Enforcement proceedings

Causes of action

What causes of action are available and commonly asserted against misappropriation and unauthorised disclosure of trade secrets in your jurisdiction?

The common causes of action usually include breach of contract, torts and unjust enrichment. Regarding claims for breach of contract, most of the time, it would be the breach of contractual duty of confidence, and the right holder may also apply for injunction, if applicable.

Pursuant to article 11 of the Trade Secrets Act, where there is an actual or threatened misappropriation, the right holder may apply to the court for the injunction for the removal or prevention of such misappropriation. In addition, if a trade secret is misappropriated, the right holder may, together with the application for the removal of the misappropriation, request of the court for the destruction or other necessary dispositions of products derived from such misappropriation or items exclusively used for such misappropriation.

Furthermore, article 12(1) of the Trade Secrets Act provides that, one who intentionally or negligently misappropriates a trade secret of another shall be liable for damages. Besides, if the misappropriation also constitutes an unjust enrichment; that is, where one person is enriched at the expense of another without justified legal ground, the right holder may claim for the return of the benefit obtained by the wrongdoer.

Court jurisdiction

What criteria are used to establish the courts’ jurisdiction over trade-secret disputes? Are there any specialist courts for the resolution of trade-secret disputes?

There is an ‘Intellectual Property Court’ established in 2008 for the purpose of handling intellectual property disputes. Pursuant to article 3 of the draft Intellectual Property and Commercial Court Organization Act (previously called the Intellectual Property Court Organization Act; the new Act was amended on 15 January 2020, and will take effect on 1 July  2021), the Intellectual Property Court has jurisdiction over disputes arising from the Trade Secrets Act, including the first instance and the second instance of the civil cases, and the second instance of the criminal cases. The establishment of the Intellectual Property Court is to set up a specialist court forum for the review of intellectual property rights disputes. In principle, as long as either the place of alleged misappropriation act or the place of alleged results of misappropriation of trade secret is within Taiwan, the Taiwan court will take the jurisdiction. Whether there is jurisdiction for this is really up to the judge review in each case.

Procedural considerations

What is the typical format and timetable of proceedings?

To file a civil lawsuit, a statement of claim shall indicate the following items:

  • the parties and their statutory representatives;
  • the subject matter and the background facts giving rise to the claim; and
  • the demand for the reliefs sought.

 

In addition, it is advisable to include a statement on the grounds for the court's jurisdiction as well as the applicable procedure.Also, for a criminal trade secret case, the public prosecutor will request the trade secret owners to fill out and file a Case Detail Explanation Form.

Generally, it takes around eight months to one-and-a-half years for the court to render the judgment in the first instance (the actual time may be shorter or longer depending on the complexity of each case).

Limitation periods

What limitation periods apply for trade-secret misappropriation claims?

The statute of limitation differs depending on the cause of action. With regard to claims for contractual claims and unjust enrichment, the limitation period is 15 years. However, the right to claim for damages resulting from torts should be exercised within two years of the date when the right holder has knowledge of both the act of misappropriation and the identity of the party liable for the damages, or within 10 years of the act of misappropriation.

Secondary liability

To what extent can someone be liable for inducing or contributing to trade-secret misappropriation? Can multiple parties be joined as defendants in the same suit?

Pursuant to article 12 (1) of the Trade Secrets Act, where there are two or more parties jointly conduct the act of misappropriation, such parties shall be jointly and severally liable for the damage compensation. In addition, the nature of the misappropriation is torts and the Civil Code already stipulates that the instigators and accomplices are deemed as joint tortfeasors; therefore the parties committing or contributing to the act of misappropriation shall be held liable. In a civil judgment rendered by the Intellectual Property Court in May 2020 (case No. 108-Ming-Yin-Shang-2), the Intellectual Property Court confirmed that a former general manager (who specialises and in charge of the company’s technical affairs) and a former vice president (who specialises and is in charge of the company’s marketing affairs) of a company constituted joint infringement on the company’s trade secrets, as they conspired and were considered to have foreseen the acts of misappropriation.

Obtaining and preserving evidence

What mechanisms are available to obtain and preserve evidence from defendants and third parties in trade-secret litigation?

Article 368 of the Code of Civil Procedure provides that, where it is likely that evidence may be destroyed or its use in court may be difficult, or with the consent of the opposing party, the party may move the court for preservation of such evidence; where necessary, the party who has a legal interest in ascertaining the status quo of a matter or object may move for expert testimony, inspection or perpetuation of documentary evidence. If the subject evidence is in the possession of a third party, the party may also move to the court to order the third party to produce such evidence.

The court may, when preservation of evidence is ordered, inspect, examine or preserve documentary evidence. If the opposing party refuses to comply with the order for the preservation of evidence without due cause, the court may, to the extend necessary, enforce such order or request assistance from the police. Furthermore, where the trade secrets of an opposing party or a third party may be damaged due to the order for the preservation of evidence, the court may, upon a motion by the party, the opposing party or the third party, restrict or prohibit the presence of the persons at the premises for the preservation of evidence, preserve the evidence separately and limit the access for the review of such evidence.

