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The Problems with Trade Secret Protection/Overprotection in Asia

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Abstract

Trade secret protection law has been an important complement to patent law and has gained increasing importance over the last three decades, not least in Asia. Major Asian countries are now at a crossroads, as some (Japan, Korea, Thailand, Taiwan, and China) are following the US approach to criminalizing trade secret infringement and imposing harsher penalties on economic espionage (Japan, Korea, Taiwan, and China). This paper identifies many of the problems associated with trade secret protection, provides indicators of the overprotection of trade secrets, and warns against its many side effects. It then points out the crossroads that Asian economies are now at and provides some suggestions for Asian jurisdictions to consider: basing trade secret protection on commercial realities, working trade secret protection in tandem with the patent regime, and learning from the German model of moderate criminal punishment for trade secret infringement and protecting employee mobility by limiting non-competition clauses.

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Notes

  1. Anselm Kamperman Sanders, p. 3.

  2. One could argue, as one reviewer did, that trademark protection can be indefinite and is hardly about the “sharing of new innovations and creations”. However, the term of trademark protection is indefinitely renewable only in theory. In practice, trademarks perish with the businesses of their owners, which have a short lifespan – about 18 years for big companies. See Stéphane Garelli, Why you will probably live longer than most big companies – Big companies used to have a lifespan of 61 years, it’s now down to 18, available at https://www.imd.org/research-knowledge/articles/why-you-will-probably-live-longer-than-most-big-companies. In addition, the creation and maintenance of especially well-known trademarks is of no lesser innovation and creativity.

  3. Mark Lemley (2012); US Supreme Court in Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) states that “trade secret law promotes the sharing of knowledge, and the efficient operation of industry.”

  4. Once, in Taiwan, the author keyed in the Chinese characters of the CHT, 中華電信, and more than 1068 search results were provided by Google Maps. By deducting those items that had 0800 service numbers, the remaining ones could be presumed to be where exchange facilities were located, as no customer service was provided there.

  5. Kai-Fu Lee (2018), pp. 231–232, 239, 243, 249–250, 269 and 276.

  6. SMIC agreed to pay TSMC USD 175 million in installments over six years. SMIC and TSMC agreed to cross-license each other’s patent portfolio through December 2010. While TSMC did not license its trade secrets, it agreed not to sue SMIC again for the acts of trade secret misappropriation that it had alleged in its suits. See Jason Dean, TSMC Reaches a Settlement In Patent Case Against SMIC, The Wall Street Journal, available at https://www.wsj.com/articles/SB110711614931040418.

  7. 1,789,493,218 shares of SMIC (8% of SMIC's issued share capital) were given to TSMC for free and TSMC was granted a warrant (exercisable within three years of issuance) to subscribe for 695,914,030 SMIC shares, subject to adjustment, at a purchase price of HKD 1.30 per share. See SMIC Press release on November 10, 2009, SMIC Settles All Pending Lawsuits with TSMC: Anticipates No Disruption to Customers, available at https://www.smics.com/en/site/news_read/4334. The same thing happened when Largan Precision (“Largan”) sued Ability Opto-Electronics Technology Co. Ltd. (AOET) in Taiwan in in 2011. Largan managed to become the highest-priced stock on the Taipei Stock Exchange since 2014. After winning a sweeping victory over AOET in 2017, which awarded the highest-ever damages of TWD 1,522,470,639 (about USD 50 million) plus interest (Taiwan IP and Commercial Court 102 (2013) Min-Yin-Su-Zi No. 6 concluding civil decision (decided on December 6, 2017)), and securing a full rejection of the appeal filed by AOET in 2021, Largan settled with AOET and bought a 15.2% share of AOET at much reduced prices. For more details and analysis, see Kung-Chung Liu (2021a, b), pp. 209–216.

  8. With effect from November 21, 2019, the Intellectual Property (Dispute Resolution) Act amended Sec. 52A of the Singapore Arbitration Act 2001 and introduced Part IIA in the International Arbitration Act to clarify the eligibility for arbitration of IP disputes in Singapore. This move follows in the footsteps of Hong Kong, which implemented similar measures, effective from January 1, 2018, by amending its Arbitration Ordinance.

