Liang Mong-song (梁孟松), a former senior research and development director at Taiwan Semiconductor Manufacturing Co’s (TSMC) advanced module technology development division, has to leave his job at Samsung Electronics Co immediately, according to a Supreme Court ruling handed down on Monday last week.
The court’s ruling is crucial and unprecedented, in that Liang — who in 2009 resigned from TSMC, where he had worked for 17 years — is not allowed to work for the company’s rival even after the expiration of a non-compete agreement with his former employer. In other words, the Supreme Court has made a ruling that seems to try to draw a line between the nation’s industrial competitiveness and people’s right to work.
The Supreme Court’s ruling was the final verdict in the trade-secret lawsuit, which TSMC filed against Liang in late 2011 after the former executive became Samsung’s System LSI division chief technology officer at its R&D headquarters in Seoul.
Last week’s decision upheld a ruling by the Intellectual Property Court last year that Liang would have to resign from Samsung and could not share trade secrets relating to TSMC’s chip technology or any other information regarding TSMC personnel to the South Korean company in order to protect the Taiwanese firm’s competitiveness.
In recent years, several Taiwanese high-tech companies encountered cases of corporate espionage involving their former executives joining competitors’ firms and sharing important trade secrets. An amendment to the Trade Secrets Act (營業秘密法) in 2013 included criminal liability and increased penalties when applied overseas, as more local companies called for stricter regulations on industrial espionage for fear of negative impacts on national security and technological competitiveness. Since then, the relationship between trade secret protection and job mobility has drawn growing attention from business leaders, trade professionals and intellectual property practitioners.
More importantly, in the case of TSMC versus Liang, the Intellectual Property Court was the first in Taiwan to apply the “inevitable disclosure doctrine” in favor of an employer to take an injunctive relief against its former employee to stop future violations. The Supreme Court’s decision last week firmly supports the Intellectual Property Court’s decision to adopt the legal doctrine.
The underlying rationale of both courts is that they believe Liang’s employment at Samsung would inevitably lead to the disclosure of TSMC trade secrets, be it with good or bad intentions, because he might unavoidably use knowledge or experience he had gained from TSMC at Samsung, despite his non-compete contract that expired in 2011.
At a time when Taiwanese firms, ranging from the flat-panel industry to IC design businesses, face the growing threat of trade secret theft by former executives, some of whom have tried to procure those secrets for competitors, legal claims relating to the inevitable disclosure doctrine are likely to increase in the wake of the favorable court rulings for TSMC, which serves as an alternative to proving actual or threatened trade secret misappropriation while frightening other employees into not defecting.
This issue is certain to raise concerns about the potential implications for the mobility and earnings of trade professionals in the high-tech sector. It is even possible that the doctrine of inevitable disclosure might be rejected in a future court ruling.
Nonetheless, the key point is whether Taiwan’s courts can use whatever means possible to effectively protect important trade secrets of local companies and if businesses can create an environment that prevents valuable employees from leaving. Otherwise, the loss of intellectual property and industrial competitiveness could eventually become a national security crisis.
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