Can a Non-compete Clause Outrun its Contractual Shelf Life?

September 9, 2015

In a court decision handed down by the highest court (the "Court") in Taiwan recently, it affirms the lower court's decision that virtually permits the non-compete clause in the employment contract to outrun its shelf life.  Parties to the suit are the semiconductor foundry TSMC, the Plaintiff, and its former director of R&D, the Defendant. The Court held that the Defendant shall not work for the Plaintiff's competitor, i.e. Samsung, in Korea until after December 31, 2015, shall not divulge to Samsung any of the Plaintiff's trade secrets as well as any information of the Plaintiff's R&D personnel who involved in its advance fabrication processes.   

The Defendant was employed by the Plaintiff during the period of from 1992 to February of 2009.  During the employment, the Defendant was involved in the development of many advanced fabrication technologies including valuable patents.  After the Defendant left the Plaintiff, he first landed a teaching job at Sungkyunkwan University, a university sponsored by Samsung, in October of 2010, and in July 2011 he joined Samsung as the deputy director of R&D.  Before formally joining Samsung, the Defendant claimed 46 million dollars' worth of TSMC's stocks for his compliance with the non-compete clause (the term of which ends in February 2011).  In the suit, the Plaintiff showed that the Defendant revealed to Samsung the Plaintiff's FinFET technology to enable to a 6-month lead by Samsung in the 16 nm fabrication and thus, injured the Plaintiff.  In essence, the Court found in the favor of the Plaintiff the following facts, among other things, that (i) during the period of from August 2009 to April 2011, the Defendant, while only taught 3 hours of class each week at Sungkyunkwan University, he stayed in Korea for 340 days out of the entire period in question (totaling 630 days); (ii) the birthday party invitations sent by the Defendant's wife was from an email address belonging to Samsung; and (iii) at Sungkyunkwan University where the Defendant taught, there were many Samsung's senior employees at the time.  

This decision shows that in appropriate circumstances, Taiwan court is and ready and willing to extend the agreed term of the non-compete clause for additional time if there is a high likelihood of sensitive trade secrets being divulged and there are serious doubts as to the full compliance of the non-compete clause by the departed employee.