Taiwan reinforces protections of core technologies and trade secrets

Taiwan’s Legislative Yuan passed an amendment to the National Security Act on 20 May 2022. The Executive Yuan will prescribe the effective date of this amendment.

This amendment aims to protect trade secrets that are involved in “core technologies” from being misappropriated by, or leaked to, industries or governmental agencies in China, Hong Kong, Macau or other foreign countries. The amendment establishes economic espionage as a criminal felony.

The focus of the amendment to the National Security Act reads as follows:

• Activities will be considered “economic espionage” when they include leaking or transmitting confidential government information, or collecting such information for foreign countries, China, Hong Kong, Macau, other hostile foreign forces or for any organisations, institutions or groups established or substantially controlled by them. A person who commits economic espionage involving China will face no less than seven years in prison and a fine of NT$50 to 100 million. A person who commits economic espionage that involves other foreign countries will face three to 10 years in prison and a fine of no more than NT$30 million.
• Any person committing an act falling under any of the following circumstances for foreign countries, China, Hong Kong, Macau or foreign hostile forces, or for organisations, institutions or groups established or substantially controlled by them shall be sentenced to five to 12 years imprisonment, in addition a fine of between NT$5 and 100 million may be imposed:
  • Acquiring a trade secret of “national core technologies” by an act of theft, embezzlement, fraud, threat, unauthorised reproduction or other wrongful means, or using or disclosing a trade secret so acquired;
  • Committing an unauthorised reproduction, usage or disclosure of a trade secret of “national core technologies” known or possessed;
  • Failing to delete or destroy a possessed trade secret of “national core technologies” as the trade secret holder orders, or disguising it.
  • Any person who knowingly acquires, uses or discloses a trade secret of “national core technologies” known or possessed by others under the circumstances prescribed in the preceding three circumstances.

• The term “national core technologies” refers to technologies that may significantly enhance the competitiveness of important industries in Taiwan or shall be protected due to national security concerns, and shall be recognised by the relevant administrative agency.
• The Intellectual Property and Commercial Court will have jurisdiction over the first instance of cases involving a crime of extraterritorial use of national core technology trade secrets. 

Before this amendment to the National Security Act, Article 13(2) of the Trade Secrets Act already provided enhanced penalties for the infringement of trade secrets for extraterritorial use, including for the purpose of using the trade secrets in foreign jurisdictions, China, Hong Kong or Macau.

In addition to the similar structure of the current Trade Secrets Act, this amendment further aims to protect “national core technologies”, which reflects the Taiwanese government’s determination to attach great importance to the protection of IP rights of high-tech industries.

Nevertheless, questions have been raised as to whether the elevation of particular trade secrets to the level of “national security” and the imposition of enhanced penalties will, on the contrary, have negative effects on the development of domestic industries. Some believe that said questions may cause worries in the near future, including for the relevant authorities who will recognise such core technologies.

On the other hand, advocates for this amendment believe that Taiwan's future prosperity will be determined by whether the government can successfully prevent core technologies from being leaked to foreign competitors.