Safeguarding Company Trade Secrets While Working Remotely

Insights 2021/06/23
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　　Many companies in Taiwan are impacted by the outbreak of the COVID-19. Since the Taiwanese Government implemented the Level 3 Alert, remote working had become the new norm. Protecting and maintaining trade secrets is the new task faced by companies.

　　According to the definition under Taiwanese Trade Secret Act, "trade secret" shall mean any method, technique, process, formula, program, design, or other information that may be used in the course of production, sales, or operations. A trade secret shall also meet the requirements under Article 2 of the Trade Secret Act:

　　1. Confidentiality: Meaning it is not known to persons generally involved in the information of this type;

　　2. Economic: Meaning it has economic value, actual or potential, due to its secretive nature; and

3. Reasonable Protective Measures: Meaning its owner has taken reasonable measures to maintain its secrecy.

　　Among the three requirements above, the first two requirements, "Confidentiality" and "Economic", are rarely at issue. However, as it is already hard to define if reasonable measures have been taken while employees are working in the office, a company faces a greater risk of unauthorized leakage while employees are working remotely. Especially for the trade secrets that have not been patented and must be protected under the concept of "trade secret".

　　For example, when employees work from home, if they can access the company's network through the internet, the company must manage and control these conducts more stringently to prevent unauthorized leakage of trade secrets. Furthermore, if there are no clear rules, employees will fear that the moment they access the data will violate the law. Therefore, companies should immediately check whether their current practices meet the requirements under the law. Otherwise, in addition to the pandemic, more legal risks will appear.

　　The most basic way to protect a company's trade secrets is through a confidentiality agreement between the company and its employees. The terms and conditions of the confidentiality agreement shall cover the trade secrets the company wants to protect. However, this does not mean that the company can sit back and relax when a confidentiality agreement exists. To be protected by the law, the company still needs to take reasonable measures to protect its trade secrets. To assist companies in mitigating legal concerns, companies can consider the practical steps below to protect trade secrets while the employees are working remotely.

　　1. Adjustment of Company's Current Policies

a. If a company's current confidentiality and information security policies do not include remote working situations, the company shall revise the current policies to cover them immediately.

b. Company may remind the employees, through written instruments, that it is their responsibility to ensure the confidentiality of the information while working remotely.

c. Establish a "Confidentiality Plan" so that employees of different levels shall have different authorizations and limit trade secret materials to be used remotely to those on a "need to know" basis. At the same time, review the company's existing patents and trade secrets immediately, and establish a complete "Confidentiality File" corresponding to the authorities given to employees of different levels. Needless to say, this is something that should be done even without the pandemic.

d. Provide training to employees on confidentiality and best practices for securing confidential information. The training should include clear expectations and limits on what employees can and cannot do when working remotely, for example:

Employees should not email company information to their personal email accounts or transfer data off of the company network.
If reasonably practical, employees should perform their work in a room to which only they have access.
Employees should only store and send documents using an encrypted cloud storage.
Employees should refrain from using public or unsecured wifi and should password-protect their home wifi.
Employees should utilize stronger passwords.

　　e. If reasonably practical, employees should connect to their companies' network through VPN to effectively mask the online identity and encrypt online connections. Companies may install security software that requires multi-factor authentication upon login to company networks.

　　f. If reasonably practical, companies may install software that can lock-out and wipe information remotely. This could allow a company to immediately lock an employee out of the company network if an employee compromises the confidential information and to wipe all data from a device if a company device is misplaced.

　　2. Other Protective Measures

　　Set up protocols so employee can return company information and devices if an employee's employment ends during remote working period. A list of devices and company information should be kept to allow the company to monitor devices, folders, and accounts and know what to check if an employee leave.

　　More importantly, a company must review whether there is a non-competition clause limiting the employee's activities after the termination of the employment relationship in the employment agreement, if so, whether it is a valid non-competition clause. For example, although there is a non-competition clause, if the company failed to provide reasonable compensation to the employee, such a non-competition clause will be void under Article 9-1 of the Labor Standard Act, which was newly established on December 16, 2015.

　　Furthermore, even if a non-competition clause was entered into before the newly established Labor Standard Act, in practice, the court will still apply the newly established Labor Standard Act to determine whether the non-competition clause is void due to unfairness (shocking the conscience). See 109 Supreme Court Civil Judgement TaiShang No. 1616 (2020). These are the legal issues that the companies should examine and ponder.

　　Adapting to the new way of working requires a company to reconstruct its protocols and policies in this new type of daily operations. Otherwise, if not knocked down by the pandemic, it will be knocked down by the enemy in the business filed due to the leakage of trade secrets. I hope we all tide over the pandemic safely.

Authour: Hung Ou Yang

Managing Partner
Taipei
+886-2-2707-9976
[email protected]

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.