In recent years, trade secret infringement cases have continually popped up in Taiwan’s news media. In one example, Ability Opto-electronics Technology Co., Ltd. (AOET) was accused of poaching a number of Largan Precision Co., Ltd. engineers, and using the job-hopping engineers to carry and steal technical data to develop manufacturing process technology. The Taiwan Taichung District Court and the Taiwan Intellectual Property Court found that AOET had violated the Trade Secrets Act and imposed criminal penalties.
The investigation and trial of trade secret cases are fraught with difficulty and dilemma. The core of the difficulty is that the trade secrets can be just images, means, or know-how. Where such material or data is stored in an accused infringer’s company and whether the accused infringer actually uses the trade secrets are among the tricky questions that must be answered. Evidence collection and technical comparison each entail their own difficulties, which are compounded by the involvement of highly specialized technologies. All these factors can frustrate the efforts of right holders, prosecuting agencies, and courts.
The dilemma in handling trade secrets cases is how to balance the protection of both parties’ trade secrets with the need to effectively compare technologies and determine whether the accused infringer has stolen from another. When such cases come to trial, to verify whether the accused has stolen the other party’s trade secrets, the technology and trade secrets of the two parties must inevitably be compared and analyzed. Accused infringers will have concerns about leakage of their own trade secrets in the course of litigation. Indeed, there have even been cases of “reverse trade secret infringement,” in which a party brings a trade secret complaint as a deliberate tactic to learn internal secrets of a competitor.
To support and enhance district courts’ ability and professionalism in handling and adjudicating trade secret cases, the Judicial Yuan has issued the Directions for District Courts on Handling Trade Secret Cases (hereinafter, the “Trade Secret Case Directions”). Meanwhile, to balance the need to protect the trade secrets of litigants and third parties with the rights of opposing parties to obtain information and evidence in the court’s case file to develop their arguments and defenses, and to flesh out the investigation confidentiality protection order system set out in the Trade Secrets Act, the Judicial Yuan has also issued an amended set of administrative directions entitled the Directions for Courts Handling Cases Involving Confidentiality Preservation Orders and Investigation Confidentiality Protection Orders (hereinafter, the “Confidentiality Order Directions”). The Confidentiality Order Directions set guidelines for the submission, perusal, and investigation of materials and evidence in the court file to stem the risk of leakage of trade secrets contained in submissions to the court. Key points of the Trade Secret Case Directions and the Confidentiality Order Directions are summarized below.
- Strengthening judges’ professional ability to hear trade secret cases:
Under Point 3 of the Trade Secret Case Directions, the judges of a court’s division specialized in trade secret cases are required to participate yearly in trade secret related seminars. This requirement reflects the unique nature and difficulties associated with trade secret cases and the need for enhanced professional ability to handle such cases. The Judicial Yuan has itself set up a curriculum of professional trade secret seminars for judges and trade secret courses for courts’ administrative personnel. This curriculum is designed to familiarize judges and administrative personnel (such as court clerks and file room staff) with the importance of trade secrets and with related laws and regulations, to achieve effective protection of trade secrets.
- Confidentiality of trade secret evidence:
Trade secret cases often involve large submissions of pictures, forms, meeting minutes, research results and the like, which themselves are vulnerable to trade secret infringements. To preserve the confidentiality of trade secret evidence during litigation and facilitate the trial process, Point 5 of the Trade Secret Case Directions requires the court, in the preparatory proceedings stage, to first assign code numbers and appellations to trade secrets and names and numbers to the corresponding evidence. This enables the prosecution and defense to clearly identify the trade secrets and evidence that they wish to explore during the trial and helps keep their arguments securely in focus.
- System for assistance from technical examination officers and expert consultants:
Like patent cases, trade secret cases involve specialized technologies. Because judges in Taiwan often lack relevant technical knowledge, providing technical assistance to judges is crucial to case adjudication. In Taiwan, there are technical examination officers on the staff of the Intellectual Property and Commercial Court, but not on the district court staffs. Therefore, Points 6 and 7 of the Trade Secret Case Directions provide that if the district courts need professional assistance, they may contact the Intellectual Property and Commercial Court to assign relevant technical examination officers to assist them or may consult experts to obtain professional advice. This system strongly enhances the district courts’ ability to hear trade secret cases and fortifies the professionalism and exactitude of judicial trials in Taiwan.
- Opportunities for the parties to present their views:
As mentioned above, accused infringers often argue in litigation that seized materials contain their own trade secrets and have nothing to do with the complainant so the complainant should be prohibited from perusing them. If the court is inclined to believe an accused’s argument that the complainant should be prohibited from perusing certain seized material and evidence in the court file, Point 9 of the Trade Secret Case Directions nevertheless requires the court, before ruling to prohibit or restrict perusal of trade secret litigation materials, to give the parties a chance to present their views. This requirement ensures that the court has a solid grasp of the truthfulness of the accused’s arguments for prohibiting or restricting perusal. It is intended to protect the parties’ interests and to prevent accused infringers from employing such arguments as a tactic to evade comparison and analysis of seized material in court and shirk legal liability.