  9. Art. 30 of The London Court of International Arbitration’s Arbitration Rules explicitly sets out that documents and awards produced in arbitration are to be kept confidential (https://www.lcia.org/dispute_resolution_services/lcia-arbitration-rules-2014.aspx#Article%2030). The 2021 Rules of Arbitration of the International Chamber of Commerce imposes a duty of confidentiality on the arbitrators and staff of the International Court of Arbitration (Art. 6 of Appendix I, Art. 1 of Appendix II and Art. 22(3), available at https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/#article_b1). Article 75 of WIPO’s Arbitration Rules expressly states that “no information concerning the existence of an arbitration may be unilaterally disclosed by a party to any third party”, although there are limited exceptions such that “a party may disclose to a third party the names of the parties to the arbitration and the relief requested for the purpose of satisfying any obligation of good faith or candor owed to that third party”. For a comprehensive analysis, see Ignacio De Castro and Andrzej Gadkowski (2020), pp. 79–90, available at https://www.wipo.int/export/sites/www/amc/en/docs/confidentialitytradesecrets.pdf.

  10. According to Karen Lorang (2011), p. 220, four negative externalities arise from arbitration. First, legally inaccurate arbitration awards, if left uncorrected, may allow ongoing legal violations that harm third parties. Second, inaccurate awards undermine enforcement and may thereby reduce the law’s deterrent effect. Third, unreasoned or inaccurate awards create uncertainty about the legal rights and obligations of third parties. Lastly, arbitration can elicit public controversy if outside observers believe victims are being denied their day in court.

  11. See https://ec.europa.eu/commission/presscorner/detail/en/IP_18_421 and https://ec.europa.eu/competition/antitrust/cases/dec_docs/40220/40220_2702_4.pdf.

  12. Jyh-An Lee (2019), pp. 154–161.

  13. The decision was never fully published given that the case was closed on the grounds of business secrets, see https://www.mlex.com/China/Attachments/2014-04-7_BT5BM49Q967HTZ82/GD%20verdict.pdf.

  14. AstraZeneca AB (SE) v. Sanofi-Aventis Singapore Pte Ltd [2012] SGHC 16 and AstraZeneca AB (SE) v. Sanofi-Aventis Singapore Pte Ltd [2013] SGHCR 7.

  15. A reverse payment by the patentee of a drug to the generic drug manufacturer to settle a patent infringement suit brought by the former brought against the latter, is understandable only as a tactic to delay the market entry of generics; therefore, both the existence and terms of the deed and any oral or written communication passing between the parties are often shielded from the public. See Steven Adamson (2018), available at https://lawecommons.luc.edu/cgi/viewcontent.cgi?article=2008&context=lclr.

  16. Taiwan enacted The Freedom of Government Information Law in 2005. China’s State Council issued Regulations on Open Government Information in 2008. In Korea, the Constitutional Court held in 1989 that there was a constitutional right to information as part of the right of freedom of expression, and the Act on Promotion of the Provision and Use of Public Data was adopted in 2013. See https://www.article19.org/resources/country-report-the-right-to-information-in-south-korea. In Japan, Art. 21 of the Constitution has been interpreted as including the right of information. See https://www.article19.org/resources/country-report-the-right-to-information-in-japan/. In India, the Right to Information Act 2005 secures the citizen’s right to information under the control of public authorities. In Malaysia, while no federal Freedom of Information Act (“FIA”) exists, the states of Selangor and Penang have state-level FIAs that apply to state-level authorities. In Singapore, no FIA exists, but public data is accessible at data.gov.sg and singstat.gov.sg.

  17. Taipei Administrative High Court, 2012 Su-Zi No. 303 (decided on October 24, 2012).

  18. WT/DS362/R (January 26, 2009)673 Panel Report, China – Intellectual Property Rights, paras. 7.514 and 7.528. WT/DS567/R (June 16, 2020) Saudi Arabia – Measures Concerning the Protection of Intellectual Property Rights discussed Art. 61 even though the decision focused on Art. 73 of the TRIPS Agreement.

  19. Daniel Gervais (2012), at 2.680.

  20. For example Carlos Correa and Abdulqawi Yusuf (2016).

  21. One could argue that, if trade secret infringement is extended to economic espionage, the goal of which seems to be to protect national interests as much as trade secret holders, it is debatable whether cases of economic espionage can be compared, as one reviewer did, to wilful trademark counterfeiting or copyright piracy. However, although economic espionage in itself seems different from wilful trademark counterfeiting or copyright piracy, only the latter two are penalised under the TRIPS Agreement, and it is therefore only against them that the former can be benchmarked as an international IP issue.

