Trade Secrets Practice (1): What is a Confidentiality Preservation Order and how to apply for one

My name is Sandra Yin, a Taiwan-based lawyer specializing in trade secrets litigation. The purpose of this series is to share the practical experience I have accumulated over the course of my career, helping you gain a deeper understanding of how to protect your rights and safeguard your proprietary information.

What Is a Confidentiality Preservation Order?

Litigation tends to lead to disclosure. Written arguments and evidence must be served to the opposing party. Questions from the judges must be answered. Hearings are in principle open to the public. Judicial opinions are published online. However, in intellectual property and commercial litigation, when certain requirements are met, a party may file a motion—without the opposing party’s consent—for a Confidentiality Preservation Order (hereinafter “CPO”), prohibiting anyone who has learned of a trade secret through litigation from disclosing it, thereby avoiding harm to the integrity of such trade secret.

How to Apply for a Confidentiality Preservation Order?

The procedural requirements and effects of an CPO are, for intellectual property litigation, governed by Articles 36 through 40 and Articles 72 and 73 of the Intellectual Property Case Adjudication Act (hereinafter the “IPCA Act”), and are applicable mutatis mutandis to criminal cases pursuant to Article 66, Paragraph 1 of the same Act. The relevant provisions applicable to commercial litigation are Articles 55 through 59 and Articles 76 and 77 of the Commercial Case Adjudication Act (hereinafter the “CCA Act”)[1]. The key aspects are as follows:

I. Requirements for Filing[2]

1. The content of a party’s written submissions or evidence involves the movant’s trade secrets.
2. The movant must be the holder of the trade secret, but is not limited to a party to the litigation—a non-party may also file a motion. In intellectual property cases, if the trade secret holder, after being advised by the court, refuses to file a motion, a party who is not a trade secret holder may also file a motion[3], so as to avoid delay of the litigation.
3. The applicant must demonstrate prima facie: (1) that the information meets the requirements for a trade secret, and (2) that disclosure of the information would impair the movant’s business activities.

The term “demonstrate prima facie” (釋明) means to persuade the court that such claim is “probably true.” In general, as long as the confidential information bears the appearance of a trade secret, the court will grant the CPO without excessive scrutiny.

II. Persons Subject to the Order

1. The CPO may be directed at “the opposing party, parties, agents, assistants ad litem, or other persons related to the litigation”[4]—in other words, all persons who may come into contact with the trade secret by way of the litigation. In addition to the opposing party, it is advisable to include their attorneys, agents, the company’s responsible person, in-house counsel or technical personnel serving as assistants ad litem.
2. The order may only be directed at natural persons, not legal entities[5].

III. Effects of the CPO[6]

1. The trade secret shall not be used for any purpose other than the litigation.
2. The trade secret shall not be disclosed to any person not subject to the CPO.

IV. Criminal Liability for Violating the CPO

1. The violator personally: In intellectual property cases, the penalty is imprisonment of up to three years, detention, and/or a fine of up to NT$1,000,000; where critical technologies of national interests are involved, the penalty is enhanced[7]. In commercial matters, the penalty is imprisonment of up to three years, detention, and/or a fine of up to NT$100,000[8].
2. If the violator is (1) a responsible person of a legal entity, (2) a manager or representative of a non-legal entity, or (3) an agent, employee, or other worker of a legal entity, non-legal entity, or natural person, and the violation was committed in the course of performing their duties, then the legal entity, non-legal entity, or natural person shall also be subject to a fine[9].

V. Contents of the Motion

1. The movant.
2. The non-movant: i.e., the person who should be subject to the CPO.
3. Prayer for relief: “The non-movant [name] shall not use the litigation materials listed in Exhibit X for any purpose other than for conducting the present litigation, nor disclose them to any person not subject to a Confidentiality Preservation Order.”
4. Subject matter of the motion: preferably presented in an exhibit, which should specify the name of the trade secret, the item numbers of the evidence or the page numbers in the court file.
5. Grounds: i.e., a prima facie demonstration of how the three requirements for a trade secret are met, as well as the harm that the movant would suffer if the information were disclosed.

In addition, a copy of the motion should be served directly on the non-movant.

What Should I Do If I Were to Move for or Respond to a CPO?

If you are the movant, pay special attention to the following:

1. Before the court issues the CPO ruling, written submissions and evidence containing confidential information should be filed with the court in a sealed manner; copies should NOT be provided to the opposing party. In other words, before making any submission, you should carefully consider whether its content involves your own confidential information—once filed, there is no taking it back.
2. Throughout the litigation, continuously monitor whether the non-movant has changed (i.e., whether individuals have been added or removed).

If you are the non-movant, pay special attention to the following:

1. Whether the opposing party’s motion is well-founded: you should make every effort to present counterarguments to narrow the scope of the subject matter, thereby reducing the cost of maintaining the litigation materials and the risk of non-compliance.
2. Scope of the CPO: once a CPO is issued, special handling and protective measures should be adopted for the specified litigation materials in the case file or database to prevent leakage.
3. Persons subject to the CPO: you may only discuss the content of the litigation materials with other persons subject to the same CPO; otherwise, it constitutes a violation.

Any thoughts or questions? Please feel free to email me at sandra.ysyin@gmail.com.

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[1] The 2023 amendment of the IPCA Act allows non trade secret holders to initiate the CPO procedure, increases the fine for violating an CPO, and changed the offense of violating an CPO from a complaint-based offense to a non-complaint-based (publicly prosecutable) offense. By contrast, the CCA Act has not been amended in tandem, resulting in discrepancies between the two statutes.

[2] IPCA Act, Art. 36, Para. 1; CCA Act, Art. 55, Para. 1.

[3] IPCA Act, Art. 36, Para. 3.

[4] IPCA Act, Art. 36, Para. 1; CCA Act, Art. 55, Para. 1.

[5] Given that both the IPCA Act, Art. 72, Para. 1, and the CCA Act, Art. 76, Para. 1, impose criminal penalty including imprisonment, and that the IPCA Act, Art. 73, and the CCA Act, Art. 77, Para. 1, impose fines on the legal entities and non-legal entities to which a CPO violator belong, it follows that the CPO may only be directed at natural persons. The same intent is reflected in the Enforcement Rules for the Adjudication of Intellectual Property Cases, Art. 45, Para. 1, Subpara. 2, and the Enforcement Rules for the Adjudication of Commercial Cases, Art. 31, Para. 1.

[6] IPCA Act, Art. 36, Para. 4; CCA Act, Art. 55, Para. 4.

[7] IPCA Act, Art. 72, Paras. 1 and 2.

[8] CCA Act, Art. 76, Para. 1.

[9] IPCA Act, Art. 73; CCA Act, Art. 77, Para. 1.