Local smartphone maker HTC Corp has entered the media’s spotlight again. What concerns investors this time is not its lackluster financial performance or high staff turnover rate, but an even bigger headache for the firm: corporate espionage.
Investigators last week alleged that HTC’s chief product designer Chien Chih-lin (簡志霖) stole trade secrets, primarily the company’s latest version of interface software dubbed Sense, and planned to use the technologies to develop products for his new companies — one in Taiwan and another in China.
If successful, the scheme will greatly sabotage HTC’s industrial competitiveness, an investigator told reporters. Chien and his alleged accomplice Wu Chien-hung (吳建弘) will face the maximum sentence of 10 years in prison and a maximum fine of NT$50 million (US$1.68 million) if found guilty.
To help local companies stave off the growing number of corporate espionage cases, lawmakers have passed an amendment to the Trade Secrets Act in January, greatly stiffening penalties.
The trade secrets case may also delay the new product cycle, UBS analyst Arthur Hsieh (謝宗文) said in a report.
“We believe HTC may have to modify or redesign its user interface, or change the identification of the flagship model next year,” Hsieh said.
This is the latest case in a slew of Taiwanese firms alleging that former employees had leaked important trade secrets to their Chinese rivals after jumping ship during a period of growing trade ties between Taiwan and China. Taiwan’s major LCD panel makers, AU Optronics Corp and Innolux Corp, and top chipmaker Taiwan Semiconductor Manufacturing Co (TSMC) rely on their technological superiority to survive and are among the employers that have accused former workers of corporate espionage.
However, that is not enough to prevent the theft of trade secrets. Taiwanese companies have to step up efforts to ward off corporate espionage as competition intensifies, and any misstep in developing new technologies or new products will have serious consequences.
To prevent company information being leaked to competitors, TSMC bars employees from bringing cellphones, or mobile devices with a camera and data storage features, to work. The chipmaker gives higher-level employees a tailor-made TSMC phone. Internet access is limited to certain areas on certain networks.
There are some other precautions that can be taken, among which strengthening internal audits and providing better training are some of the easiest. Increasing the frequencies of financial audits could prevent potential embezzlement and fraud.
To reduce or avert corporate shrinkage and losses, business owners should remind their employees about the consequences of trade theft. They should remind employees that reporting suspicious behavior is important to protect the company’s intellectual property and competitiveness, as well as protecting the employee’s best interests and even their jobs.
To solve this fundamental problem, company executives should create a working environment that provides meaning for employees. They should try to create a workplace where employees feel they will achieve a purpose or create something of value for their customers and themselves. Thus, they will not think of leaving or harming the company.
To safeguard competitiveness, local firms not only have to focus on technology and product development, but also protect their corporate intellectual properties and prevent valuable employees from leaving.