  22. Art. 7 of EU Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure reminds us of the importance of proportionality and abuse of process: “The measures, procedures and remedies provided for in this Directive shall be applied in a manner that: (a) is proportionate; (b) avoids the creation of barriers to legitimate trade in the internal market; and (c) provides for safeguards against their abuse.”

  23. Art. 93 of Korea’s Trademark Act. The most severe criminal punishment for copyright infringement is imprisonment with labor up to 5 years, a fine up to KRW 50 million, or both (Art. 136(1), Korea’s Copyright Act).

  24. Arts. 213–215, 217, 219 and 219-1 of China’s Criminal Law.

  25. In Taiwan, the harshest criminal punishment for trademark infringement is imprisonment of 3 years and/or a fine not exceeding TWD 200,000 (Art. 95 of Taiwan’s Trademark Act). The harshest criminal punishment for copyright infringement is imprisonment of 5 years and TWD 5 million (Art. 91(2) and (3) of Taiwan’s Copyright Act).

  26. In Japan, the harshest criminal punishment for trademark infringement is imprisonment of 10 years or a fine not exceeding JPY 10 million or both (Art. 78, Japan’s Trademark Act). The same criminal punishment applies according to Japanese Copyright Act (Art. 119(1)).

  27. See Stefania Negri (2005); Jay Silver (1990); Gakharman Sadiev (2016), p. 920.

  28. Arts. 14-1, 14-2(1) and 14-3(1) of Taiwan’s Trade Secrets Act.

  29. According to the 2008 Berkeley Patent Survey, which targeted small high-tech startups in the US, the cost of applying and enforcing patents was the most common reason cited by all survey respondents for not patenting major technologies. Other reasons included the belief that particular innovations were not patentable or that trade secret protection was adequate, and a reluctance to disclose commercially valuable information. See Stuart Graham, Robert Merges, Pamela Samuelson, and Ted Sichelman (2009), pp. 1255–1328, 1310–1314, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1429049.

  30. The observation that “… the courts (in the UK – added by this author) have checked the ability of breach of confidence protection to make real inroads into the territory of the patent system” (David Llewelyn and Tania Aplin (2019)) shares a similar view.

  31. According to Transparency International, Corruption Perceptions Index 2020, while Singapore, Hong Kong, Japan, Taiwan, and Korea enjoy a high global ranking (3rd, 11th, 19th, 28th, and 33rd), Malaysia, China, India, Indonesia, and Thailand (57th, 78th, 86th, 102nd and 104th) do not; available at: https://www.transparency.org/en/cpi/2020/table/sgp.

  32. According to World Justice Project, Rule of Law Index 2020, while Singapore, Japan, Hong Kong, and Korea enjoy a high global ranking (12th, 15th, 16th and 17th), Indonesia, India, Thailand, and China (59th, 69th, 71st, and 88th) do not; available at: https://worldjusticeproject.org/sites/default/files/documents/WJP-ROLI-2020-Online_0.pdf.

  33. For example, Taichung District Court in Taiwan conducted all 13 court sessions in camera in the 2017 Zhi-Su-Zi 11 criminal case, which involved US company Micron suing Taiwanese company United Microelectronics Corporation for infringing Micron’s trade secrets to help Chinese company Fujian Jinhua develop DRAM. For more details and analysis, see Kung-Chung Liu (2021a, b), pp. 217–224.

  34. See Joseph Jaconelli (2002) (the core of the idea of open justice is “the provision of adequate facilities for members of the public at the trial”); Jason Bosland and Johnathon Gill (2014), pp. 482–524. The open justice rule is enshrined in the US Constitution (Sixth Amendment, guaranteeing public trial in all criminal prosecutions) and the European Convention on Human Rights (Art. 6, guaranteeing a fair and public hearing and public pronouncement of the judgment in principle).

