The Trade Secret Act (“TSA”) of 1996, while granting civil damages to victims, did not itself impose criminal penalties on perpetrators who misappropriate trade secrets, leaving the crimes to be punished by the Criminal Code. Yet the Criminal Code has been criticized for being too lenient to deter trade secret violations.  For instance, the punishment for infringing upon industrial trade secrets under the Criminal Code is imprisonment for up to one year, which is hardly proportionate to the enormous interests at stake in industrial spy cases.  As a result, more severe criminal punishment has been sternly urged by industry leaders.

Against the above backdrop, on January 11, 2013, the Legislative Yuan amended Articles 13-1 to 13-4 of the TSA, which went into effect after the President’s announcement on January 30, 2013.  With clearly defined punishable acts, severe penalties (especially for offshore violations), and expanded coverage of offenders, the newly amended TSA is expected to be a significant step toward better protection of innovations and fairer market competition.  Major amendments include:

I. Criminal Penalty Imposed on Trade Secret Infringement

A person who commits any of the following offenses with illegal intent shall be imprisoned for up to five years together with a criminal fine between NT$1 million and $10 million shall be imposed.  If the illegal gain exceeds NT$ 10 million, the fine may be increased to three times of the illegal gain:

  1. Acquiring a trade secret by illegal means (e.g. theft, embezzlement or unauthorized reproduction) or using or disclosing an illegally acquired trade secret;
  2. Reproducing, using or disclosing a trade secret without or exceeding authorization;
  3. Failing to delete or destroy a trade secret when so instructed by the trade secret owner, or misappropriating the trade secret by hiding the same; and
  4. Knowingly acquiring, using or disclosing a trade secret that is acquired by others in any of the above ways.

Items 2 and 3 clearly indicate that individuals who fail to abide by the trade secret owner’s authorization and instruction may incur criminal liability, even if the trade secret has been obtained legally originally.  In this regard, employees, especially those who plan to resign, should make certain that all trade secrets belonging to the employer that are in the employee’s possession be carefully handled in accordance with the employer’s instructions.  In the meantime, employers who wish to rely upon the amended TSA for better protection should provide clear and unambiguous guidance to employees about authorized access and use of trade secrets in advance, because any unclear or ambiguous language regarding the handling of trade secrets would most likely be interpreted to the advantage of alleged criminal offenders.

Offenders of the above crimes can only be charged upon the complaints of victims or other entitled complainants.  Complaints may be filed selectively against any one of the co-offenders in a case.  As explained in the legislative proposal, evidence for most trade secret violations is difficult to gather. By granting complainants the right to file severable and selective complaints against any co-offender(s), it is hoped that some co-offenders will consider cooperating with an investigation to avoid indictment. However, whether the right to file selective complaints will enhance the odds of prosecution or breed abuse remains to be seen.

II. More Severe Penalty on Offshore Trade Secret Infringement

If any TSA offense is committed with the intent of using the misappropriated trade secret outside the territory of Taiwan, the offender shall be imprisoned for no less than one year and up to ten years, together with a criminal fine between NT$ 3 and 50 million, which can be increased to from two to ten times of the illegal gain if the illegal gain exceeds NT$ 50 million.  The obvious rationale behind this harsh penalty is to protect the competitiveness of Taiwan’s industries.  The real challenge, however, lies in how to obtain sufficient evidence to prove the intent of extra-territorial violations and to locate and apprehend offshore offenders.

III. Penalty on Employer of Offender

The amended TSA imposes a fine on the employer or principal (either a legal or natural person) for any violation committed by his/her/its employees, agents or representatives when performing their duties, unless the employer or principal has made a sincere effort to prevent the crime.  Placed in a business context, the employer or principal behind an offender is the entity which actually harvests the economic interests flowing from the crime and, as such, must ultimately be held responsible for exploiting the trade secrets of others.  Given the possible legal exposure incurred by an employee’s misbehavior, companies must send an explicit and unmistakable message to all employees, indicating that under no circumstances will infringement upon a third party’s trade secrets be tolerated.  Companies should also provide necessary education and training in order to effectively raise employees’ awareness about this critically important issue.