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The Taiwan Supreme Court Clarified the Level of Proof in Trade Secret Protection Cases
In the civil judgment of 2017-Tai-Shang-Zi-No.55 made on January 4th 2017, the Supreme Court of Taiwan clarified the level of proof in trade secret protection cases. The following is an overview of the legal standards specified in judgment of this case by the Supreme Court.
1. In this case, Himax Technologies, Inc. (the Plaintiff/Appellant), after the resignation of its ex-employees (the Defendant/Appellee), found that the ex-employees had sent its confidential files to their own email accounts within the period after their applying for resignation but prior to their final resignation, which caused the disclosure of relevant trade secrets. The Plaintiff/Appellant then claimed for default penalty and damages pursuant to the Employee Confidentiality and Intellectual Property Rights Transfer Agreement (hereinafter “the Agreement”) entered into by and between the Plaintiff/Appellant and the Defendant/Appellee.
2. The lower court brought in a verdict against the Plaintiff/Appellant, holding that:
(i) Though the files at issue had been sent to their external email accounts, the ex-employees denied any disclosure of trade secrets and claimed they had emailed the files for overtime work at home. Therefore, Himax was liable for presenting proof that the ex-employees had emailed the files at issue to their external accounts for interests of themselves or any third party instead for the purpose of satisfying business needs. However, the Plaintiff failed to provide the relevant proof but merely questioned if the files at issue had been exploited by the Defendant/Appellee for purposes other than overtime work. Merely a subjective conclusion, the question presented by the Plaintiff seemed groundless.
(ii) Moreover, the lower court stated that there were many possibilities with respect to the access time of the files at issue and whether to send back, rename and encrypt the same, that these were all subject to the nature and content of overtime work, progress of their tasks at resignation and their own work habits, and that the ex-employees' defenses that they had emailed the files at issue to their external accounts for the purpose of overtime work were not unreasonable. Moreover, the same should apply to another defense that the files at issue had been deleted.
(iii) On the other hand, documents provided by Himax, including email information, cross-departmental investigation reports and response letters from a third-party server supplier concerning retrieving email messages, were unable to identify content of trade secrets, neither to mention whether they were of economic value and whether Himax has taken reasonable measures to maintain its secrecy. Although Himax filed a petition to subpoena a witness, the witness either was unable to show what the trade secrets at issue were if presenting before the court. Therefore, the lower court decided not to subpoena the witness and ruled the Plaintiff’s claims for damages and deleting trade secrets were groundless.
3. In this regard, the Supreme Court discarded the original judgment of the lower court and clarified legal standards for degree of proof in trade secret cases:
(i) Paragraphs 1 and 2 of Article 10-1 of Taiwan Intellectual Property Case Adjudication Act provide: “In trade secret infringement cases, if a party has made a preliminary showing that his/her trade secret has been or is likely to be infringed, and the other party denies such allegation, the court shall order the other party to raise a specific defense as to the reasons for the denial”; “The court may, subject to the circumstances, find the preliminary showing of the infringed party true if the other party mentioned in the preceding paragraph fails without good cause to raise a defense within the prescribed time limit or to raise a specific defense.” With regard to civil cases of trade secret infringement, one of the two parties involved often encounters difficulties in collecting the necessary proof to prove infringement facts and the scope of damages. Should the court fail to impel the other party to present relevant proof but have the party claiming his/her trade secret has been or is likely to be infringed shall bear all burdens of proof to infringement facts and the scope of damages, it would be difficult for the victims of infringement to get remedies they deserve. The law, therefore, lowers the degree of proof burden of the party claiming his/her trade secret has been or is likely to be infringed, on one hand, and on the other hand, has the other party bear the obligations to raise a specific defense against the preliminary proof made by the claimed party.
(ii) In this case, according to the aforementioned investigation report, the lower court found the following facts: six of the files at issue were successfully restored while the rest twelve files were unable to be restored. Why would the ex-employees who had applied for resignation send files owned by their company to their external accounts? If the files were emailed for the purpose of working overtime, it would go beyond common sense if their work results were not sent back to Himax. In addition, the said investigation reports suggested six of the files were successfully restored, and Himax claimed these six files were trade secrets and then filed a request to subpoena a deponent to testify the restoring process. Under such circumstance, it is not out of question to say Himax failed to fulfill its obligation to explain infringement on its trade secret by the Appellee. If Himax already made a preliminary showing the infringement facts but was denied by its ex-employees, the court shall ask the two ex-employees to decrypt the files at issue and specify their overtime works so as to fulfill their obligations of making a specific defense.
(iii) Moreover, it is a positive fact that if the ex-employees have deleted the files at issue after emailing out, and the Defendant/Appellee should be liable for the burden of proof. The lower court seemed to have made a quick conclusion by deciding it is reasonable to support the defense made by the ex-employees without any proof that files at issue had been deleted.
(iv) Last but not least, the court shall, as pursuant to Article 286 of Taiwan Code of Civil Procedure, investigate proofs introduced by the parties except for those considered unnecessary by the court. The term “unnecessary” refers to any proof presented by the parties that is unrelated to facts to be proved or might be true but insufficient to affect the basis of moral conviction. Should the parties claim certain proof method is associated with matters to be proved, the court should not avoid carrying out investigations by pre-judging it is hard to deliver results and thus considered it unnecessary. Therefore, the request of Himax to subpoena a witness to describe the content of the six restored email messages was associated with whether the Appellee had infringed on trade secrets. The lower court decided at its own discretion that the witness was unable to tell what the trade secret at issue was after appearing before the court, and thereby rejected to subpoena the witness. The decision ignored the obligations of the party accused of infringement to make a specific defense.
It can be concluded from the abovementioned case that in trade secret infringement cases, the owner of a trade secret often encounters difficulties in collecting supporting proof, and in order to fully implement the protection of trade secrets, Taiwan Intellectual Property Case Adjudication Act lowers the degree of proof burdened by the owner of trade secrets and has the other party bear obligations to make a specific defense in Paragraphs 1 and 2 of Article 10-1 thereof. This interpretation of the Supreme Court is of considerable value for owners of trade secrets while citing and referring to prior judgments to protect their own rights in the future.