Nevertheless, trade secret owners in Taiwan will sometimes try to file criminal complaints with Public Prosecutor Offices so that police raids can be conducted against the infringers, in which evidence relating to the complaints can be searched and seized.

Expert evidence

What rules and standards govern the admissibility of expert evidence?

It is quite common in Taiwan for a court to appoint an expert where special knowledge or experience is required.

As a part of the evidence investigation, the party who wishes to call an expert should first file a petition to the court. Further, since the party-appointed expert usually would receive remuneration from such party, the other party may question the credibility or validity of testimony provided by the party-appointed expert. Therefore, the courts usually prefer to have a court-appointed expert selected from an independent institute.

Confidentiality during litigation

What measures may the court and litigants take to protect trade secrets during litigation?

There are several measures provided under the Trade Secrets Act, the Intellectual Property Case Adjudication Act, the Code of Civil Procedures and other relevant regulations to protect the secrecy of trade secrets during litigation. For example, the court may refuse or limit the access to reviews, transcription or videotaping of litigation materials if such materials include trade secrets. 

The litigants may also apply to the court for the issuance of a confidentiality preservation order.  The person subject to a confidentiality preservation order shall not use the trade secrets for purposes other than those related to the case, nor disclose the said trade secrets to those not subject to the order, the violation of which may be subject to a sentence of imprisonment or detention not more than three years, or a fine of not more than NT$100,000 upon a criminal complaint.

The court, as it deems appropriate, may close the trial to the public and/or restrict access to the files of the litigation related information.

The Trade Secret Act was newly amended in December 2019, based on which a new mechanism named ‘investigation confidentiality protective order’ applies to trade secret cases. According to newly added article, the prosecutor investigating a trade secret case may, if he or she deems it necessary, issue an investigation confidentiality protective order to the relevant parties (including suspects, the defendants, the victims, the complainants, the agents ad litem, the defence attorneys, expert witnesses, witnesses, or other associated persons) having access to the investigation contents. A person violating an investigation confidentiality protective order shall be punished by imprisonment for up to three years, short-term detention, or a fine of up to NT$1 million.

Defences

What defences are available and commonly asserted against trade-secret misappropriation claims?

Regarding the scope of protection defense, the defendants commonly argue that the alleged trade secrets are already in the public domain as a result of the behavior of a third party, or that the right owner did not take reasonable protective measures to maintain the secrecy of the trade secret. Consequently, the alleged trade secrets lost their nature of secrecy and are thus not protected by the Trade Secrets Act. With respect to the conduct of misappropriation, the defendant sometimes argues that they acquire the alleged trade secrets by their own independent research or that the information or skilled involved are distinct from the alleged trade secrets.

Appeal

What avenues of appeal are available following an adverse decision in a civil suit? Is new evidence allowed at the appeal stage?

In principle, the party who receives an adverse decision may appeal to the High Court (appellate court), the second instance. If the case is reviewed by the Intellectual Property Court in the first instance, the appellate court is still the Intellectual Property Court with different judges. The case in the second instance will be reviewed by a panel of three judges, while there is only one judge reviewing the case in the first instance.

Both the first instance and the second instance are trial of fact; therefore, new evidence generally will be allowed in the second instance, provided that such new evidence can be deemed as submitted for the purposes of supplementing those already presented in the first instance.

However, only cases with the claim value that exceeds NT$1.5 million (approximately US$50,000) can be appealed to the Supreme Court, the third instance. In addition, since the third instance is a trial of law, the losing party of the second instance may only appeal to the third instance on the ground that the judgment made by the second instance is in contravention of laws.

Costs

What is the typical cost range of a trade-secret misappropriation suit? Can a successful litigant recover costs and attorneys’ fees?

The court fee for filing the lawsuit in the first instance is around 1.1 per cent of the claim (the exact amount will be decided by the court), and the court fee for appealing to the second instance and the third instance are both around 1.65 per cent of the claim (the exact amount will be decided by the court).

The attorney fee, in principle, shall be borne by the party itself unless otherwise agreed between the parties. The exception is that the winning party may ask the losing party to reimburse its attorney fee in the Supreme Court to the amount approved by the court. However, the attorney fee that can be reimbursed in the Supreme Court shall not be more than 3 per cent of the claim value or NT$50,000, whichever is lower.

Litigation funding

What litigation funding options are available?

Currently, there is no litigation funding mechanism available in Taiwan. Contingency fee agreements shall subject to the consent of the parties, which are not usual in Taiwan.

Alternative dispute resolution

What alternative dispute resolution (ADR) methods are available to resolve trade-secret disputes?