  35. Three editorials of the Commercial Times (published in Taiwan in Chinese): “Control Yuan Should Investigate Taichung District Court and the Judicial Yuan for not Publishing Decisions” (October 8, 2020); “Taichung District Court, IP Court and the Judicial Yuan and Their Joint Karma on Trade Secrets” (August 23, 2020); and “Taichung District Court Should Publish Its 2017 Zhi-Su-Zi 11 Criminal Decision with no Delay” (July 17, 2020).

  36. Pat Garofalo (2021) reports wide use of economic development NDAs by Amazon, Google, etc.

  37. See https://en.wikipedia.org/wiki/WikiLeaks and https://wikileaks.org/.

  38. The US, Australia, Canada, Korea, Japan, New Zealand, Morocco, and Singapore signed the ACTA on October 1, 2011 in Tokyo. See https://ustr.gov/acta. The ACTA caused a worldwide outcry that led Google to shut down for one day in protest, and eventually led to the demise of the ACTA itself, see https://en.wikipedia.org/wiki/Anti-Counterfeiting_Trade_Agreement.

  39. Generally see Kung-Chung Liu (2019), pp. 1–7. For literature criticizing ACTA, TPP/CPTPP and RCEP respectively for being too secretive, see Peter Yu (2011); Michelle Limenta.

  40. A case illustrating this point would be Mars v. Teknowledge [1999] EWHC 226, where the Court held that even an express contractual provision could not override the buyer’s entitlement to find out how the product worked.

  41. See https://www.cccs.gov.sg/media-and-consultation/newsroom/media-releases/supply-of-lift-spare-parts-public-consultation-on-proposed-voluntary-commitments-by-supplier.

  42. Sec. 16600 of the Business and Professions Code provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

  43. Sec. 16601 of the Business and Professions Code. Similar provisions can be found in other common law jurisdictions, e.g. Sec. 28 Contracts Act 1950 of Malaysia and Sec. 27 of the Indian Contract Act-1872.

  44. Taiwan IPCC, 2013 Min-Ying-Shang-Zi 3 civil decision (decided on May 2, 2013).

  45. Taiwan’s Supreme Court 2015 Tai-Shang-Zi No. 1589 (decided on August 21, 2015).

  46. Art. 1(3) of Directive (EU) 2016/943 provides: “Nothing in this Directive shall be understood to offer any ground for restricting the mobility of employees.” Similarly, the Chinese Supreme People’s Court (SPC), in its Opinions on Comprehensively Enhancing Judicial Protection of Intellectual Property Rights, also tries to strike a proper balance while enhancing protection for trade secrets: “To enhance trade secret protection, to protect fair competition between businesses and reasonable movement of talents, and to further technological innovation.” SPC’s Opinions on Comprehensively Enhancing Judicial Protection of Intellectual Property Rights, FaFa[2020] No. 11 (issued on April 15, 2020) (最高人民法院关于全面加强知识产权司法保护的意见).

  47. Recital 16 of EU Trade Secrets Directive articulates that “in the interest of innovation and to foster competition, the provisions of this Directive should not create any exclusive right to know-how or information protected as trade secrets.”

  48. Art. 7(1) of Taiwan’s Trade Secrets Act provides that “An owner of a trade secret may grant a license to another for the use of the trade secret. The territory, term, contents, methods of use or other matters in connection with the license shall be determined by the contract between the parties.”

  49. David Llewelyn and Tania Aplin (2019).

  50. 18 U.S.C. § 1832.

  51. In Japan in 2003, Art. 21(1) of the Unfair Competition Prevention Act introduced criminal punishment of up to 10 years’ imprisonment with forced labor, a fine of not more than JPY 20 million, or both.

  52. In China, the eleventh Criminal Law Amendment (effective March 1, 2021) raises the maximum sentence for trade secret crime from 7 to 10 years.

  53. Art. 18(2) of the Korean Unfair Competition Prevention and Trade Secret Protection Act of 1961 (last amended in 2019) stipulates “Any person who acquires or uses useful trade secrets of any company or discloses trade secrets to a third party for the purpose of making illegal profit or causing damage to the company is liable to imprisonment with labor not exceeding 10 years or to a fine exceeding KRW 500 million.” In 2019, there was a total of 484 cases of trade secret leakage, 28 of which involved the leakage of trade secrets from abroad; 7 were prosecuted. See Byungil Kim (2021), p. 80.

