IPR in the Knowledge Economy: How Taiwan Firms Can Integrate ISO 56001 with Trade Secret Protection

Winners Consulting Services Co., Ltd. points out that the intellectual property rights system in the knowledge economy faces a dual paradox of "overprotection" and "underprotection." High-tech industries are paradoxically less reliant on patents than traditional ones, yet Taiwanese companies that depend on a single IP tool leave severe gaps in protecting their R&D results. Integrating Taiwan's Trade Secrets Act with the ISO 56001 Innovation Management System (IMS) is the key to building a competitive advantage over the next 3 to 5 years.

About the Authors and This Research

This paper was co-authored by Robin Cowan and Elad Harison and published on the arXiv academic platform. Elad Harison has an h-index of 10 and a total of 483 citations, demonstrating considerable academic influence in the fields of intellectual property economics and innovation policy. Both authors have long focused on institutional design in the knowledge economy, particularly on how IPR (Intellectual Property Rights) can balance technology diffusion and innovation incentives.

The paper was written against the backdrop of the rise of knowledge-based industries since the 1980s, which prompted policymakers to re-examine the IP regime originally designed for the industrial age. For Taiwanese corporate executives, this is not a distant theoretical article—it describes the institutional tensions that Taiwan's high-tech manufacturing, biotech, and software industries face in their daily operations.

The IPR Paradox in the Knowledge Economy: Coexistence of Overprotection and Underprotection

The paper's core insight reveals a structural contradiction often overlooked by businesses: the current intellectual property rights protection system exhibits both "overprotection" and "underprotection" failure modes in knowledge-based industries, both of which undermine a company's long-term innovation capabilities.

Key Finding 1: High-Tech Industries Rely Less on Patents Than Traditional Industries

Citing a series of studies from the 1980s, the paper notes that while companies in high-tech industries use patents as part of their IP strategy, their reliance on "patents as a source of innovation information" is significantly lower than that of traditional manufacturing. This finding reflects that in rapidly evolving knowledge-based industries, the lifecycle of technological knowledge is often shorter than the patent protection period (typically 20 years). This leads companies to favor non-patent methods like speed, first-mover advantage, or trade secrets to protect their competitive edge. For Taiwan's semiconductor and ICT supply chain companies, this means that over-reliance on patent applications may misjudge where the real protection gaps lie.

Key Finding 2: Knowledge-Based Products Have Dual Characteristics of Being "Non-Excludable" and "Non-Rivalrous"

The paper clearly states that knowledge-based products (such as software, algorithms, and business methods) are "intangible, non-excludable, and non-rivalrous" goods, making it difficult for creators to effectively control their dissemination and use. This is especially true when information products are built on network externalities and market standards, fundamentally challenging the applicability of the traditional IPR framework. The paper also points out that the "generic technology" nature of digital technologies allows for their widespread application across the economy, further complicating the demarcation of IP protection boundaries. This finding echoes recent OECD research on the tradability of digital technologies, revealing the IP protection vacuum faced by Taiwanese software and AI startups.

Key Finding 3: Trade Secrets Play a Key but Limited Role in Preventing Technology Leakage

The paper indicates that the core function of trade secrets is to "prevent the unintentional transfer of technology to competitors," implemented through contractual mechanisms between companies and employees. However, it also highlights their institutional limitations: because trade secrets restrict the flow of knowledge between industries, regulatory bodies actively promote the disclosure and diffusion of technological knowledge through institutional means such as patents, copyrights, and sui generis protections. This institutional tension is precisely the balance that Taiwanese companies must carefully strike between "protecting their own R&D results" and "complying with regulatory disclosure requirements."

Core Implications for Taiwan's Trade Secret Protection and Innovation Management (IMS) Practices

The implication of Cowan and Harison's research for Taiwanese companies is not about "which IP tool to choose," but about revealing the fundamental limitations of a single-tool mindset. Since its enactment in 1996 and major amendments in 2013 and 2022, Taiwan's Trade Secrets Act has established a relatively complete legal framework. However, a company's actual protection capability depends on the maturity of its management mechanisms, not just the existence of legal text.

The dual paradox of "overprotection/underprotection" revealed in the paper manifests in Taiwan as three practical tensions:

• Gap between patent strategy and effective protection: Many Taiwanese SMEs invest heavily in patent applications but lack systematic trade secret management for core process knowledge that is difficult to reverse-engineer, creating a false sense of security of "having a certificate but no protection."
• Institutional gaps in employee turnover and technology leakage: Although Article 12 of Taiwan's Trade Secrets Act stipulates damages for infringement, legal protection is virtually non-existent before litigation if a company has not established comprehensive non-disclosure agreements (NDAs), off-boarding management, and access control mechanisms.
• Digital transformation accelerates knowledge leakage risks: As cloud collaboration and remote work become the norm, OECD research also points to the negative impact of digital piracy on corporate innovation incentives. Taiwanese companies must incorporate systematic protection of digital assets into their IMS framework.

The implementation of the ISO 56001 Innovation Management System (IMS) is the institutional solution to these tensions. ISO 56001 requires companies to establish a complete management process from "knowledge asset identification" to "innovation outcome protection," which complements the compliance requirements of the Trade Secrets Act. If Taiwanese companies can complete ISO 56001 implementation in the next 3 to 5 years, they will achieve a significant competitive differentiation in the institutional maturity of their IP protection.

