UPDATE 3-Taiwan charges Tokyo Electron's Taiwan unit in TSMC trade secrets case

Taiwan prosecutors said on Tuesday they had charged Tokyo Electron's Taiwan unit with violating the National Security Act and the Trade Secrets Act, after a former employee was indicted in August for alleged theft of trade secrets from chipmaker TSMC.

Taiwan prosecutors said on Tuesday they had charged Tokyo Electron's Taiwan unit with violating the National Security Act and the Trade Secrets Act, after a former employee was indicted in August for alleged theft of trade secrets from chipmaker TSMC. The prosecutors said in a statement that it was the first corporate indictment under Taiwan's National Security Act involving the alleged theft of national core critical technology trade secrets.

The unit could face fines of up to T$120 million ($3.8 million) if convicted, they said. Prosecutors, after questioning the company's former employee identified only by his surname Chen, and relevant Tokyo Electron staff and reviewing the evidence together with the company's written responses, concluded the company had a legal duty to supervise Chen.

"However, apart from general and cautionary internal rules, the company lacked evidence of concrete preventive or managerial measures. Prosecutors therefore determined that the company failed to take necessary steps to prevent the offence and should bear corporate criminal liability under the relevant provisions," the statement said. In a statement on Wednesday, Tokyo Electron said that it, the parent entity, had not been indicted and the matter had no impact on its financial results.

"We deeply regret this matter, take it with the utmost seriousness and sincerely apologise for the considerable concern this has caused our stakeholders," it said. "The indictment does not allege any organizational involvement by Tokyo Electron Limited or Tokyo Electron Taiwan Ltd. in directing or encouraging the former employee to improperly obtain information, nor does it identify any external leakage of the relevant confidential information," the company said.

It added that its own investigation also found no organizational involvement or leak of information. The company said it had set up an information security framework including a round-the-clock monitoring system by security experts to detect and prevent information leaks.

It said it would further reinforce the compliance and audit systems across the group, including its Taiwan unit, to "ensure that such incidents never occur again." In August, Taiwan prosecutors indicted three people for theft of trade secrets from chipmaker TSMC, accusing them of conspiring to use the information to help Tokyo Electron in competing for TSMC supplier deals for the 2-nanometer process, its most advanced chip technology.

The defendants included an ex-TSMC employee, surnamed Chen, who after joining Tokyo Electron had solicited help from his former colleagues for the information on TSMC's technology trade secrets. ($1 = 31.3750 Taiwan dollars)

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