Amended National Security Act imposes stricter punishments on trade secret misappropriation following new list of crucial tech

In a December 2023 press release, Taiwan’s National Science and Technology Council (NSTC) announced its first list of technologies that fall within the scope of crucial tech, with a special focus on semiconductors. This comes after the 2022 amendments to the National Security Act, which affords the NSTC power to define the technologies that warrant enhanced trade secret protection.

The National Security Act

The 2022 amendments to the National Security Act impose criminal penalties on economic espionage and prohibits anyone from leaking any technologies that are critical to Taiwan’s national security, industrial competitiveness or economic developments to foreign countries or hostile forces. Violations of this law will result in criminal sanctions, including jail time of up to 12 years and a fine of up to NT$100 million (approximately US$3.19 million).

Further, the new law authorises the NSTC to determine which specific technologies warrant special enhanced protections.

First list of crucial technologies released

In a December 2023 press release, the NSTC announced its first list of such technologies. The list covers 22 specific technologies spanning five industries:

• national defence;
• aerospace;
• agriculture;
• semiconductors; and
• information security.

The NSTC will reexamine the list every three months and make necessary adjustments. It will also take public comments into consideration when reevaluating.

Taiwan has long been known for its advanced developments in the semiconductor industry and future developments of the field will undoubtedly have a profound influence on Taiwan’s domestic economy. So, as expected, the NSTC’s list covers technologies within the 14-nanometre semiconductor process, as well as heterogeneous integration through system-in-package.

The NSTC explained that while the list aims to offer strengthened trade secret protections on semiconductor technologies, the new law will not prohibit industry members’ regular and usual business activities – including collaboration with foreign business partners. Taiwan’s minister of economic affairs, Mei-Hua Wang, also stressed that the National Security Act merely targets unlawful misappropriation of trade secrets that involve the listed crucial technologies; regular business activities will not be affected.

The NSTC’s list includes three specific technologies related to information security:

• secure crypto processors;
• post-quantum cryptography; and
• cyber defence.

Audrey Tang, the minister of digital affairs, said that the Taiwanese government will put more effort and resources into developing listed technologies in relation to cyber and communication security.

Enhanced trade secret protection

Protection of technologies usually involves IP portfolio and business concerns. Now, more factors must be taken into consideration. The amended National Security Act only offers enhanced protection on the listed technologies if they satisfy the three requirements for trade secret protection: secrecy, commercial value and reasonable measures taken to protect the secrecy. More stringent criminal punishments will be imposed upon those who misappropriate any trade secrets that fall within the 22 listed crucial technologies for the benefit of foreign governments or hostile forces/affiliates.

At the same time, under other legislation, individuals or members of any entity must obtain advanced approval from the regulators before entering China if those parties receive government sponsorship to develop any of the listed crucial technologies. This requirement acts as another line of defence against national security threats and trade secret misappropriation.