Author: Jamie J. Yang, Partner

The prosecution of Tokyo Electron Ltd. (TEL) in Taiwan has put a longstanding but underexamined provision of Taiwan’s Trade Secrets Act back into focus. For foreign companies operating in or entering Taiwan’s semiconductor supply chain, the case is a timely reminder that the risk of trade secret liability does not end at the hiring decision, rather, it extends to what happens after the new employee walks through the door.

Photo by Julio Lopez on Unsplash（封面）
Photo by GuerrillaBuzz on Unsplash（內文）

The TSMC/TEL Incident

The case arose from the alleged theft of TSMC’s national core critical technology. Three individuals — a TEL employee and two TSMC employees — were indicted for offences under the Trade Secrets Act and the National Security Act, including the aggravated offence of misappropriating trade secrets with intent to use them outside Taiwan. Following indictment of the individuals, prosecutors separately investigated TEL as a corporate entity and, in December 2025, filed a supplemental indictment against TEL itself.

Prosecutors charged TEL with four counts of corporate liability, two under Article 13-4 of the Trade Secrets Act, and two under Article 8(7) of the National Security Act, seeking fines totaling NT$120 million (approximately USD 3.7 million), to be imposed as a combined sentence. The prosecutorial statement was unambiguous: TEL had internal policies, but those policies were general and precautionary in nature. The company lacked evidence of concrete, specific preventive measures actually being implemented.

Article 13-4: The Dual-Penalty Provision

Article 13-4 was enacted in 2013 as part of a major overhaul of Taiwan’s criminal trade secret regime. It imposes what Taiwanese jurisprudence calls a dual-penalty rule: when a representative, agent, employee, or other staff member of a legal entity commits an offence under Articles 13-1 or 13-2 of the Trade Secrets Act in the course of business, the legal entity is automatically subject to the same category of fine prescribed under those articles, in addition to the liability of the individual actor.

The provision includes an exculpation clause. A legal entity may escape liability if its representative or principal can demonstrate that it used its utmost efforts to prevent the offence from occurring.

In practice, however, this defense has never succeeded. In over a decade of case law surveyed across Taiwan’s courts, from district courts in Hsinchu and Taichung to the Intellectual Property and Commercial Court, no hiring company that actually litigated the merits of the exculpation clause has prevailed.

Two Cases That Define the Standard

The two most instructive decisions for understanding why the defense fails are the UMC/Micron case and the Yitec/Himax case.

In the UMC/Micron matter (Intellectual Property and Commercial Court, Case No. 109-Xing-Zhi-Shang-Chong-Su-4, judgment rendered January 2022), UMC had established a new business division specifically to develop DRAM technology, recruiting engineers directly from Taiwan Micron (formerly Rexchip, a joint venture with Elpida) to staff it. The court found that UMC’s IT department had discovered, no later than December 2015, that one of the recruited engineers had files bearing “Micron” in their names on his company-issued laptop. Rather than disciplining him or confiscating the device, senior management approved his request for a new laptop with USB port restrictions disabled, allowing him to continue accessing Micron’s trade secrets. The court also found that UMC had not conducted any substantive verification at the point of hiring. Both engineers had signed declaration forms as part of their employment contracts, confirming that they had not had access to confidential information belonging to a former employer. Both ticked “No.” UMC’s management, legal department, and human resources personnel accepted these declarations at face value without questioning, following up, or seeking any confirmation of their accuracy. The court held that for senior research and development executives recruited into roles materially identical to those they had held at a direct competitor, UMC was under an obligation to conduct substantive verification of whether those declarations were truthful. Accepting the forms without any meaningful scrutiny amounted to no supervisory or monitoring function at all.