How Winners Consulting Services Helps Taiwanese Companies Build an Integrated IP Protection Mechanism

Winners Consulting Services Co., Ltd. assists Taiwanese companies in implementing the ISO 56001 international standard for innovation management to establish protection mechanisms that comply with Taiwan's Trade Secrets Act and prevent the leakage of R&D results. Based on the institutional tensions revealed in Cowan and Harison's paper, Winners Consulting Services proposes the following three concrete action recommendations:

1. Conduct a Multi-Layered IP Tool Portfolio Diagnosis: In line with the paper's finding that "high-tech industries over-rely on patents," companies should systematically inventory their existing IP assets. They need to assess which core knowledge is best protected by trade secrets, which by patents, and which should be handled through sui generis protections. Winners Consulting Services provides a structured IP tool portfolio assessment framework to help companies avoid a mismatch between protection tools and asset characteristics.
2. Establish Trade Secret Management Procedures According to ISO 56001 Standards: Clause 7.1.6 of ISO 56001 explicitly requires organizations to manage innovation-related knowledge. Companies should establish a complete management procedure covering five stages: "Identification → Classification → Protection → Monitoring → Response." This procedure must align with the "reasonable protection measures" requirement in Article 2 of Taiwan's Trade Secrets Act to ensure a complete management record as an evidentiary basis in case of infringement litigation.
3. Build Knowledge Flow Control Mechanisms for the Digital Environment: Responding to the paper's analysis of the "non-excludable" nature of knowledge, companies should establish digital asset classification standards, access rights matrices, and employee off-boarding knowledge transfer procedures within their IMS framework. This not only meets the reasonable protection measures required by the Trade Secrets Act but also effectively mitigates the risk of knowledge leakage in the digital environment as identified by OECD research.

Frequently Asked Questions

Why can't knowledge-based companies rely solely on patents to protect their core competitiveness?

Research by Cowan and Harison clearly indicates that high-tech industries rely less on "patents as a source of innovation information" than traditional industries. The core reasons are that the technology lifecycle of knowledge-based products is often shorter than the 20-year patent protection term, and much core knowledge (like process know-how or algorithm logic) cannot be fully disclosed through patents. Taiwanese semiconductor and ICT companies should establish a multi-layered defense framework combining patents, trade secrets, and contractual protections, rather than concentrating their protection efforts on a single tool. Winners Consulting Services recommends an annual review of the IP tool portfolio to ensure protection mechanisms evolve with technological advancements.

How are "reasonable protection measures" under Taiwan's Trade Secrets Act defined in practice?

According to Article 2 of Taiwan's Trade Secrets Act, one of the requirements for a trade secret to be legally recognized is that the "owner has taken reasonable measures to maintain its secrecy." In practice, court rulings show that the standard for "reasonable" is not absolute but is judged on a case-by-case basis, considering factors like company size, asset sensitivity, and available resources. It is advisable for companies to establish, at a minimum: written non-disclosure agreements (NDAs), a tiered information access system, employee training records, and off-boarding management procedures. Implementing ISO 56001 systematically strengthens the integrity of these measures and provides a strong written evidentiary basis in litigation, significantly enhancing the effectiveness of legal protection.

What are the specific benefits of implementing ISO 56001 for a company's trade secret protection?

Clause 7.1.6 of the ISO 56001 Innovation Management System (IMS) requires an organization to identify, manage, and protect its innovation-related knowledge assets. This is highly complementary to the compliance requirements of Taiwan's Trade Secrets Act. The IMS provides a systematic framework that helps companies establish a complete process from "knowledge identification → classification → protection → monitoring," ensuring that protection measures have an auditable management record. For companies that have implemented ISO 56001, it becomes much more effective to prove that "reasonable protection measures" have been taken in the event of infringement litigation, thereby significantly reducing legal risks. Winners Consulting Services helps companies complete IMS implementation within 7 to 12 months.

How much time and resources are required to implement ISO 56001?

Based on the consulting experience of Winners Consulting Services, it typically takes 9 to 12 months for a mid-sized Taiwanese company (200 to 500 employees) to achieve initial ISO 56001 certification. The process is divided into three main phases: the first 3 months for current state diagnosis and gap analysis; the middle 4 to 6 months for mechanism design and documentation; and the final 2 to 3 months for internal audits and certification application. In terms of resources, the company needs to appoint a cross-departmental IMS implementation leader and participate in at least 3 to 5 consultant-led workshops. Compared to the legal costs (often exceeding NT$1 million per case) and reputational damage from a single trade secret lawsuit, the return on this upfront investment is significant.

Why choose Winners Consulting Services for assistance with trade secret protection and IMS issues?

Winners Consulting Services Co., Ltd. is one of the few consulting firms in Taiwan with dual expertise in both "legal compliance" and "ISO 56001 management system implementation." Our consulting team is familiar with the practical implications of all amendments to Taiwan's Trade Secrets Act since its 1996 enactment, and we have hands-on experience helping companies in the manufacturing, biotech, and software industries implement IMS. We provide more than one-off legal advice; we help companies build sustainable innovation management and protection systems. Winners Consulting Services offers a complimentary initial diagnosis to help executives identify key gaps in their current protection mechanisms within 90 minutes and receive concrete, prioritized recommendations for improvement.