Four Pillars Enterprise Co. filed a complaint against Avery Dennison
for using a joint venture as bait to steal its trade secrets, Avery Dennison
counter-charged Four Pillars Enterprise for making and disseminating false
statements that are sufficient to damage its business reputation
Chinese Taipei
Case:
Four Pillars Enterprise Co. filed a complaint against Avery Dennison for
using a joint venture as bait to steal its trade secrets, Avery Dennison counter-charged
Four Pillars Enterprise for making and disseminating false statements that
are sufficient to damage its business reputation
Key Words:
Trade S ecrets, Damage of Business Reputation
Reference:
Fair Trade Commission Decision of July 21, 2005 (the 715th Commissioners'
Meeting), Letter Kung Erh Tzu No. 0940006432 and 0940006433 of August 4, 2005
Industry:
Other Plastic Products Manufacturing (2109)
Relevant Laws:
Article 19、Article 22 and Article 24 of the Fair Trade Law
Summary:
- This case originated from a complaint filed by Four Pillars Enterprise
Co. (hereinafter referred to as the complainant) on December 31, 1998 against
Avery Dennison Corporation (hereinafter referred to as the respondent)
which is briefly stated as such: Starting from 1987, the respondent had
used a joint venture with the complainant and purchases from the complainant
as baits, causing the complainant to undoubtedly provide the respondent
with trade secrets of practical and commercial value, including information
on his products, technology, machines, equipment, costs, selling prices,
markets and clients. However , the respondent had neither purchased products
from nor sold products to the complainant. Furthermore, the respondent
had even used the trade secrets that had been improperly obtained from
the complainant in its company in Jiangsu, China in June 1994. Consequently,
the respondent and the complainant have engaged in unfair competition in
China and Asia markets. Such acts have violated Subparagraph 5, Article
19 and Article 24 of the Fair Trade Law. In addition, on February 27, 2004,
the aforementioned respondent Avery Dennison has counter-charged Four Pillars
Enterprise Co. in another case for making or disseminating false statements
that are sufficient to damage its business reputations, in which the case
has violated Article 22 and Article 24 of the Fair Trade Law.
- The Subparagraph 5, Article 19 of the Fair Trade Law stipulates that
“no enterprise shall have act of acquiring the secret of production and
sales, information concerning trading counterparts or other technology
related secret of any other enterprise by coercion, inducement with interest,
or other improper means which is likely to lessen competition or to impede
fair competition.” With regard to the scope of protection for trade secrets,
the protection is only applicable in the case of “secret of production
and sales information of other enterprises”, “information concerning trading
counterparts” or “other confidential technologies of another enterprise”
and the manners of conducts are limited to “by means of coercion, inducement
with profit or other improper means” in which the improper means are exemplified
in the stipulation as conducts that are likely to lessen competition or
impede fair competition on the market. Therefore, the said article does
not prohibit any acts of regular business contacts among enterprises. In
addition , whether the purpose of the enterprise’s conduct is competition
should be taken into consideration while in determining “the likelihood
to lessen competition or impede fair competition”. As regard to the term
trade secret, it must be that its owner has taken reasonable measures to
maintain its secrecy, for instance, the owner of the trade secret only
can contend that the secret held by the company is trade secret protected
by this Law if reasonable protective measures with respect to personnel
and events have been taken by the company’s internal management to prevent
the secret from being disclosed.
- The respondent in this case did not engage in any act of acquiring the
complainant’s secret of production and sales by means of improper means
and thus the respondent did not constitute any conduct that meets the conditions
stipulated in Subparagraph 5, Article 19 of the Fair Trade Law:
- With regard to the allegation filed by the complainant that the respondent
has acquired its relevant trade secrets, although the complainant and
the respondent have common consensus that the information they have exchanged
with each other in the process of negotiating the establishment of their
joint venture were regarded as “p rivate” information, that is the nature
of such information are private, the relevant information of “adhesive”,
“production equipment and production flowcharts”, “marketing information”
and “finance and costs” did not meet the attributes of trade secret.