The Yitec/Himax case (Hsinchu District Court, Case No. 110-Zhi-Su-1, judgment rendered June 2025) is the most analytically rigorous treatment of what “utmost efforts” actually requires. Yitec hired an engineer who had served as the liaison between his former employer, VIS (Vanguard International Semiconductor), and the victim company, Himax’s predecessor PSI (Powerchip Semiconductor International), carrying process-related trade secrets on personal portable drives into Yitec’s offices. Yitec argued that it had conducted information security training, required employees to sign confidentiality agreements, and had designated USB storage as “controlled items.” The court rejected each element. The company’s own IT director admitted in investigation that, prior to December 2020 and after the relevant period, Yitec had imposed no actual restrictions on USB usage whatsoever. Devices were labelled “controlled,” but employees could freely use their personal drives. The court articulated the controlling standard: the exculpation clause requires not general or abstract precautionary declarations, but affirmative, concrete, and effective measures capable of actually preventing the illegal conduct. Paper policies without enforcement infrastructure do not qualify.

When Acquittals Are Not Victories: The Technicality Cases

In several cases, corporate defendants were acquitted not because their compliance programs were adequate, but because the charges failed on technical grounds unrelated to the merits of their preventive efforts.

The most instructive example involves Yingwei Technology (Hsinchu District Court, Case No. 109-Zhi-Su-5 and 6, judgment rendered January 2025). Four employees of a probe card manufacturer, a research manager, a senior engineer, a quality assurance supervisor, and a junior engineer, were convicted of unlawfully reproducing their former employer’s trade secrets. All four were also employees of Yingwei. The prosecutor sought to hold Yingwei liable under Article 13-4. The court refused. Article 13-4 requires that the individual offence be committed “in the course of business” of the corporate defendant. The court found that all four employees had committed the reproduction — copying files to personal storage devices — while still employed at the victim company, before they joined Yingwei. Since the criminal acts occurred before their employment at Yingwei began, those acts could not legally be characterised as having been committed in the course of Yingwei’s business. Yingwei’s acquittal had nothing to do with whether it had adequate safeguards. It was a matter of timing.

Importantly, the court also noted a separate framing issue: the original indictment charged the employees only with unlawful reproduction, not with unlawful use after joining Yingwei. Even if the employees had later used such files at Yingwei, that use was outside the court’s scope of inquiry because prosecutors had not pleaded it. This is a reminder that Article 13-4 corporate liability tracks the specific conduct charged against the individual, and if the indictment is drawn too narrowly, the corporate exposure may be narrowed with it.

Practical Implications

The TEL prosecution is a reminder that companies, particularly those operating in Taiwan’s technology and semiconductor sectors, should take seriously.

First, compliance policies must be operationally real, not just textually present. As both the UMC and Yitec decisions confirm, the existence of an internal policy manual is insufficient. What courts examine is whether specific, concrete measures were in place and actually enforced, such as USB controls, monitored onboarding processes, and documented checks on new hires’ prior employers and their obligations.

Second, onboarding is the critical window. The cases that resulted in acquittal on technicality share a common feature: the harmful acts occurred before the employee joined. Companies that conduct structured onboarding, requiring new hires to confirm in writing that they have returned or destroyed all prior employer materials, and auditing device content at the point of entry, close the timing gap that allowed Yingwei and similar defendants to escape. Conversely, companies that wait until a problem surfaces will find themselves in the position of Yitec or UMC.

Third, management awareness is disqualifying. The UMC judgment makes clear that once the company’s senior leadership is on notice of a possible infringement and takes no corrective action, the exculpation clause is practically gone. The decision to look away, or worse to actively accommodate the employee’s continued use of a competitor’s materials, converts a compliance failure into affirmative corporate participation.

Fourth, the stakes have escalated. The TEL prosecution is notable not only for the scale of the fines sought — NT$120 million — but for the concurrent invocation of Taiwan’s National Security Act, which carries its own corporate liability provision. For companies whose business touches areas designated as national core critical technology (NCCT), which now encompasses broad swaths of advanced semiconductor manufacturing, the consequences of a compliance failure extend well beyond the trade secret regime.

The exculpation clause in Article 13-4 was designed to incentivize companies to build genuine safeguards, not to provide a paper defense. Taiwan’s courts have now said as much, repeatedly. The TEL case suggests that prosecutors are increasingly prepared to test that standard against multinational defendants whose internal compliance frameworks were built for other legal environments. The time to assess whether Taiwan-specific measures are in place is before the next hire, and not after the search warrant arrives.