  54. Art. 13-1 of Taiwan’s Trade Secrets Act laid down a maximum prison term of 5 years and a fine (not alternatively) for trade secret theft in 2013.

  55. Thailand enacted the Trade Secrets Act (effective since July 22, 2002) to promote free trade and prevent unfair trade practices. See Secs. 33–35 of the Act. To date, there have been only 17 criminal cases in the IPIT Court, 1 case in the Appeal Court for Specialized Cases and 19 cases in the Supreme Court. Few trade secret cases have considered Secs. 33–35 of the Act. Yet many of those cases have failed to secure criminal punishment, mainly on technicalities involving incomplete indictments and insufficient evidence. See Sutatip Yuthayotin and Tosaporn Leepuengtham (2021), p. 229.

  56. For example, in Japan, the extent of judicial involvement determines the extent of the discovery, and, in most cases, there are not enough resources to litigate discovery. The judiciary remains overworked and unreceptive to contested discovery unless it is “indispensable.” The result is the continuing lack of meaningful discovery in Japan, see Andrew Pardieck.

  57. See Takakuni Yamane (2021), pp. 62–70.

  58. Asians tend to dearly value “face” and loss thereof. Involvement in criminal cases is widely considered a disgrace, especially in Japan where the indictment rate and conviction rate is extremely high. See Joo Yup Kim and Sang Hoon Nam (1998), pp. 522–534; J Mark Ramseyer and Eric Rasmusen (2001), pp. 53–88. To deflect these concerns, we refer to the English Law Commission’s Discussion Paper in 1992 on the desirability of making misuse of trade secrets a discrete criminal offence, which suggested that prosecutions could be brought only by the Director of Public Prosecutions. Cited from David Llewelyn and Tania Aplin (2019).

  59. 18 U.S.C. § 1831.

  60. Art. 21(3) of Japan’s Unfair Competition Prevention Act provides that: “A person who falls under any of the following items shall be punished by imprisonment with work for not more than ten years, a fine of not more than JPY 30 million, or both: (i) a person who commits offences prescribed in paragraph (1), item (i) or (iii) for the purpose of use outside Japan; (ii) a person who makes a disclosure that constitutes offences prescribed in paragraph (1), item (ii) or items (iv) through (viii) knowing that the receiving party has the purpose of use outside Japan that constitutes said offences; (iii) a person who uses trade secrets of an owner conducting business within Japan in a way that constitutes offences prescribed in paragraph (1), item (ii), or items (iv) through (viii).”

  61. Art. 18(1) Korean Unfair Competition Prevention and Trade Secret Protection Act of 1961 (last amended in 2019) stipulates “Any person who has [...] used useful trade secrets of any company abroad […] or leaked such trade secrets to any third party knowing that they […] will be used in the foreign country for the purpose of making illegal profit or causing damage to the company is liable to imprisonment with labor not exceeding 15 years or to a fine exceeding1.5 billion won.”

  62. Art. 13-2(1) and (2) of Taiwan’s Trade Secrets Act.

  63. Art. 219-1 of China’s Criminal Law provides that “Whoever steals, pries into, buys, or illegally provides any trade secret for any overseas institution, organization, or individual shall be sentenced to imprisonment of not more than five years and a fine or shall be sentenced to a fine only; or, if the circumstances are serious, shall be sentenced to imprisonment of not less than 5 years and a fine.” According to Art. 45 of the Criminal Law, the maximum term of any fixed-term imprisonment is 15 years. Therefore, the sentence for serious economic espionage can be from 5 to 15 years.

  64. According to US Department of Justice (USDOJ), in 2019, there were only 2 indictment cases against economic espionage and 14 indictment cases against trade secret theft (the indictment ratio is less than 25%), while US courts found 1 economic espionage case for which the sentence was 27 months. See USDOJ, Pro IP Act Annual Report FY 2019 (2020 not yet published), 43 and 17, available at https://www.justice.gov/doj/page/file/1392186/download.

  65. Kung-Chung Liu and Reto M. Hilty (2021), p. 2.

  66. Byungil Kim (2021), p. 80.

  67. As of March 2021, there were over 340,000 SMEs in Hong Kong. They accounted for more than 98% of the total number of enterprises and provided job opportunities for more than 1.2 million persons, or about 45% of total employment (excluding the civil service), see Support and Consultation Centre for SMEs, Trade and Industry Department of the Government of the Hong Kong Special Administrative Region, available at https://www.success.tid.gov.hk/english/aboutus/sme/service_detail_6863.html.