Furthermore, the complainant has presented such information voluntarily
in the process of negotiating on the joint venture and moreover did not
request the respondent to sign any essential confidentiality and non-disclosure
agreement. It is indeed difficult to conclude that the complainant has
already taken reasonable measures to maintain the secrecy of its trade
secrets and the constitution of the respondent’s act thus did not satisfy
the conditions stipulated in Subparagraph 5, Article 19 of the Fair Trade
Law.
- The respondent did not conduct any acts of “improper acquisition”:
The investigation found that information that the respondent acquired
during the process of joint venture negotiation were given voluntarily
by both parties. The complainant never requested the respondent to sign
any kind of confidentiality and non-disclosure agreements . Both parties
have started to get into touch with each other since 1987 and more than
one hundred of letters and internal memorandum were exchanged between
both parties. In addition , both parties have visited each other in Chinese
Taipei, the United States and Mainland China, and notably after the two
joint venture meetings taken place in June and November of 1991, both
parties started to have more in-depth discussions. Several internal memorandum
and letters of the respondent thereafter revealed that the respondent
has doubts on the complainant’s financial issues after reading through
the annual reports given by the complainant and the respondent has to
go further to affirm the complainant’s financial condition. Thereafter,
the respondent has terminated the joint venture project due to the complainant
did not give cooperation in the accountant’s financial audit. There is
no concrete evidence to substantiate that the respondent did not have
joint venture intention from the beginning and acquire the trade secret
with improper means.
- To sum up, the complainant and the respondent for the reason of joint
venture negotiations have voluntarily provided the respondent with the
relevant information; there is no evidence to prove that the respondent
indeed did not have joint venture intention from the beginning. Furthermore,
various evidences reveal that it is still difficult to conclude that
the respondent has acquired the trade secrets of the complainant by improper
means of coercion and inducement with interest.
- In addition, Article 24 of the Fair Trade Law stipulates that “In addition
to what is provided for in this Law, no enterprise shall otherwise have
any deceptive or obviously unfair conduct that is able to affect trading
order.” However, the standard form of obviously unfair conduct refers to
conduct contrary to business competition ethics, in another word, the business
competition conduct has violated social ethics or impaired fair competition
in quality, price, service and other effective competitions. Although the
complainant in this case deemed that there were abnormalities in the process
of joint venture discussion and the extent of information provided, but
the complainant did not give any objections from the beginning to the end
of the joint venture discussions. Both parties have carried out joint venture
negotiations voluntarily. Moreover , a business contract is concluded upon
the consent of both parties and without any specific objective standards.
If either one of the parties concerned does not cooperate or both parties
cannot reach an agreement, then of course the agreement cannot be concluded.
Further investigation found that the hiring of the competitor’s employees
is indeed common in societal and economic senses . In general, an offering
of better terms to attract the competitor’s employees is quite common and
also meets the principle of effective market competition. Although the
respondent has ever intended to hire the employees of the complainant but
there is no evidence to substantiate that the respondent has hired the
complainant’s employee with means that violate business ethics, furthermore,
the complainant discovered the hiring and stopped it. Therefore, there
is no other concrete evidence to substantiate that the respondent has deceptive
or obviously unfair conducts and violated the provision of Article 24 of
the Fair Trade Law.
- The complainant argued that the secrecy for information obtained by the
respondent was not extinguished as a result of joint venture negotiations.
The parties involved in the discussion of agreement preparation shall maintain
secrecy and bear the obligations of contract prior to signing. It is true
that a special kind of trust could been developed between the parties involved
during the contact and discussion of agreement preparation. All parties
involved shall perform their duties according to the principle of good
faith and trading customary practice along with the common effort, care
for and protection obligations. The Civil Code has clearly stipulated the
responsibilities of “negligence in agreement preparation” for such obligations
of contract prior to signing in the added Paragraph 1, Article 245-1 of
the Civil Code. However, t he violation of obligation to maintain secrecy
on information known from agreement preparation is considered as a civil
issue. If the respondent has violated such obligation, both parties shall
seek relief through civil proceeding.
