IP Week @ SG 2017: Trade secrets at Taiwan Semiconductor

26-09-2017

IP Week @ SG 2017: Trade secrets at Taiwan Semiconductor

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Sylvia Fang, vice president and general counsel at Taiwan Semiconductor Manufacturing Company, outlines to WIPR the importance of trade secrets and how courts have dealt with them, following IP Week @ SG, hosted by the Intellectual Property Office of Singapore.

What roles do trade secrets play?

The vast majority of a company’s IP could consist of trade secrets because trade secrets do not expire (unlike patents for example) as long as certain continuing legal requirements are met. Therefore, trade secrets form an indispensable part of any company’s IP strategy.

For example, at Taiwan Semiconductor Manufacturing Company (TSMC) more than 90% of our IP is protected as trade secrets. Trade secrets play a critical role in helping drive a company’s bottom line and its shareholders’ value.

Can you outline some of the precedent-setting trade secrets litigation cases you’ve worked on? What have you learned from them?

My team and I established a Taiwan legal precedent in August 2015 when we won a lawsuit against a former TSMC executive who was accused of violating his “non-competition agreement”.

Our case against him rested on a legal doctrine derived from US case law called the “inevitable disclosure doctrine”.

The doctrine essentially says that if a former employee joins a competitor in a similar position and engages in dishonest behaviour, then the court may reasonably infer that the former employee will probably not honour his “non-disclosure agreement” which forbids him from disclosing any trade secrets or proprietary information to any outsiders.

The Taiwan Supreme Court ruled in our favour and prohibited the former TSMC executive from offering his services to Samsung before the end of 2015. He also must refrain from leaking any trade secrets related to TSMC’s chip technology.

Trade secrets are vulnerable to be leaked due to the mobility of employees.

Also, lawsuits are slow and suing a rogue person cannot begin to compensate for a firm’s ensuing financial loss.

From an evidentiary matter, proving that a former employee is in violation of his/her non-competition agreement is difficult in practice.

Are there differences in how trade secrets are used throughout the world?

Different parts of the world are at different stages of economic development, and as a country’s own companies begin developing their own trade secrets, the law begins to mature.

As a global company, we need to be more cautious with protection in countries with less experience in enforcing trade secrets.

When we do enforce our trade secret rights, we generally look first to more mature jurisdictions where the outcome is more certain.

Do you expect more companies to begin using trade secrets in the next few years?

Yes. Unlike a patent, no governmental authority needs to issue a formal legal document to create a trade secret right.

As long as certain legal requirements are met, a company’s IP may be protected as a trade secret which does not expire.

According to Baker McKenzie’s recent survey of over 400 senior executives across five industries, 48% of executives said that their trade secrets were more important than their patents and trademarks, and 60% say protecting trade secrets is a board-level issue.

I believe it’s becoming a trend for companies to spend more resources to protect and enforce their trade secrets. In Asia, certainly, there appears to be an increased focus on trade secret protection.

Do you have any advice for companies looking to take advantage of trade secrets?

In general, a company looking to use trade secrets to protect its IP needs to adopt best practices that help keep its trade secrets reasonably confidential.

Identify your critical trade secrets, put a clear and enforceable policy in place, develop a strong culture of trade secret protection with your employees, and don’t hesitate to take legal action if you believe your trade secrets have been misappropriated.

The protection of trade secrets is increasingly difficult to do in light of sophisticated techniques used in industrial espionage and cyber attacks.

Can you outline some big cases of IP theft?

Two recent trade secrets theft cases outline a common fact pattern: a key employee allegedly steals trade secret information and takes it to his/her new employer.

First, in February this year, Waymo, formerly Google’s self-driving car division, filed a lawsuit against self-driving truck startup Otto and its parent company Uber for patent infringement and stealing trade secrets that involved this fact pattern.

This case is still ongoing and highlights the importance of keeping a company’s trade secrets confidential and not giving physical pieces of it away in any way.

Second, video game maker ZeniMax Media sued Facebook’s subsidiary Oculus over a virtual reality headset for trade secret theft also involving this fact pattern.

ZeniMax alleged that Oculus’ chief technology officer had “secretly and illegally copied thousands of documents containing ZeniMax’s IP”, and took them when he left the company.

In February, the jury awarded ZeniMax $500 million, a judgment which Oculus is currently appealing.

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WIPR