  68. In Japan, SMEs accounted for 99.7% of all enterprises and employed approximately 70% of the labour force in 2016. See Japan’s Ministry of Economy, Trade and Industry, 2019 White Paper on Small and Medium Enterprises in Japan, October 2019 (Summary), available at https://www.chusho.meti.go.jp/pamflet/hakusyo/2019/PDF/2019hakusyosummary_eng.pdf. SMEs have historically served as key suppliers to large manufacturing firms and represent the backbone of the service sector, see Raphael Lam and Jongsoon Shin.

  69. In the past decade, SMEs have represented 99% of companies, employed more than 85% of the working population, and consistently made up around 99% of the manufacturing sector in South Korea, see Chiang Min Hua (2018), pp. 54 and 59.

  70. In China, SMEs account for 98.9% of the total number of businesses and comprise 65.6%, 63.3%, 54% and 77.3% of gross industrial output value, sales revenues, total profits and employed people, respectively, see Rajesh Singh, Suresh Garg and S.G. Deshmukh (2010), pp. 54–65.

  71. In the past decade, SMEs have accounted for almost 78% of employment, 96% of manufacturing companies, and 98% of all companies in Taiwan, see Chiang Min Hua (2018), pp. 54 and 57.

  72. In Singapore, SMEs contribute almost half of the nominal value added of all enterprises, employ 72% of the workforce, and make up 99% of enterprises, see H. M. Chung and K. Au (2021), p. 202.

  73. The definition of SME varies slightly across the countries. In Hong Kong, manufacturing enterprises that employ fewer than 100 persons, and non-manufacturing enterprises that employ fewer than 50 persons are regarded as SMEs, see Support and Consultation Centre for SMEs, Trade and Industry Department of the Government of Hong Kong, available at https://www.success.tid.gov.hk/english/aboutus/sme/service_detail_6863.html. In Japan, SMEs in manufacturing refer to companies with up to JPY 300 million capital or 300 employees, see Japan’s Ministry of Economy, Trade and Industry, 2019 White Paper on Small and Medium Enterprises in Japan, October 2019 (Summary), available at https://www.chusho.meti.go.jp/pamflet/hakusyo/2019/PDF/2019hakusyosummary_eng.pdf. In South Korea, manufacturing companies with fewer than 300 workers and annual sales less than USD 8 million are categorized as SMEs. In Taiwan, SMEs in manufacturing refer to companies that hire fewer than 200 people, with paid-up capital amounting to less than TWD 80 million (about USD 2.5 million), see Chiang Min Hua, Post-industrial Development in East Asia: Taiwan and South Korea in Comparison (Springer Singapore, 2018), 51, available at https://doi.org/10.1007/978-981-13-0274-9. In China, SMEs in manufacturing refer to companies with annual income of less than CNY 4 billion or fewer than 1,000 employees, available at http://www.stats.gov.cn/tjsj/tjbz/201801/t20180103_1569357.html. In Singapore, SMEs are companies with annual sales turnover under SGD 100 million, or fewer than 200 workers, and at least 30% local shareholding, see Annie Koh and Esther Kong, Building Growth Enterprises in Singapore: Public-Private Partnership, in Hsi-Mei Chung and Kevin Au (eds.), Succession and Innovation in Asia’s Small-and-Medium-Sized Enterprises (Palgrave Macmillan 2021), 203.

  74. In 2003, Japan switched from being a net importer of IP to a net exporter, currently exporting twice as much as it imports. See Asian Development Bank, Asia’s Journey to Prosperity: Policy, Market, and Technology Over 50 Years, 2020, 163, available at https://www.adb.org/sites/default/files/publication/549191/asias-journey-chapter-5.pdf.

  75. See https://esg.tsmc.com/csr/en/update/innovationAndService/caseStudy/11/index.html.

  76. See TIPO, Annual Report 2018, available at https://pcm.tipo.gov.tw/PCM2010/PCM/ebook/2018E/ebook/index.html?_ebooktimestamp=637723064366982046.

  77. German Patent and Trade Mark Office, Current Statistical Data for Patents, available at https://www.dpma.de/english/our_office/publications/statistics/patents/index.html.

