International report - TIPC awards enhanced damages in trade secret misappropriation case 20 Dec 17
Formosa Transnational - Taiwan
On December 6 2017 the Taiwan Intellectual Property Court (TIPC) delivered its verdict in a trade secret misappropriation case and awarded enhanced damages of NT$1.5 billion (approximately $51 million) to Largan Precision Co Ltd. The TIPC held that know-how relating to lens manufacturing process technologies had been unlawfully shared by former Largan employees with Ability Opto-Eletronics Technology Co Ltd (AOET) and declared Largan the rightful owner of two AOET patents.
Largan had never intended to sell or licence its know-how. In 2011 four employees left Largan to work for AOET and allegedly disclosed know-how relating to lens manufacturing process technologies. AOET subsequently filed two patents using this knowledge.
After discovering that AOET may have acquired its know-how, Largan commenced criminal proceedings. An indictment was issued on the four employees and other defendants, including AOET – the case remains pending at the Taichung District Court.
In addition to criminal proceedings, Largan pursued civil action against AOET at the TIPC, which took four years to render its first-instance judgment.
According to a TIPC press release, the court held that AOET and the former Largan employees had willfully misappropriated Largan's know-how, and declared Largan to be the legal owner of the two patents because it had developed the patented technologies.
Further, the TIPC awarded Largan enhanced damages of $50 million – triple the established damages amount – because the company had invested at least NT$600 million in R&D relating to the lens manufacturing process technologies. The court deemed this investment to have been in vain following AOET’s unlawful and wilful acquisition of Largan's know-how.
This verdict and enhanced damages award mark a new chapter in Taiwanese trade secret litigation. Taiwanese companies have been reluctant to protect know-how using trade secrets due to the difficulty in enforcing trade secret rights. Further, many trade secret holders are concerned that any unnecessary disclosure of secret technologies during legal proceedings could result in additional harm. The TIPC's recent ruling demonstrates that trade secret holders should pursue legal action without these concerns and obtain court-issued protective orders to prevent secret technologies from being used for any illegitimate purposes by opposing parties.
Further, the ruling suggests a new approach to calculating damages which:
- does not rely on a defendant's profits from infringing activity;
- incentivises innovators to protect their know-how using trade secrets; and
- ensures that innovators are entitled to proper remedies following substantial R&D investment.
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