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Although laws in the Philippines and Taiwan recognise trade secret privileges, experts remain cautious due to ongoing difficulties protecting confidential business information

PHILIPPINES

TAIWAN

Trade secrets in the Philippines protected by blend of laws

Philippine law recognises the privileged character of trade secrets. Foremost, the Intellectual Property Code (IP Code) recognises that the protection of undisclosed information forms part of intellectual property rights, incorporating provisions from the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

In certain countries like the US, there is a basic model law, namely, the Uniform Trade Secrets Act, which defines trade secrets, outlines claims related to their violation, codifies common law principles, and has been adopted by 47 states and the District of Columbia.

The same situation exists in Germany, where trade secrets are primarily covered by the new Trade Secrets Act on the protection of confidential know-how and business information (business secrets), against unlawful acquisition use and disclosure.

In other countries such as Brazil, China and the Philippines, trade secrets are protected through disparate law sources such as general intellectual property laws, specific laws on unfair competition that include violations of trade secrets, civil code and penal code, rather than a single, specific trade secrets law.

The following body of statutes and jurisprudence, in addition to TRIPS, further mandates the protection of undisclosed information, establishing the trade secrets framework in the Philippines.

Statement of the law

The Revised Penal Code (RPC) prohibits the disclosure of trade secrets. Article 291 of the RPC applies generally to any manager or employee, provided that the disclosed information came to their knowledge by reason of their office or position.

In particular, article 292 of the code applies to a person in charge, employee, or workman of a manufacturing or industrial establishment. The disclosed information relates to the manufacturing process, specific or limited to their factories. Imprisonment and fines are imposed accordingly.

Further, the National Internal Revenue Code (NIRC) restricts the procurement of unlawful divulgence of trade secrets by internal revenue officers. Section 278 of the NIRC imposes imprisonment and fines against “any person who causes or procures an o?cer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income or inheritance of any taxpayer, knowledge of which was acquired by him [or her] in the discharge of his [or her] o?cial duties”.

In Republic Act (RA) No.6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act, the public is provided access to records concerning chemical substances and mixtures. However, section 12 of RA No.6969 clarifies that the Department of Environment and Natural Resources may consider records confidential and limit the right of access when such reports divulge trade secrets.

These hold production and sales methods, processes unique to the manufacturer, and other information that tend to adversely affect the competitive position of such manufacturer, processor or distributor. Exceptions are only provided to medical research or scientific institutions in case the information is needed for the purpose of medical diagnosis and treatment of a person exposed to the chemical substance.

Notably, RA No.7394, or the Consumer Act, establishes standards of conduct for business and industry. Article 40(f) of RA No.7394 prohibits the disclosure and use of information concerning any method or process which, as a trade secret, is entitled to protection. Any person in violation of the provision is subject to imprisonment and a fine. In case the offence is committed by a juridical person, the chairman of the board of directors, president, general manager, partners and persons directly responsible are penalised.

Contracts

The protection of trade secrets may be enforced in contracts and other private instruments. For instance, an employment contract may include non-disclosure clauses. Similarly, service contracts between juridical persons may prohibit the disclosure of manufacturing information. In case of a breach, the party in violation is liable for damages or a penalty.

The Civil Code governs obligations and contracts. Article 1168 of the Civil Code provides the remedies of the creditor in negative obligations, such that “when the obligation consists in not doing, and the obligor does what has been forbidden him [or her], it shall also be undone at his [or her] expense”.

Further, article 1170 of the Civil Code mandates that those in contravention of the tenor of the contracts are liable for damages. Article 1226 of the code clarifies that in obligations with a penal clause, the penalty substitutes the indemnity for damages. However, damages must still be paid in case the obligor refuses to pay the penalty or is guilty of fraud in the fulfilment of the obligation.

The liability for damages is not limited to the contracting parties. Article 1314 of the Civil Code on tortious interference provides that any third person who induces a contracting party to violate their contract must be liable for damages to the other contracting party.

The requisites of the action are:

1. the existence of a valid contract;
2. knowledge by the third party of the existence of the contract; and
3. interference by the third party without legal justification. It must be noted that malice or spite is not an essential element. Here, the liability of the contracting party in violation and that of the third party are solidary. The contracting party commits the breach, and the third party commits the tortious act of interference.

Jurisprudence

The Supreme Court consistently upholds the privileged character of trade secrets. In Garcia v Board of Investments, the court recognises that trade secrets and confidential, commercial and financial information are exempt from public scrutiny. This is further reiterated in Chavez v Presidential Commission on Good Government, where the court acknowledges trade secrets as restrictions against compulsory disclosure. Clearly, a party cannot be compelled to produce, release or disclose documents, papers or any object that are considered
trade secrets.

