Corporate Criminal Liability of Tokyo Electron for Employee Infringing TSMC's Trade Secrets

A well-known Japanese semiconductor equipment manufacturer, Tokyo Electron, was involved in a trade secret misappropriation case concerning its Taiwanese subsidiary and Taiwan Semiconductor Manufacturing Company ("TSMC"). On April 27, 2026, the court rendered its judgment, imposing a criminal fine of NT$150 million on the subsidiary, Tokyo Electron Taiwan Ltd. ("TEL Taiwan"), making it a corporate criminal liability case with a notably high fine.

A distinctive feature of this case is that the court simultaneously granted a suspended sentence (probation) with conditions. Specifically, TEL Taiwan was granted a three-year probation period, subject to the requirement that within one year after the judgment becomes final and binding, it must fulfill certain obligations, including paying NT$100 million to TSMC and NT$50 million to the national treasury. In other words, through the conditional probation, TSMC effectively receives an amount equivalent to two-thirds of the fine, while the remaining one-third is paid to the treasury. In addition, for TEL Taiwan, such payments need not be made immediately but only within one year after the judgment becomes final and binding.

Determination of Corporate Criminal Liability

Li-Ming Chen, a former employee of TEL Taiwan, had previously worked as an engineer in TSMC's yield management department before joining TEL Taiwan. In order to improve the yield of etching equipment at his new employer, between 2023 and 2025 he repeatedly induced former colleagues to use their positions to access TSMC's internal systems, and to photograph and reproduce a substantial amount of confidential data, which was then used to enhance the performance of TEL Taiwan's equipment. These acts constituted trade secret misappropriation.

The court held that TEL Taiwan failed to fulfill its corporate responsibility to supervise its employees. According to the company's internal performance evaluations of Chen, comments such as "effectively leveraging existing client resources to obtain valuable information" and "able to collect customer and competitor information" were recorded. These evaluations indicated that TEL Taiwan was clearly aware that Chen might exploit prior relationships to obtain TSMC's internal information through improper means. See Article 13-4 of Taiwan Trade Secrets Act (providing "[w]here the representative of a juristic person, the agent, employee, or any other staff of a juristic person or natural person commits any of the crimes prescribed in Articles 13-1 or 13-2 in the course of business, not only the actor, but the juristic person or the natural person shall be punished with the fine prescribed [above]. However, if the representative of a juristic person or natural person has done his/her utmost to prevent a crime from being committed, the juristic person or natural person shall not be punished"). 

In other words, in light of these internal evaluation records, TEL Taiwan could not credibly claim that it was unaware of Chen's information-gathering activities or the resulting misappropriation of TSMC's trade secrets. Admittedly, in a commercial context, collecting customer or competitor information is not inherently unlawful. However, the key issue for establishing corporate criminal liability lies in whether the company knew or should have known that such information was obtained through illegal means, and whether it failed to adopt reasonable preventive measures. From this perspective, Taiwanese courts have increasingly emphasized the importance of corporate internal control systems and their effective implementation.

Grounds for Granting a Suspended Sentence

A key point of observation in this case lies in the court's criteria for granting a probation to a corporate defendant. Following the incident, TEL Taiwan actively cooperated with the prosecutor's investigation as well as its own corporate internal investigation. It also reached a settlement with the victim, undertook to pay substantial compensation for damages, and reviewed and implemented concrete measures to prevent similar conduct from recurring. Thus, the court agreed to grant TEL Taiwan a suspended sentence.

Policy Background: National Core Critical Technologies

With respect to the broader institutional background of trade secret protection, Taiwan's National Science and Technology Council announced amendments in 2025 to the "National Core Critical Technologies" list, expanding its scope to include key sectors such as semiconductors, artificial intelligence, and cybersecurity, and strengthening the protection mechanisms for such technologies.

This development underscores Taiwan's recognition of the importance of certain industrial technologies to national security and economic development. In future cases, such policy considerations may influence how Taiwanese courts assess sentencing in corporate criminal liability cases.

How Should Foreign Corporations Respond to Corporate Criminal Liability in Taiwan?

In Taiwan, it is practically difficult for a corporation to prove that it has exercised sufficient diligence to prevent unlawful conduct so as to be exempted from corporate criminal liability. Moreover, unlike the U.S., there are no explicit statutory provisions granting sentence reductions for cooperating with internal corporate investigations.

However, as illustrated by the landmark case involving TSMC, when employees of a foreign corporation are implicated in trade secret violations, the foreign corporation should promptly and proactively cooperate in conducting internal investigations, provide relevant information, and seek to reach a settlement with the victim company. Under such circumstances, Taiwanese courts may be willing to grant a probation to the corporate defendant. Furthermore, through the mechanism of conditional probation, corporate defendants have the opportunity to negotiate with the court for acceptable conditions.

Accordingly, actively cooperating in internal investigations and achieving a settlement remains one of the most effective strategies for corporations to mitigate legal liability.