20 May, 2005
Taiwan Cabinet Approves Sensitive Technology Protection Act
The Executive Yuan (Cabinet) recently approved a proposed Sensitive Technology Protection Act (the Act) that authorizes Taiwan's National Science Council to identify sensitive technologies that companies cannot export abroad without approval.
The act is widely viewed as a response by the Chen administration to what is known in Taiwan as the Hejian case. Earlier this year, prosecutors raided UMC, Taiwan's second-largest chip foundry, and allegedly found that UMC had transferred sensitive technologies to Hejian, a Chinese semiconductor company based in Suzhou.
The Act defines sensitive technologies very broadly. The National Science Council can place a technology on its list of controlled technology if these criteria are met:
1. Laypeople do not know about the technology;
2. The technology has real or potential economic value because it is secret; and
3. The rightsholder has tried to keep the technology secret.
If a company wants to transfer one of the listed technologies abroad, the Act requires the company to apply for approval to the Council. The Council would then appoint a review committee. One-third of the members must be outside experts and there are provisions for confidentiality and recusal.
The Council must approve applications within two months or the application is automatically approved. Foreign entities and their subsidiaries are explicitly excluded from this regulatory regime, and the Act requires the Council to administer the regime “in compliance with international standards”.
Under the Act, violators face up to seven years imprisonment or labor along with fines of up to NT$30 million (approx. US$950,0000) for illegal technology transfers. If the violator has willfully conspired with a foreign state or party, the penalties increase by 50 percent to ten and a half years imprisonment and NT$45 million in fines.
The Act will now be sent on to Taiwan’s Legislative Yuan (Legislature), where the debate will be framed as a choice between keeping Taiwanese high tech industries at home and maintaining global competitiveness through investment in China. Whether the chronically inefficient Legislature will take up the bill anytime soon is another question.
