Criminal Case: Determination of “Reasonable Confidentiality Measures”

Case No.: Intellectual Property and Commercial Court, Shang Su (Criminal Appeal) No. 36 of 2022

Issue: Where a company established a document- directory, access -permission chart, and account/password controls, but did not expressly prohibit employees from saving company data to personal devices, does this still constitute “reasonable confidentiality measures”?

Facts: The defendant, formerly a department manager at Company A, forwarded a company trade-secret file (the “MD-60AA File”) to his personal email account before resigning. After leaving Company A, he took a position with a competitor, Company B. Although Company A sent a written demand requiring deletion of the file, the defendant failed to delete it.

First Instance (Hsinchu District Court): The court held that because Company A had not expressly incorporated a prohibition on the use of private email accounts or cloud storage into its employee handbook, and reliance on employee self-discipline alone was insufficient, the confidentiality measures were not reasonable. The court held that the defendant was not guilty.

Second Instance (IP and Commercial Court): The appellate court reached a different conclusion, reasoning as follows for the following reasons:

• The court should account for the company’s status as a small/medium-sized enterprise with only 24 employees and NT$36 million (~USD1.13 million) in capital.
• Company A had already implemented concrete safeguards, including a non-disclosure clause in its employee handbook, access -control and password management, and watermarking of confidential documents.
• The absence of a specific prohibition on managerial-level employees carrying personal devices was a reasonable degree of flexibility that reflected the company’s scale and its trust in management-level staff, and did not by itself defeat the reasonableness of the confidentiality measures.

The court ultimately found the defendant guilty of the offense of “failing to delete trade secrets after being notified to do so”, sentencing the defendant to one year of imprisonment. As for Company B, because it failed to urge its employee to delete the trade secrets, it was fined NT$1.5 million (~USD46,980).

Practical Significance: Reasonable confidentiality measures need not be “”watertight.””. Courts will assess reasonableness holistically, in light of a company’s actual manpower, financial resources, and the nature of the information at issue. This case also provides a concrete example for of how why a company should notify a departing employee to delete its trade secrets.

Civil Case: On the Establishment of Damage and the Assessment of Damages

Case No.: Intellectual Property and Commercial Court, Min Ying Shang (Civil Appeal) No. 5 of 2023

Issue: Where seedlings containing trade secrets were stolen but never successfully sold for profit, does this still constitute damage giving rise to liability for compensation?

Facts: The defendant instructed his ex-wife, who was employed at Company A (a seedling company), to steal Company A’s parent lines, intending to sell them for profit. Company A brought a claim for NT$30 million (~USD939,600) in damages.

First Instance (Qiaotou District Court): The court found that a trade secret had been misappropriated, but because the parent lines or their derivative seeds had never actually been sold, it could not be established that Company A suffered damage or that the defendant obtained wrongful gains. Accordingly, no damages could be awarded under the Trade Secrets Act; instead, the court awarded approximately NT$7.14 million (~USD224,000) based solely on the defendant’s breach of the confidentiality undertaking.

Second Instance (IP and Commercial Court): On appeal, the court increased the damages awarded to NT$10.2 million (~USD320,000), finding that the defendant’s conduct also constituted trade secret misappropriation. The court reasoned that:

• Even absent in the absence of an actual sale, Company A suffered damage of considerable pecuniary value through the loss of its exclusive right to market the parent lines.
• Economic value is not limited to amounts actually realized through sale; the loss of competitive advantage and market exclusivity is itself a form of damage.

Calculation of Damages: Because the parent lines had never been sold on the open market and had no established market price, and because the defendants had not realized any sale proceeds, none of the conventional methodologies for the calculation of damages — the “”specific loss calculation method”,” the “”differential method”, ” the “”total profit method”,” or the “”total sales value method”” — could be applied. The court therefore fixed damages at NT$10.2 million (~USD320,000) pursuant to Article 222, Paragraph 2 of the Code of Civil Procedure, exercising its discretion based on the entirety of the record and the arguments presented.

Practical Significance: This decision clarifies that a finding of damage from trade secret misappropriation does not require proof of actually realized profit. It further illustrates how courts may exercise discretionary authority to fix an amount for damages amount where precise calculation is not feasible.