Strategies for protecting Taiwanese businesses from cross-border risks: Using US trade secret litigation to protect your business innovations

by White & Case LLP
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Powerful US remedies can help protect valuable proprietary information, even if your business is headquartered in Taiwan

Trade secret theft is a critical challenge for technology companies today.

A departing employee might download proprietary company information without permission, taking it to a competitor. A failed joint venture partner might keep sensitive commercial data obtained under a contract. A former consultant might take on a new consulting arrangement with a competitor and share secret information. And outsiders are increasingly breaching companies' IT systems.

Taiwan-headquartered businesses have several methods to protect trade secrets beyond resorting to domestic legal options. If your company's innovations were stolen, you may be able to find powerful remedies under US law—even if your trade secrets were stolen and used outside the United States.

TRADE SECRETS: VITAL AND VULNERABLE

Under US law, trade secrets can generally include any information that is valuable to your business and would be valuable to your competitors. Any non-public information that gives your company a competitive advantage or economic benefit may be a trade secret.

A successful strategy to remedy trade secret misappropriation should consider all available remedies, including your cross-border legal options.

Trade secrets can be the most valuable assets of a technology company. These secrets may include chemical compositions, manufacturing processes and techniques, research methods, equipment designs, product formulas, vendor and supplier details, unique combinations of generally known compounds and customer lists. Protecting this valuable information is often vital to maintain a competitive advantage.

In many countries, including the US, patenting software innovations can be costly and uncertain, given recent court decisions on the standards for patent eligibility. By comparison, protecting your trade secrets requires only that you take reasonable security precautions—which many companies already take—to protect confidential information.

TRADE SECRETS WERE STOLEN: WHAT NOW?

Despite all the security measures your company may have in place, trade secrets often remain vulnerable. If your confidential information is stolen, you will need to move quickly. The first steps should include preserving all relevant information, enlisting assistance from law enforcement authorities, where applicable, and analyzing your options for preliminary legal relief while you work on a long-term solution.

Identifying and preserving relevant data sources are crucial. First, determine exactly what information may have been taken, and then identify and preserve relevant sources for future use, particularly if US litigation is a possibility. This may include copies of employee hard drives, emails, server locations and external storage devices, such as USB drives. Your company already may have HR policies regarding the computers or mobile devices of departing employees for a certain period after each employee's departure. If any issues are raised about the actions of a departing employee within that period, make sure to preserve relevant employee computers, phones and other electronic devices as well as any server locations where the employee may have stored documents.

Consider contacting national or local law enforcement authorities with the information you collect during an investigation, since trade secret misappropriation may constitute a crime. For example, the 2013 amendments to Taiwan's Trade Secrets Act strengthened enforceability and introduced criminal punishments and fines. In the US, trade secret theft may violate the Economic Espionage Act and the Computer Fraud and Abuse Act.

In addition, in certain circumstances, evidence collected by law enforcement—or even law enforcement's actual findings— may be admissible in civil trials and can further support a separate civil lawsuit.

Next, examine your legal options to quickly stop or prevent any additional harm to your company.

In US courts, at the start of a case, parties to a lawsuit can seek a preliminary injunction or temporary restraining order to prevent a range of conduct, as long as they can satisfy the court that they are likely to succeed on the merits of their case. Injunctions are key in trade secrets cases, since they may prevent a former employee from sharing confidential information with others, stop the destruction of computers or other sources, or even prevent the marketing of a competitive product.

THE US DTSA: A NEW LEGAL OPTION FOR TECHNOLOGY COMPANIES

Companies with business in the US are increasingly using a 2016 US law, the Defend Trade Secrets Act (DTSA), for relief from trade secret theft. For example, when a US-headquartered semiconductor company recently alleged that its former employees passed trade secrets to a Chinese company through a Taiwanese business partner, even though Taiwanese prosecutors criminally indicted the employees and civil cases were brought in Taiwan and China, the company also filed a complaint under the DTSA in California.

In 2017, companies filed more than 1,100 complaints in US federal courts under the DTSA. While the number of US patent infringement cases has declined over the last few years, the number of US court cases that include a DTSA claim have increased every quarter since the law was enacted. Statistics indicate a high initial success rate for DTSA claims.

In addition to preliminary injunctions or temporary restraining orders, the DTSA lets companies seek "ex parte" seizure orders—a one-sided (unopposed) court order that directs law enforcement officers to seize property, like computers and electronic data sources. This extraordinarily powerful legal remedy can quickly prevent the further dissemination of a trade secret in situations where a preliminary injunction would not suffice. For example, if your company's investigation reveals that a former employee unlawfully possesses trade secrets in the US and is preparing to leave the country with them, an ex parte order may allow you to seize the former employee's laptops or other electronic devices.

BLOCK INFRINGING PRODUCTS FROM ENTRY INTO US MARKETS

Your company can take advantage of another strong remedy for trade secret theft under US law.

Section 337 of the US Tariff Act of 1930, as enforced by the US International Trade Commission (ITC), allows companies with industries in the US to block imports from competitors who misappropriated trade secrets. The ITC has the authority to issue orders that completely exclude unfairly traded products from entering into or being sold within the US.

Companies with investments, expenditures or licensing programs in the US may be able to initiate investigations in the ITC to remedy misappropriation (among other unfair acts, including patent infringement)—no matter where the trade secrets were developed, misappropriated, or used—so long as there is an imported product providing the ITC with jurisdiction.

And a victory in the ITC can deliver a powerful blow to a competitor who stole your trade secrets: an exclusion order enforced by US Customs that bans the importation of your competitor's unfairly imported product into the US for a period equal to the time that your company spent developing your misappropriated trade secret. If your company spent ten years developing a manufacturing technique, and you can convince the ITC that a competitor misappropriated that technique, you could potentially block your competitor from importing its similar product into the US for the next ten years—even if your business is headquartered in Taiwan and your competitor is also based in Asia.

KNOW YOUR CROSS-BORDER OPTIONS

Trade secret misappropriation often crosses borders, inflicting damage that spans multiple countries.

A successful strategy to remedy misappropriation should consider all available remedies. These might include a combination of US trade actions, US federal or state court actions, and civil and criminal proceedings in your home country, EU member states or other jurisdictions, where appropriate. Knowing your cross-border legal options will be the best chance to protect your innovations.

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