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The concept of “secrecy” under article 2 of the TSA requires that the information in question is not generally known or readily accessible to individuals who customarily deal with such information within the relevant industry. Information that is easily obtainable or widely recognised within the industry does not qualify as a trade secret. Therefore, the assessment of secrecy hinges on industry standards: the information must be unknown not only to the general public but also to professionals in the pertinent field.

Further, the Supreme Court has clarified that trade secrets are a type of information which, if not publicly known and not readily ascertainable by legitimate means, satisfy the requirement of being “not known to persons generally involved in information of this type”. This standard differs from the requirements for invention patents under the Patent Act, which demand absolute novelty (not forming part of prior art), and non-obviousness (not easily achievable by persons of ordinary skill in the relevant technical field based on prior technology).

The Supreme Court has also clarified that the secrecy of trade secrets is relative, rather than absolute. If the owner intends to maintain confidentiality and reasonably discloses the information to specific customers for business purposes under a sales contract, such information can still be considered secret.

In certain cases, the defendants argued that the accused trade secret can be obtained by reverse engineering and therefore asserted that the accused trade secret lacks secrecy. The prevailing judicial view holds that information acquired by reverse engineering does not automatically lose its confidential status. Some courts further clarify that if reverse engineering requires substantial investment of time, money, equipment and expertise, the resulting information is not readily accessible to the public and may still qualify as a trade secret.

Defining economic value of Taiwan trade secrets

The concept of “economic value” under article 2 of the TSA encompasses technology or information that is both confidential and possesses actual or potential economic value. The protection afforded by the TSA is not limited to information with realised economic benefits; it also extends to technology and related information that is still in the research and development phase and that has not yet reached mass production, provided it holds potential economic value.

Possession of trade secrets grants companies a competitive advantage over their rivals. For competitors, obtaining another entity’s trade secrets can significantly reduce the time required for learning, minimise errors and enhance production efficiency, thereby conferring substantial value.

Importantly, information derived from unsuccessful experiments may also have potential economic value and is therefore protected under the TSA. This broad interpretation ensures that both actual and potential economic interests are safeguarded, underscoring the essential role of trade secrets in preserving a company’s competitive edge.

Taiwan trade secret confidentiality measures

Common confidentiality measures include marking documents as “confidential” or “restricted access”, signing confidentiality agreements with employees and business partners, and prohibiting departing employees from retaining confidential information, and the like.

In practice, to safeguard trade secrets, business owners frequently require individuals with access to sensitive information to sign confidentiality agreements. Under the principle of freedom of contract, the scope of confidential information agreed on by the parties does not need to mirror the statutory definition of trade secrets under the TSA.

Nevertheless, to be considered valid, the confidential information must be clearly defined, reasonable, and at a minimum not generally known. Courts may find overbroad definitions, such as those designating all employer information as confidential, unenforceable.

Taiwan trade secrets IPCAA article 35

The Supreme Court has acknowledged the significant evidentiary challenges encountered by right holders in trade secret disputes. To mitigate these difficulties, the Supreme Court has both reduced the rights holder’s burden of proof and imposed an obligation on defendants to provide a specific response to the rights holder’s assertions.

Article 35 of the IPCAA further clarifies this framework. When a party makes a preliminary showing of misappropriation or risk of misappropriation of trade secrets, and the opposing party denies such assertions, the court shall order the opposing party to submit a specific defence supported by facts and evidence within a prescribed period. Should the opposing party fail to respond without justifiable reason, or if the response lacks specificity, the court may, at its discretion, deem the claimant’s assertions to be established.

Taiwan trade secret liability of reverse-engineering

Article 10 of the TSA establishes civil liability for the misappropriation of trade secrets, specifying five grounds for such liability. Item 1 addresses those who acquire trade secrets by improper means; items 2 and 3 concern recipients acting in bad faith; and items 4 and 5 apply to individuals who initially obtained trade secrets lawfully, but later misused or disclosed them. In 2013, criminal liability was introduced to further deter misappropriation.

According to statistics from the Taiwan Intellectual Property Office, the most common form of trade secret misappropriation falls under item 1: Unlawful acquisition. For instance, an employee who breaches contractual obligations by reproducing company customer data from a computer system without authorisation engages in conduct that does not constitute legitimate use in the course of employment. Notably, such misappropriation is actionable even if no actual damage occurs.

A widely discussed issue in recent legal practice is whether results obtained through “reverse engineering” constitute misappropriation. According to the legislative rationale behind article 10 of the TSA, reverse engineering refers to a third party lawfully obtaining an item containing a trade secret and analysing its components and design to derive the same trade secret.

Since such results are achieved through the third party’s own research and development, this does not constitute unfair competition. Therefore, the “improper means” enumerated in article 10 of the TSA do not include results derived from lawful reverse engineering, which do not constitute misappropriation. However, the defendant shall prove that he/she/it obtained the accused trade secret through reverse engineering.

Define scope of trade secret protections

Owners of trade secrets should clearly define the scope of their trade secrets and establish explicit guidelines regarding the scope of users and methods of use. For products susceptible to reverse engineering, owners should consider alternative protective measures such as applying for patents or entering into contracts containing confidentiality and non-compete clauses.

When an employee misappropriates a trade secret and the owner is unable to prove the three statutory elements required under the TSA, the owner may still assert a breach of the duty of confidentiality or a violation of the non-compete obligation. In addition to contractual liability, rights holders may also claim damages for misappropriation of property rights based on torts.

Lee and Li Attorneys-at-Law
8F, No.555, Sec. 4, Zhongxiao E. Rd
Taipei 110055, Taiwan, R.O.C.
Tel: +886 2 2763 8000
5F, Science Park Life Hub, No.1, Industry E. 2nd Rd
Hsinchu Science Park, Hsinchu 300091, Taiwan, R.O.C.
Tel: +886 3 579 9911
Email: attorneys@leeandli.com