In the landmark case of Air Philippines Corporation v Pennswell, Inc, the Supreme Court provides the comprehensive definition of a trade secret: “A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it. The definition also extends to a secret formula or process not patented, but known only to certain individuals using it in compounding some article of trade having a commercial value. A trade secret may consist of any formula, pattern, device or compilation of information that: (1) is used in one’s business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information. Generally, a trade secret is a process or device intended for continuous use in the operation of the business, for example, a machine or formula, but can be a price list or catalogue or specialised customer list. It is indubitable that trade secrets constitute proprietary rights.”

In the same case, the court adopts from American jurisprudence the following factors to determine whether a piece of information is a trade secret:

1. How the information is known outside of the employer’s business;
2. How the information is known by employees and others involved in the business;
3. Measures taken by the employer to guard the secrecy of the information;
4. Value of the information to the employer and competitors;
5. E?ort or money expended by the company in developing the information; and
6. How the information could be easily or readily obtained through an independent source.

These effectively delineated the parameters for the doctrinal “substantial factual basis” standard in the determination of trade secrets. In the earlier case of Cocoland Development Corporation v National Labor Relations Commission, the court laid down the rule that any determination by management as to the confidential nature of technologies, processes, formulae or trade secrets must have a substantial factual basis that can pass judicial scrutiny.

The court opined that to rule otherwise would be to permit an employer to label anything as a trade secret and weaponise it to dismiss an employee on the pretext that an arbitrary trade secret had been disclosed.

Conclusion

In the Philippines, the legal framework for trade secrets is embodied in congressional laws, administrative rules and regulations implementing such laws, contracts and quasi-contracts, and judicial decisions.

The state recognises that an effective intellectual and industrial property system develops domestic and creative activity, facilitates the transfer of technology, attracts foreign investment and ensures market access for its products. In protecting trade secrets, it secures the exclusive rights of scientists, inventors, artists and proprietors to their intellectual property, promoting national development and progress.

ROMULO MABANTA BUENAVENTURA SAYOC

& DE LOS ANGELES
21st Floor, AIA Tower,
8767 Paseo de Roxas
Makati City 1226, Philippines
Tel: +63 2 8555 9555 / +63 2 8848 0114
Email: romulo@romulo.com

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Overview of trade secret laws in Taiwan

Trade secrets In Taiwan are primarily governed by the Trade Secrets Act (TSA), which defines what constitutes a trade secret and provides for both civil and criminal liabilities in cases of misappropriation. The TSA works in conjunction with article 317 of the Criminal Code, which penalises unauthorised disclosure of commercial or industrial secrets by persons with privileged access.

Additionally, the Intellectual Property Case Adjudication Act (IPCAA) offers procedural rules for handling trade secret disputes in civil and criminal courts.

Definition and ownership

Article 2 of the TSA defines a trade secret as confidential information including methods, techniques, processes, formulas, programmes and designs that is not known to the general public, holds economic value due to its secrecy, and is protected by reasonable confidentiality measures. Such measures may include non-disclosure agreements, document labelling, restricted access controls, internal classification, information tracking systems, and regular confidentiality training for employees and contractors.

Regarding ownership, unless otherwise stipulated in a contract, trade secrets developed by employees during the course of employment generally belong to the employer. If developed outside of employment, the secret belongs to the employee, although the employer may use the secret on payment of reasonable compensation.

For contracted R&D projects, ownership depends on the contract terms; without which the hiring party owns the secrets.

Misappropriation and remedies

Under article 10 of the TSA, civil misappropriation includes acquiring, using or disclosing trade secrets through improper means, knowingly or with gross negligence, or failing to maintain confidentiality when legally required.

Criminal liability under article 13-1 arises from unlawfully obtaining trade secrets by theft, fraud, coercion or other wrongful acts, whether for personal gain, third-party benefit, or to harm the rights holder. Unauthorised reproduction, use or failure to delete trade secrets after demand also constitutes criminal infringement.

Article 13-2 imposes harsher penalties for attempted unauthorised use of trade secrets abroad (including use in mainland China, Hong Kong and Macau). A trade secret owner can also initiate a civil lawsuit for misappropriation to seek injunctive relief, destruction of products or materials derived from the misappropriation, compensatory damages or restitution of unjust enrichment. Additionally, the owner can file a criminal complaint against anyone alleged to have illegally acquired, used or disclosed the trade secrets.

Enforcement, dispute resolution

Litigation forums. Courts can exercise jurisdiction if either the misappropriation or its effects occur within Taiwan. The Intellectual Property and Commercial Court (IP Court) has exclusive jurisdiction over both civil and criminal trade secret cases, including those involving national core key technologies as defined under the National Security Act.

Filing of lawsuits. The statute of limitations for trade secret civil claims varies; breach of contract and unjust enrichment claims have a 15-year limit, while tort-based damage claims must be filed within two years of discovering the misappropriation conduct and offender, or within 10 years of the act, whichever is earlier.