- The same Commissioners’ Meeting also resolved the case of counter-charges
made by the respondent against the complainant and Mr. Yang, Pin-Yen for
making and disseminating false statements that are sufficient to damage
its business reputation and claimed that such conducts have violated Article
22 and Article 24 of the Fair Trade Law.
- Article 22 of the Fair Trade Law stipulates that “n o enterprise shall,
for the purpose of competition, make or disseminate any false statement
that is able to damage the business reputation of another.” The term
“purpose of competition” refers to the intention to cause the clients
of the competitor to lose confidence in the competitor’s business reputation
and compete for the trading opportunity. The term “make or disseminate”
refers to the acts of employing speech, text, pictures or mass media
to show particular information to the third person or any other person
so that they can understand the circumstances. As for the term “false
statement” refers to the false viewpoint or description of the objective
fact but not including the value judgment and expression of opinions
that are not related to the fact. And, the decision of whether the statement
is “false” shall be determined by the objective standards rather than
the subjective viewpoint of the party concerned.
- Avery Dennison has quoted reports covered by Business Weekly and The
Journalist in the counter-charges, an examination of the reports show
that these reports are personal experiences of Mr. Yang, Pin-Yen in the
proceedings of the litigation on Economic Espionage Act in the U.S..
A further examination of the reports revealed that most of the contents
are on civil and criminal cases of the United States “Economic Espionage
Act”, reminders and warnings on intellectual property rights issues for
the local enterprises when they are discussing joint venture or doing
business with American business enterprises. The wordings of Mr. Yang,
Pin-Yen that “the judgments for the last two lawsuits can be reversed
so long as Avery Dennison does not have this rights” were simply his
own value judgment on the facts. Furthermore, the complainant and the
respondent have filed lawsuits against each other for more than ten years,
and similar lawsuits and judgments for them are found at many countries
and known to the relevant public and their trading counterparts in which
they also have their own evaluations about it. It is normal for Mr. Yang
Pin-Yen to defend himself as he was inconvincible with the judgments
from the United States and felt injustice. Furthermore, it is very likely
that the looser of a lawsuit and the court to have different understanding
on the case. It is indeed difficult to conclude that the speech of Mr.
Yang Pin-Yen was for the purpose of damaging the business reputation
of Avery Dennison.
- Moreover, Business Weekly admitted that they have reported the case
in the face of the corporate espionage controversies in Chinese TaipeiChinese
Taipei . The Weekly “initiated interview” with Mr. Yang Pin-Yen; the
report was neither paid for by Yang Pin-Yen or Four Pillars nor was it
an advertisement. The purpose of the Weekly’s report is to understand
the thinking and experience of the person being interviewed and on the
basis of the dictation of the interviewed, the relevant materials and
interviews were supplemented in the report as evidences. Therefore, the
whole report is about the subjective feelings, beliefs and interpretations
of the person being interviewed and have been affected by the understanding
and written expression of the writer. It is still difficult to conclude
that Mr. Yang and Four Pillars have violated Article 22 of the Fair Trade
Law of “make or disseminate any false statement that is able to damage
the business reputation of another”.
- Article 24 of the Fair Trade Law stipulates that “i n addition to what
is provided for in this Law, no enterprise shall otherwise have any deceptive
or obviously unfair conduct that is able to affect trading order.” Article
24 of the Fair Trade Law is a supplementary provision that is applicable
only to acts that are out of the reach of other articles of the Fair
Trade Law. If a certain unlawful act is caught by other provisions of
the Fair Trade Law, then there are no grounds for the application of
Article 24. Conversely, only if those specific provisions fail to evaluate
the alleged unlawful act in its entirety will there be room for the supplementary
application of Article 24. It is obvious that Article 22 of the Fair
Trade Law can be quoted to evaluate the charges of Avery Dennison that
Four Pillars has acts of damaging its business reputations and hence
there is no need to consider the applicability of Article 24 in this
case.
Summarized by Yang, Chia-Hui;
Supervised by Lin, Kin-Lan
Appendix:
Four Pillars Enterprise Co.’s Uniform Invoice Number: 11222009
Avery Dennison Corporation
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