Taiwan Sets in Motion Stricter Laws for Commercial Espionage

To curb the number and scope of leaks of proprietary information from Taiwanese high-tech companies abroad, the government looks for stricter law coupled with heavier punishment on mishandling of trade secrets.

Employee-poaching has been one of the means adopted by emerging foreign competitors to access secrets from Taiwanese high-tech companies in recent years, which is especially common in semiconductor and display panel industries, for insiders' cutting-edge technologies are regarded as invaluable information for rivals.

Real-world Cases

In October 2012, AU Optronics Corp. (AUO), one of Taiwan's top-two makers of displays, accused two former senior R&D executives, both of whom were hired by China's TCL Corp., a multinational electronics company, right after quitting in July, of stealing its AMOLED (active matrix organic light emitting diode)-related technologies to help the Chinese rival develop AMOLED panel mass production capability.

In the initial stage of the investigation, the prosecutor prohibited the two accused from leaving Taiwan, but later voided the restraining order, partly because AUO had failed to provide enough proof of the origin of stolen technologies, and partly because current laws do not cover legal definition and protection of sensitive high technologies, to the bane of Taiwan's high-tech industries.

Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC), world's No.1 semiconductor foundry, filed an appeal in 2011 with Taiwan's Intellectual Property Court for a preliminary injunction against its former head of R&D, headhunted as the vice R&D president by Samsung Electronics, to prevent the ex-employee from sharing key technologies with its Korean rival.

But the apparent injustice upset TSMC for the court ruled in 2012 that the preliminary injunction violates one's civil right to work, and hence cancelled the order to stop the ex-employee from going to Samsung Electronics.

The abovementioned cases show that the flow of trade secrets from Taiwanese high-tech firms in the form of brain drain to foreign competitors can't be effectively stemmed, partly due to the lack of effective judicial and administrative protections. To plug such loophole, industry insiders is urging the government to implement, enforce stricter laws and punishments on unauthorized sharing of trade secrets, by referring to commercial espionage acts established by the U.S. and S. Korea.

Tighter Law

In response to high-tech firms' call, the Economic Committee under Taiwan's Cabinet recently approved a draft amendment of the current trade secret misappropriation law to enable state prosecution of business espionage, with the guilty to suffer heavier penalties for divulging business secrets abroad.

The amended bill allows fining criminals guilty of divulging business secret to foreigners between NT$1 million and NT$50 million, with imprisonment up to 10 years, depending on gravity of case. In case of undue enrichment exceeding NT$50 million, fines can be increased 2 to 10 times the amount of such enrichment. Once prosecution begins, a case can no longer be settled or dismissed through reconciliation between enterprises.

As for offenders guilty of business espionage at home, fines will be raised to NT$1 million, or triple the undue enrichment when unjustified profits earned exceed NT$10 million. Also public servants taking advantage of their positions to profit from releasing business secrets will suffer 50% heavier penalties according to the amended bill.

The draft amendment has won support from the Economic Minister Shih Yen-shiang, who says that business espionage undermines enterprises, but also Taiwan's export-driven economy to cause huge losses that can exceed tens of billions of New Taiwan dollars.

A Taiwanese lawmaker participating in the drafting of the bill amendment says that business secret leaks from Taiwan to foreign countries, especially China, is an issue of concern to the American Chamber of Commerce in Taipei, whose white paper indicates that moderate enforcement of legal protection of trade and industrial secret is among the reasons why the U.S. government declines to lift restrictions on American enterprises' sharing advanced technologies with Taiwanese, which also goads Taiwanese lawmakers to realize stricter laws and punishments for commercial espionage.