There is an old Chinese saying that one must not hurt others and must protect oneself. For Taiwanese firms coming under pressure from American laws against economic spying, this is a phrase worth bearing in mind.
In the industrial age, enterprises had to sell a physical product to make a buck. But now that we have entered the information age and acceptance of the idea of intellectual property rights has become widespread, firms have begun to view things as intangible and abstract as technical know-how and business acumen as their most valuable money-making tools. And although these kind of knowledge can be recorded in books, such books are difficult to understand and in the end, it is "technicians" who are key.
In a how-to manual on industrial espionage, chapter one might mention that if a company wants to protect itself, it must be very careful with high-level technical people it has hired away from other companies. No matter how badly it wants to make use of such a person's talents, it must first know whether or not that person has signed an agreement not to reveal information to competitors, and if so, what exactly that agreement covers.
Of course, it is difficult to divide knowledge into discrete packets and difficult to determine which sorts of intellectual property belong to an individual and which to the company. There are, however, some guidelines which one can follow. First, if some piece of knowledge or technology is connected to some kind of specialized product and an employee takes that knowledge with him to another company where it is used to make a similar product which will compete with the product of the original company, then the employee and his new company are in violation of the law. Based on these standards, the hiring away of talent frequently seen at domestic technology firms is suspect.
Evidence in black and white
But in Taiwan, if you ask ten companies, nine will tell you that employees know themselves what technical knowledge they are allowed to share and what they should keep to themselves. The companies feel that they don't have the resources to keep track of such things and that it is the employees' own responsibility. Unfortunately, a judge may not buy such an explanation. Even if a company hasn't intentionally ripped off a technology, if it has "willfully ignored" the means of protecting itself mentioned above, it still may be sued.
Expanding on this, in situations where several experts gather together, there may be specific means of protection. Hsu Te-cheng, director of the Taiwan Regional Association of Adhesive Tape Manufacturers, says that when the association organizes its annual convention, he always asks the professionals who will speak to get a document from their company indicating the company's approval. This document should state that the company has agreed to let this person speak, should mention the topic he will speak on and the content of his presentation, and, ideally, should also include the notes for the speech, provided by the company itself. These documents are all kept on file by the association to prevent any future misunderstandings.
Robert Chen, head of the legal department at Acer Computers, strongly suggests that when dealing with foreign or overseas Chinese hired professionals or consultants, Taiwanese firms should watch what they say and do. Taiwanese business people are often surprised in patent infringement and dumping disputes with America, wondering how the US knows so much of what goes on in Taiwan. The US may be able to do so through information garnered from a few experts who come to Taiwan to speak about intellectual property rights and technology transfers. These experts come, on the one hand, to encourage firms to pay larger firms for the right to use their technology. On the other hand, they come to secretly collect information on Taiwanese firms which they then pass on to their companies.
A more proper means of acquiring technology is, of course, to purchase it, either in the form of a technology transfer or through licensing its use. Currently, the manufacture of various components of a product may be distributed all over the world. In this situation, large companies can expand their market and increase their name recognition by the sale or transfer of technology to smaller companies. These big firms can also take in significant amounts of money from the sale of licenses to use their technology, thus recouping some of their development costs. It really is worth it to them to make such sales. Similarly, for Taiwanese firms which don't have the resources to enter into the high-risk research and development arena, buying technology from a larger firm is still the quickest way to upgrade their industrial level.
"The sale of technology is something from which both sides benefit. If firms do things right, even though they may not be able to completely remove their fears of industrial spying, they at least can reduce them to the point where they are not paralyzed," says Paul CB Liu, a professor in Chengchi University's Graduate School of Technology Management and Innovation.
Technology buying teams
However, given that international discussions on technology sales are always the fuse that sets off later disputes, Liu reminds firms that if they want to avoid inadvertently breaking the law, there are a few principles which they should keep in mind.
The first of these is to establish a technology purchasing team. "In purchasing technology, you can't just rely on the technical people to work it out," says Yu Chuo-min, a professor in the Department of Business Administration at Chengchi University. He feels that in addition to the technical people, there should be representatives from the legal, financial and sales departments as well.
