This case has made a huge impact on Taiwan’s precision optics industry as well as the intellectual property community. On the other hand, the chairperson of Largan informed the press that it will donate the damages awarded to it to fund the promotion of intellectual property education as well as related programs.