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Is Secrecy Lost When Trade Secrets Are Disclosed to Specific Customers?
Article 2 of the Taiwan Trade Secrets Act indicates that "secrecy," "economic value" and "reasonable measures taken to maintain its secrecy" are identified as the three essential requirements of a trade secret. In litigation of trade secret infringement, it is common for a defendant to argue lack of secrecy based on grounds such as that the trade secret owner sold the machine containing the trade secret to its customer and had provided the customer with the machine's drawings and other information prior to the sale, and thus the customer could also learn the trade secret by disassembling the machine. It is unclear whether such defenses are necessarily sufficient to prove lack of "secrecy" in local practice. The 2019 Tai-Shang-Zi No. 2125 civil decision rendered by the Taiwan Supreme Court dated July 23, 2020 seems to take a more favorable position toward the trade secret owner.
The plaintiff in the case asserted that the defendant, once the general manager of the plaintiff's company, infringed the plaintiff's trade secrets by disclosing the plaintiff's design drawings of machinery equipment components, learned in the course of performing his duties, to a third party after resigning from the plaintiff's company. The defendant argued that the plaintiff's machinery equipment occupies a market share of 80% in Taiwan and its structure had been known to the relevant industry for a long time. The plaintiff also admitted that it provided the PDF files of the design drawings at dispute to customers, so the design drawings of the machinery equipment components at dispute lacked secrecy.
Rejecting the defendant's argument, the Taiwan Supreme Court clarified its opinion that "the secrecy of a trade secret is a relative concept, not absolute. When reasonably disclosing the trade secret to a specific customer based on sales contracts of business activities, the secret owner still has the intent to maintain its secrecy; thus, the secrecy of the trade secret is still maintained." The Taiwan Supreme Court held that, as the plaintiff's client purchased the machinery equipment at dispute for manufacturing and production, not for disassembly, and the equipment's outline drawings provided by the plaintiff were simply a preliminary layout for the customer to build a clean room, all that the client needed to know were the dimensions of the equipment outlines, not the specific graphic files for measuring the dimensions of each component. Therefore, the Court did not accept the defendant's argument that the design drawings at dispute were not a secret due to being potentially accessible through the machine entity.
In addition, in terms of the requirement of "economic value" and "reasonable measures taken to maintain its secrecy," the Taiwan Supreme Court also held that the economic value of the design drawings of the machinery equipment components at dispute is justified given the fact that they are applicable in the production of machines. Also, the said secret information has been categorized and classified according to business needs, and controlled with authorized accounts and passwords, to the extent that no one can easily know it by regular and proper methods. The Court thereby determined that the plaintiff had taken reasonable measures to maintain the secrecy of the design drawings of the machinery equipment components at dispute, and that the three requirements of trade secrets had been satisfied.