Three Thresholds for Trade-Secret Protection in Taiwan: Secrecy, Economic Value, Reasonable Measures

An employee leaves with the client list and joins a competitor. Can the company sue for trade-secret misappropriation in Taiwan? The answer turns not on how complex the list is, but on whether the information clears three thresholds. For foreign companies with operations, suppliers, or former employees in Taiwan, this is a decisive enforcement forum — and the observation from handling these cases is consistent: most losses are lost not on the facts but on a threshold that was not held, above all the third, reasonable measures.

Why the three thresholds decide the case

Under Trade Secrets Act art. 2, a “trade secret” must satisfy three elements at once: secrecy (not known to persons generally involved with that type of information); economic value (actual or potential economic value by reason of its secrecy); and reasonable measures (the owner has taken reasonable measures to maintain its secrecy).

All three are required. In practice the plaintiff must prove each one separately — if proof on any one falls short, the trade-secret status fails, and however clear the defendant’s conduct, there is no case to make. This is the fundamental difference from other IP rights: a patent or trademark carries a certificate issued by a state authority, while a trade secret is recognized only after the fact, by a court.

First · Secrecy

Secrecy means not generally known — the information cannot be common knowledge in the field, available in public literature, or industry common sense. Courts look at whether it has been disclosed in books, papers, patent specifications, or industry reports; whether it is a generally adopted practice; and whether a third party could easily develop it independently or obtain it by reverse engineering.

The recurring disputes: a client list of bare names and contact details rarely clears the bar, but a client database carrying transaction terms, purchase history, and credit ratings may; a formula is often a core secret but must not have leaked through a patent specification or public literature; process know-how must record operating parameters specifically beyond the general industry level.

Second · Economic value

Economic value requires that the information have actual or potential economic value by reason of its secrecy — that it is because it is secret that it confers a commercial advantage. Courts consider whether the information is key to earning revenue or saving cost, whether a competitor obtaining it would gain an unfair advantage, and whether the company invested meaningful R&D in developing it.

The recurring disputes: information not yet in use may still hold potential value, but its commercial viability must be argued; outdated information the market no longer uses is hard to value; a purely routine internal management process struggles to clear the element. In most cases economic value is the easier element — the very fact of the defendant’s misappropriation reflects the information’s commercial appeal.

Third · Reasonable measures

The third threshold is the leading cause of loss. Courts assess reasonable measures on the totality, and the proof should include at least: written non-disclosure agreements with employees, partners, and suppliers; data classification labeling secrets as “confidential” or “top secret”; access controls — physical documents locked, electronic files password- or permission-controlled; departure handover procedures returning data, revoking access, and signing a departure confidentiality statement; and training records, with periodic trade-secret training and attendance logged.

What courts actually require: not “an NDA exists, therefore it passes.” The court examines whether the measures match the importance of the information. A core formula protected only by a generic confidentiality clause in a standard employment contract may be found short of reasonable.

Criminal exposure after the 2013 amendment, and why cases are lost

A major January 2013 amendment added arts. 13-1 to 13-4. Article 13-1 punishes specified acts of misappropriation — among them acquiring a trade secret by wrongful means, and reproducing, using, or disclosing it without or beyond authorization — when committed for unlawful gain or to harm the owner: up to five years’ imprisonment or short-term imprisonment, to which a fine of NT$1 million to NT$10 million may be added. Article 13-2: where the offense is committed for the purpose of using the trade secret in a foreign jurisdiction, mainland China, Hong Kong, or Macau, the sentence is one to ten years’ imprisonment, to which a fine of NT$3 million to NT$50 million may be added. Attempts are punishable under both articles. Article 13-3: an art. 13-1 offense is prosecuted only upon complaint. Article 13-4: where a representative, agent, employee, or other staff member commits either offense in the course of business, the legal person or individual employer is also liable to the fine, unless its representative or the employer has done the utmost to prevent the offense.

During proceedings, the confidentiality-preservation-order regime under the Intellectual Property Case Adjudication Act (art. 36 et seq.) lets a court issue an order over trade-secret material to prevent secondary leakage in the course of litigation.

Why cases are lost, in our observed order: reasonable measures insufficient (the majority) — NDAs that are a formality, no classification, no access control; secrecy under-proven — generally known in the trade, or already disclosed in a patent or paper; weak link between the alleged infringer and the data — no access log, no evidence of use; thin economic-value argument — no quantified account of the information’s commercial significance.

What this means for foreign counsel

For a company that needs to protect trade secrets in Taiwan: build a four-tier classification (public / general / confidential / top secret) mapped to access rights and storage; run NDAs and internal rules on dual tracks — NDAs with employees, suppliers, and partners, reinforced internally by a handbook, IT policy, and departure-handover SOP; run trade-secret training at least annually, with attendance and a short test logged; and on a suspected breach, secure the evidence at once — anomalous access, bulk downloads, unusual contact with a competitor must be fixed the moment they are found, and a confidentiality-preservation order applied for in the proceeding. Trade-secret matters are won on procedure, and first-hand IPC Court experience is what moves them.