  78. Valentin Todorov, Competitive Industrial Performance Index 2020: Country Profiles (United Nations Industrial Development Organization 2020), 14 and 128, available at https://stat.unido.org/content/publications/competitive-industrial-performance-index-2020%253a-country-profiles.

  79. United Nations Industrial Development Organization Statistics 2020, available at https://stat.unido.org/database/CIP%202020.

  80. SMEs are considered the backbone of the German economy. In 2015, 99.6% of German firms were SMEs, creating 58.5% of jobs and 35.3% of total sales in Germany. SMEs constituted 54.9% of net value added in Germany. Based on the EC’s definition of SMEs, SMEs in Germany generated 47% of gross value added in 2015, see Hansjörg Herr and Zeynep Nettekoven (2018), p. 6.

  81. Id, 8.

  82. Available at https://www.theglobalipcenter.com/wp-content/uploads/2021/03/GIPC_IPIndex2021_FullReport_v3.pdf, 13.

  83. It has been suggested that the question as to the maximum duration cannot be answered by the courts, and must be dealt with by the legislature, as it ultimately concerns industrial policy, and that courts should always be able to rule that, given the circumstances of a case, even the maximum period allowed by law is too long in a specific case. See Christopher Heath (2017a, b), p. 39.

  84. See https://wirtschaftslexikon.gabler.de/definition/kaufmaennische-angestellte-39823.

  85. Thüsing (2021); Christopher Heath (2017a, b), p. 94.

  86. Thüsing (2021).

  87. Sec. 138 of the German Civil Code stipulates “(1) A legal transaction which is contrary to public policy is void. (2) In particular, a legal transaction is void by which a person, by exploiting the predicament, inexperience, lack of sound judgement or considerable weakness of will of another, causes himself or a third party, in exchange for an act of performance, to be promised or granted pecuniary advantages which are clearly disproportionate to the performance.”

  88. See Art. 2(1) of the German Basic Law (constitution), which mandates: “Every person shall have the right to free development of his personality insofar as he does not violate the rights of others or offend against the constitutional order or the moral law”. Article 12(1) of the German Basic Law mandates: “All Germans shall have the right freely to choose their occupation or profession, their place of work and their place of training. The practice of an occupation or profession may be regulated by or pursuant to a law.”

  89. Art. 23(1) and (2) of the Trade Secrets Protection Act lays down three year’s imprisonment or a fine for anyone who commits any of the proscribed acts to further his own or other’s competition for his own benefit or the benefit of a third party, or with the intention of causing damage to the holder of a business. Article 23(3) of the Act lays down a more lenient punishment of imprisonment not exceeding two years or a fine for whoever uses or discloses a trade secret in the form of a template (Vorlage) or specification (Vorschrift) of a technical nature entrusted to him in the course of trade to further his own or other’s competition or for his own benefit in violation of § 4(2) No. 2 or 3. Article 23(4) Nos. 2 and 3 of the Act punishes economic espionage with imprisonment up to five years or a fine. Article 23(4) No. 2 punishes anyone who commits the proscribed acts in the knowledge that the trade secret will be used in a foreign country. Article 23(4) No. 3 punishes anyone who commits proscribed acts and uses the trade secret in a foreign country.

  90. The fact that major German commentaries on the Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb), such as Baumbach and Hefermehl (2019); and Ohly and Sosnitza (2016), only briefly discuss the criminal consequences of trade secret infringement without mentioning their role or significance attests to this conclusion.

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Authors and Affiliations

  1. Professor of Law (Practice), Singapore Management University, Singapore, Singapore

    Kung-Chung Liu

  2. Renmin University of China, Beijing, China

    Kung-Chung Liu

  3. Shandong University, Qingdao, China

    Kung-Chung Liu

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I am indebted to Shaquil Ahmad Woozeer, Genevi LIM Xuan Ying, Tien-Hsin Wang and Minyu Zheng for their help in collecting materials for this paper. Dr. Christopher Heath, Dr. Sebastian Engels and two anonymous reviewers are also thanked for their invaluable comments on earlier draft.

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Liu, KC. The Problems with Trade Secret Protection/Overprotection in Asia. IIC 53, 94–115 (2022). https://doi.org/10.1007/s40319-021-01136-9

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