- Procedures for restricting the perusal of files and evidence in a trade secret case:
Trade secrets cases are often a double-edged sword. The complainant, while asserting their rights, also fears that more trade secrets will be leaked during the trial. The accused infringer, when presenting material in their defense, likewise fears that the complainant will seize this opportunity to spy on the accused’s own trade secrets. Therefore, strengthening the protection of both parties’ information has become an important topic in trade secret cases. To achieve this goal, Point 13 of the Trade Secret Case Directions requires the court during the trial to extract pleadings, evidence, and ancillary documents containing trade secrets from the main court file and manage them in a separate file to avoid inadvertently leaking restricted confidential information to others due to it being mixed in with other materials. In addition, before any copying, perusal, delivery, or uploading of electronic files and evidence, the Trade Secret Case Directions require that confidential portions should be redacted or de-identified to ensure the effectiveness of restrictions on access to file contents and evidence.
- Redaction or de-identification of written court decisions:
Judicial decisions in Taiwan are usually open to the public. However, in trade secret cases, to avoid the disclosure of trade secrets in a written court decision, Point 15 of the Trade Secret Case Directions requires that portions of a written decision that involve trade secrets be carefully redacted or de-identified, and specifically requires that the holders of the trade secrets be consulted before the written decision is made public, to confirm whether the trade secrets have been appropriately redacted. It bears noting that trade secrets contained in judgments do not necessarily all belong to the complainants. Judgments often also contain trade secrets of accused infringers (even if found to infringe on the trade secrets of others). Thus, the portions that must be redacted by the court include the trade secrets of both parties. This protection is not exclusively enjoyed by the complainant.
- Methods for submitting and perusing materials and evidence in the court file and conducting investigation in cases involving confidentiality preservation orders or investigation confidentiality protection orders:
If a case file or evidence are already protected by a confidentiality preservation order (issued during a trial) or by an investigation confidentiality protection order (issued during the investigation before a potential trial), it means that such evidence and material is highly critical and confidential. To ensure confidentiality, the Confidentiality Order Directions require that the following measures be taken:
- Point 3 of the Confidentiality Order Directions recommends that when any party submits documents and evidence containing trade secrets, it should seal the material in a double envelope with a security seal, label the case details including the case number and the court unit handling the case conspicuously on the front of the envelope, and submit it to the court separately from other materials, to clearly alert the court to the material’s special nature and ensure its confidentiality.
- Point 10 of the Confidentiality Order Directions provides that if a party or third party—when submitting materials or evidence specified as containing trade secrets to the adjudicating court—applies at the same time for a confidentiality preservation order or for cancelation of an investigation confidentiality protection order, then at the time such a request is granted, to avoid intermingling of those materials or evidence with others in the file, the court should separate them from the main court file. It should put them in a separate restricted access file or evidence bag, and make special notations on the file covers, evidence bags, and boxes, in order to clearly distinguish the files and evidence that may be provided for perusal and those that are restricted from perusal.
- Point 12 of the Confidentiality Order Directions provides, with respect to files or evidence containing trade secrets covered by an existing confidentiality preservation order or investigation confidentiality protection order, that when a party (even a party not specifically restricted by the order) or a third party requests to peruse such files or evidence, the court clerk shall notify the person who was granted the order or the prosecutor handling the case involving the order. That person or prosecutor should then respond within 14 days as to whether they agree to the request for perusal. During this period, the court clerk may not hand over any documents in those files or provide such files or evidence for perusal. This stringent provision—prohibiting courts from turning over information covered by confidentiality orders to anyone at all except with the permission of the person granted the order or the prosecutor in charge of the investigation—reflects the highly confidential nature of material covered by such orders and is intended to make sure that such material is not accidentally leaked under any circumstances.
The Judicial Yuan’s purpose in issuing the Trade Secret Case Directions and the Confidentiality Order Directions is to strengthen the ability and professionalism of judicial trials of trade secret cases in Taiwan, and at the same time strengthen the protection of both parties’ trade secrets to avoid secondary harm in trade secret litigation. We believe these are positive measures that will effectively enhance the protection of trade secrets in Taiwan. In addition, since trade secret cases often involve highly specialized legal, technical, and procedural issues, it is recommended that anyone who suspects others of infringing trade secrets or who finds themself accused of infringing trade secrets promptly seek assistance from lawyers versed in the field to prevent expansion of the damage.
This is a translation of the original article in Chinese, which can be found here. Translation by Paul Cox, Head of our Translation Department.Written December 8, 2021 By Christine Chen, Brian Wang.