Trade secrets for General Counsel: what to prepare for departing employees, lawsuits and evidence preservation

An employee left with our data and we are preparing to sue. What must the company prove first? How do we choose between criminal and civil routes?

All three elements in Article 2 of the Trade Secrets Act must be met: not known to persons generally involved with that type of information, having actual or potential economic value because of its secrecy, and the owner has taken reasonable secrecy measures. Courts look at whether measures exist, are visible and are carried out; a signed confidentiality agreement alone is not enough.

Which route to take, and when, is for lawyers to judge case by case.

We found a leak. How should evidence be preserved? What are investigation confidentiality orders and confidentiality preservation orders?

• First move: once a leak has happened and you are preparing to sue, call a lawyer first; the programme can be improved later, but evidence preservation cannot wait.
• Preserve internally: access and download logs, access rights and device records before departure, confidentiality agreements and training sign-off records. The key is having logs and classification before someone leaves; adding them afterwards is too late.
• Investigation confidentiality order: the January 2020 amendment to the Trade Secrets Act added Articles 14-1 to 14-4; when a prosecutor handling a trade secret case considers it necessary for the investigation, the prosecutor may issue an investigation confidentiality order.
• Confidentiality preservation order: a mechanism under the Intellectual Property Case Adjudication Act that protects trade secrets submitted in litigation.

Asking the prosecutor for an investigation confidentiality order and applying for a confidentiality preservation order are handled by lawyers.

A new hire brought in data from their former employer. Can our company be held liable? What can the General Counsel prevent?

Possibly. Under Article 13-4 of the Trade Secrets Act, when a company's representative or employee commits an offence under Article 13-1 or 13-2 in the course of business, the company is also fined, unless the representative did their best to prevent the offence.

Taiwan's Intellectual Property Office explains in its trade secret case bulletin that this article punishes the company's own failure to supervise, and that a company can invoke the proviso by showing it has implemented a compliance programme. In one judgment it summarises, the court considered that the company:

• asked recruiters to tell candidates about confidentiality duties
• had employees sign confidentiality agreements when joining
• ran information security audits
• gave training after joining, including not disclosing others' trade secrets

The General Counsel can make these fixed steps in onboarding and keep sign-off records. Whether the proviso applies is for legal counsel to judge case by case.

How should confidentiality and non-compete clauses be written so they hold up in court?

• Specific confidentiality terms: in judgments compiled by the Intellectual Property Office, confidentiality agreements that did not specify their scope, documents that were not classified and drawings without confidentiality marks have all been reasons courts found no reasonable secrecy measures (courts weigh several shortcomings together).
• Non-competes must meet the four conditions of Article 9-1 of the Labor Standards Act:
  • The employer has legitimate business interests that need protection
  • The employee's position gives access to or use of trade secrets
  • Duration, region, scope of activity and prospective employers stay within reasonable bounds (duration at most 2 years)
  • The employer gives reasonable compensation for losses from not competing (not including pay received during employment)

An agreement that fails any condition is void; making every employee sign one does not work. The General Counsel and HR decide which positions touch core secrets and how compensation is paid, then apply it at joining, during employment and at departure.

When we co-develop or exchange technical data with customers or suppliers, what should the confidentiality agreement cover?

A framework:

• Sign before disclosing: the service page lists "a confidentiality agreement before external disclosure" among the measures courts can see; sending data first and papering it later leaves a gap.
• Specific scope: name the data and versions, mapped to the company's classification and confidentiality marks, not just "all business information".
• Limited recipients: agree who on the other side can access it and for what purpose, and how and when it is returned or destroyed.
• Ownership and later use: who owns joint results and whether they can be used for other customers.
• Consistent with your own system: the confidentiality level, access control and audit cooperation promised in the contract must be things the company can actually do.

Final legal opinions on the clauses come from lawyers. The external confidentiality template listed on Winners Consulting's service page is one of four sets (joining, employment, leaving and third parties).

If national core key technologies or use abroad are involved, what else should the General Counsel watch?

• Heavier penalty for use abroad: infringing a trade secret with intent to use it in a foreign country, mainland China, Hong Kong or Macao carries 1 to 10 years' imprisonment under Article 13-2.
• National Security Act, Article 3: prohibits obtaining trade secrets of national core key technologies by improper means; such technologies must be identified and take effect when announced by the Executive Yuan, so the rule covers only announced technologies, not all R&D.
• Act Governing Relations between the People of the Taiwan Area and the Mainland Area, Article 9: people who work on identified technologies under government commission, subsidy or funding above a threshold need review and approval to enter mainland China, including within three years after leaving.

Whether a technology falls within the announced items must be checked item by item against the competent authority's list and confirmed by legal counsel. Either way, the reasonable secrecy measures in Article 2 are the baseline.

How does Winners Consulting help the General Counsel with trade secret protection?

This is Winners Consulting's own account. Test us with the questions above.

• Legal test first: we check each item against the three elements of Article 2 of the Trade Secrets Act and mark the protection route: trade secret, patent or contract
• Measures courts can see: a three-tier classification (top secret, confidential, internal), confidentiality marks, a register of people with access, and access control and logging specifications
• Confidentiality and non-competes: four template sets for joining, employment, leaving and third parties; non-competes checked clause by clause against Article 9-1 of the Labor Standards Act
• Departure and leak response: a departure procedure and evidence preservation manual; after implementation, we simulate an employee leaving with data and run it from logs to evidence preservation
• Division of work with lawyers: Winners Consulting builds the system and the chain of evidence; litigation, asking prosecutors for investigation confidentiality orders, applying for confidentiality preservation orders and final legal opinions on contracts are handled by partner lawyers
• Timeline (as listed on the service page): usually 3 to 6 months depending on company size and information scope
• Named clients: trade secret clients who have authorised disclosure include MediaTek and MPI Corporation (旺矽科技)
• First step: the first mechanism diagnosis is free

More: trade secret protection, choosing a trade secret consultant, CTO page, CISO page