If there is an arbitration agreement, the parties may choose to submit the trade-secret disputes for arbitration. The Arbitration Act in Taiwan, in principle, follows 1985 UNCITRAL Model Law. In addition, the Chinese Arbitration Association established in 1955, is the major arbitration institution in Taiwan.

Besides, the parties may also choose to initiate court mediation before or after the case is pending at the court. If an agreement is successfully reached in the mediation, it has the same legal effect as a final judgement and thus the parties would be bound by it. On the other hand, if no agreement can be made from the court mediation, the application for court mediation will be deemed as the initiation of a civil lawsuit. In this way, the parties’ interests in statute limitation are protected.

Enforcement risks

To what extent may enforcement of trade-secret rights expose the rights holder to liabilities such as unfair competition?

In Taiwan, the unfair competition is governed by the Fair Trade Act. Article 45 of the Fair Trade Act provides that, no provision of this Act shall apply to any proper conduct in connection with the exercise of rights under the Copyright Act, Trademark Act, Patent Act or other Intellectual property laws. Therefore, to the extent that the right holders of trade secrets exercise their rights under the Trade Secrets Act with proper cause, they would not be subject to the liabilities under the Fair Trade Act. Nevertheless, if the right holders abuse their rights or violate the good faith principle and thus affect the fair competition, we cannot exclude the risk for them to be punished under Fair Trade Act.

Remedies

Injunctions

Under what circumstances can a rights holder obtain a preliminary or final injunction in a civil suit for trade-secret misappropriation?

According to the Code of Civil Procedures, where necessary for purposes of preventing material harm or imminent danger or other similar circumstances, an application may be made for an injunction maintaining a temporary status quo with regard to the legal relation in dispute. To obtain a preliminary injunction order, a rights holder will have to prove:

  • the preliminary injunction application is necessary to prevent material harm; or
  • there is imminent danger or other similar circumstances.

 

The Supreme Court issued a ruling in 2019 (case No.: 108-Tai-Kan-213) in which the factors to be considered in a preliminary injunction petition for a trade secret case were emphasised as follows:

  • whether there is legal relation between the parties and there is a need to maintain the temporary status quo;
  • whether there is likelihood of success for the petitioner (the rights holder); or
  • whether the granting or rejection of the petition will cause irreparable harm to the petitioner or opposing party, balance on the degree of damage to both parties, and impact on public interest.
Damages

What rules and criteria govern the award and calculation of damages for trade-secret misappropriation?

Trade Secrets Act provides for two kinds of calculation methods for damages resulting from trade secret misappropriation:

  • the damages suffered by the right holder (ie, the actual loss incurred and the loss of profits). However, if the right holder is unable to prove the damages, the difference between the profits normally expected from the use of the trade secret before the misappropriation and after the misappropriation may be used for the damage calculation; or
  • the profits earned by the infringer through the misappropriation. If the infringer is unable to prove the costs or the necessary expenses, the total revenue gained from such misappropriation shall be deemed as the profits.
Other civil remedies

Are any other civil remedies available for wilful trade-secret misappropriation?

Article 13(2) of the Trade Secrets Act provides that, if the misappropriation is conducted intentionally, the court may, at the request of the right holder and by taking all the circumstances into consideration, award an amount higher than the actual damages but less than three times of the amount of the proven damages.

Criminal remedies

What criminal remedies are available for trade-secret misappropriation? Under what circumstances will they be awarded, and what procedural issues should be considered when seeking them?

The person who commits or attempts to commit one of the acts stipulated under article 13-1 of the Trade Secrets Act might be sentenced to a maximum of five years imprisonment or detention, in addition thereto, a fine between NT$1 million and NT$10 million may be imposed. Besides, if the value of the illegal gains obtained by the offender exceeds the maximum amount of the fine, the court has the discretion to increase the fine to up to three times of the value of such illegal gains. The acts provided under article 13-1 of the Trade Secrets Act include:

  • acquiring a trade secret by an act of theft, embezzlement, fraud, coercion, unauthorised reproduction, or other wrongful means; or use or disclose a trade secret so acquired;
  • committing an unauthorised reproduction, usage, or disclosure of a trade secret known or possessed;
  • failing to delete or destroy a possessed trade secret as the trade secret holder orders, or conceal it; or
  • any person acquiring, using or disclosing a trade secret known or possessed by others knowingly that such trade secret is under one of the circumstances as prescribed in the preceding three subparagraphs.

 

The criminal prosecution and the guilty judgment require the right holder’s accusation, and it is possible for the right holder to settle with the infringer and thus withdraw the accusation. If so, the court cannot render a guilty judgment.

Administrative remedies

What administrative remedies are available for trade-secret misappropriation? Under what circumstances will they be awarded, and what procedural issues should be considered when seeking them?

Currently, there are only civil and criminal remedies available for trade secret misappropriation under the Trade Secrets Act. There is no administrative remedy under the Trade Secrets Act.

Law stated date

Correct on

Give the date on which the information above is accurate.

14 August 2020.