Yu says with resignation that Taiwan's business people are used to pinching pennies. Even when sending personnel overseas to discuss the licensing of technology, they only send one or two. The result is that these persons walk into a meeting room where they see five or six professionals arrayed in front of them and they are stunned. Under attack from all sides, they become tired, lose their focus and are easily taken advantage of.
Second, when discussing the purchase of technology, it's best to negotiate directly with the company that owns the technology. Companies should do their utmost to avoid going through individuals or trying to buy something on the cheap when it is unclear to whom the technology belongs. The world is full of technology brokers, all of them boasting about how they can help the buyer get the technology he wants. An unprincipled buyer can easily be sucked in.
The most difficult thing for people to accept in the Yuen Foong Yu Paper case was the fact that the broker who came to Yuen Foong Yu again and again over a two year period to tell them that he could put secret information into their hands was an undercover FBI agent. Perhaps Taiwan's business people are opportunists, but if the Americans hadn't laid the bait right in front of Yuen Foong Yu and encouraged them again and again to take it, winding them up and pulling them in deeper, the affair never would have become so serious.
With legal agencies willing to entrap them, firms can't relax their defenses for a moment. Tien Wei-cheng, president of the Development Center for Biotechnology, recommends that to preserve evidence, those who attend negotiations exchange name cards with their counterparts and be very clear about what company the people they are speaking to are with and their positions within that company. If these people have not brought name cards they should be asked to spell their names so that the Taiwanese negotiators can write them down, and the latter, using poor English as an excuse, should ask to record the meeting.
A third principle is that business people should take the time to find out the origin of the technology in question and be very clear about what rights they are buying. Tien says that during negotiations, firms should explicitly ask if the technology in question was developed by the company they are speaking with and whether or not it has a valid patent. If Company A is representing Company B in the negotiations, the firm should request to see an official document indicating that Company A has the right to do so and confirm its authenticity with Company B before going any further. And even after everyone has shaken hands on the deal and is going their separate ways, Tien says that firms should remember to ask, "Is all the information you gave us today legal?" If the representative hems and haws, no matter how much your firm wants that information, don't take it.
Have a plan to obey the law?
By carefully following the above steps, even if your negotiating counterpart is setting you up, you won't be easily entrapped. Taking this one step further, American lawyer Irvin Nathan says that in America, if the persons a Taiwanese firm is negotiating with seem a little shady, the firm can report them to the FBI. On the one hand, the firms are being good citizens by doing so. At the same time, they are building a reputation for the firm as a law-abiding entity. He feels that this kind of action is one which Taiwanese firms might want to consider taking.
There are currently two cases involving Taiwan companies being reviewed under the US Economic Espionage Act. Of these, in the Yuen Foong Yu case only the two employees directly involved are being tried, while in the Four Pillars case, the company's American affiliate has also been named. So when a company's employees are implicated in an illegal action, how can the company avoid being tarred with the same brush and being bled dry by reparations?
Nathan says that to answer this question, you have to look at a company's attitude towards the law. Does it have a set and rigorously implemented "compliance program"? Liu, who worked for many years in Seattle, a high-tech hub, says that American high-tech companies always have a fully staffed legal department headed by a vice-president. When new employees join the company, they are familiarized with relevant laws and regulations including those pertaining to keeping their own company's secrets and not stealing secrets from other companies. The employees' legal records are also included in annual performance reviews. In the US, employees don't need to steal industrial secrets to please their bosses.
Liu, however, also points out that professionalism costs money. Besides Acer, there are very few local companies which have a regular legal department, much less programs to train employees and monitor this aspect of their behavior. Moreover, the national attitude is different. In Taiwan, continuously stressing to employees the importance of obeying the law and the seriousness of breaking it makes employees feel that they are not trusted.
A new understanding of people's relationship to the law cannot be developed overnight. However, Taiwan's firms have already set out upon the road to internationalization and global competition. There is no turning back. How to play the game by its new rules and how to play without getting hurt are questions which Taiwan's firms must seriously address.
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The high attendance at the seminar in which American lawyers explained the EEA shows how important the new law is regarded as in Taiwan.(photo by Diago Chiu)