Criminal complaints under article 13-1 of the TSA must be filed within six months of identifying the offender, with a 30-year prosecution limit, with the exception that no limitation applies to criminal offences under article 13-2.

Interim remedies. Interim remedies are available in civil litigation pursuant to the Code of Civil Procedure. These include provisional attachment, provisional disposition and preliminary injunctions, which respectively aim to preserve the plaintiff’s claims, ensure future execution, and maintain the status quo of the disputed legal relationship.

In misappropriation cases, a preliminary injunction is sought to prevent further use or distribution of the trade secret until a final judgment is rendered. Such remedies may be sought before or during a civil suit, even while a criminal proceeding is ongoing. Courts evaluate the likelihood of success and balance of interests before granting an injunction.

Evidence, disclosure, restrictions

Evidence collection and investigation. In civil litigation, courts hold preparatory hearings for parties to present arguments, evidence, clarify issues and question witnesses. The judge next schedules an oral hearing and issues a judgment. Parties may also request the court to appoint a neutral expert as an “inspector” to verify the documents, devices or equipment held by the opposing party or third parties for evidence collection.

In criminal litigation, prosecutors gather evidence and the court assesses the evidence’s validity during the trial. Multiple preparatory hearings may be held to define the scope of investigation and to summon documents or witnesses.

Disclosure rules. In civil cases, if a document is held by the opposing party or a third party, a party can request the court to compel its production, although the court has discretion over such requests. Failure to comply may lead to fines.

In criminal cases, prosecutors may seek search warrants for evidence collection. The defendant’s counsel is permitted, during the detention hearing proceedings only, to review the case file and evidence, make copies and take photographs or video. Once prosecution is initiated, all evidence and litigation files will be submitted to the court for the judge’s examination.

Restrictions on disclosure. During criminal investigations, prosecutors can issue a confidentiality protective order to the parties involved – including their counsel, expert witnesses and other witnesses – pursuant to article 14-1 of the TSA, requiring them to keep confidential any information they access during the investigation, with violations potentially leading to imprisonment or fines.

During the trial stage for both civil and criminal cases, according to articles 36 and 66 of the IPCAA, courts may, on petition of a party or third party, also issue confidentiality orders to the opposing party, their counsel, expert witnesses and witnesses to safeguard trade secrets. Violating such orders can result in criminal penalties.

Additionally, the court may impose restrictions or prohibitions on the opposing party’s ability to review, transcribe, photograph or reproduce the relevant files if litigation files or evidence contains trade secrets or confidential business information of either party, or of a third party.

Trial procedures

Non-public trials. According to the Code of Civil Procedure, the Code of Criminal Procedure and the IPCAA, if litigation files or evidence contains trade secrets or confidential business information, the court may, on the motion of a party or a third party, or with both parties’ consent, close the proceedings to the public.

Burden and standards of proof. In civil proceedings, the party making a claim must in principle prove its allegations based on the “preponderance of evidence” standard, meaning the claim is more likely true than not. For interim remedies in trade secret cases, the petitioner only needs to explain the facts, but the proof standards vary; provisional attachment and disposition require a preponderance of probability, while preliminary injunctions necessitate a higher standard, reflecting a high likelihood of misappropriation.

In criminal proceedings, a lower standard is used to initiate prosecution, requiring only sufficient evidence of suspicion. However, for a guilty verdict, the standard rises to “beyond a reasonable doubt”, which means that the evidence presented must be convincing to the extent that it leaves no doubt in the mind of the average person as to its truth.

Appeal. In both civil and criminal cases, parties can appeal first-instance decisions to the IP Court within 20 days of the judgment. Appeals of second-instance decisions to the Supreme Court are permitted only on the grounds that the judgment of the lower court is in contravention of the law.

Trends and conclusion

Given Taiwan’s pivotal role in the global information and communication technology, and semiconductor sectors, its trade secret laws have progressively evolved to meet the demands of a rapidly advancing high-tech economy.

Notable legislative developments include the 2013 enhancement of criminal liabilities under the Trade Secrets Act, the 2019 amendments designed to strengthen protections for foreign enterprises and streamline secrecy order procedures, and the 2022 amendment to the National Security Act aimed at safeguarding “national core key technologies”.

These developments collectively serve to underscore Taiwan’s clear and sustained commitment to robust trade secret protection.

LEE AND LI, ATTORNEYS-AT-LAW
8F, No.555, Sec. 4, Zhongxiao E Rd,
Taipei 11072, Taiwan, ROC
5F, Science Park Life Hub,
No.1 Industry E 2nd Rd.
Hsinchu Science Park, Hsinchu 30075
Taiwan, ROC
Tel: +886 2 2763 8000; +886 3 579 9911
Email: attorneys@leeandli.com

 

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