Your Taiwan Subsidiary Shares the Parent's Code With a Chinese Customer: Trade Secret Exposure and the MOEA Permit

A field engineer at the Taiwan subsidiary of a U.S. equipment maker drops a shared-folder link into a chat with a customer's plant in Jiangsu. The folder holds the parent's firmware source and calibration scripts, and the customer wants its line running again before the weekend (an invented example). Nobody sees a contract issue. It is a support ticket.

Taiwan law sees two. Whose secret is this, and did the mainland customer just receive a license?

The parent owns the secret, the subsidiary holds it

Where the group uses an intercompany license (the parent owns the code, the Taiwan subsidiary may use it), Article 7 of the Trade Secrets Act leaves the territory, term, scope and manner of a license to the parties, and it forbids a licensee to sublicense a trade secret to a third party without the owner's consent. Giving a customer working access to source files can look a lot like a sublicense.

Article 13-1, paragraph 1, item 2 makes it a crime to copy, use or disclose a trade secret "without authorization or beyond the scope of authorization." The act alone is not enough. The person must also intend to obtain an unlawful benefit for themselves or a third party, or to harm the owner. A support ticket answered in a hurry puts exactly that question on the table. The base penalty is up to five years in prison or short-term detention, plus an optional fine of NT$1 million to NT$10 million. Intent to use the secret in a foreign country, mainland China, Hong Kong or Macau moves the case to Article 13-2: one to ten years, an optional fine of NT$3 million to NT$50 million, attempts punishable, and a fine that can rise to two to ten times the gain when the gain exceeds the cap.

Two details change how a U.S. parent experiences this. Article 13-3 makes only the Article 13-1 offense depend on a complaint by the victim; Article 13-2 is missing from that list. A parent that would prefer a quiet settlement with a former engineer does not control whether prosecutors go ahead.

Then there is Article 13-4. When an employee commits either offense in the course of business, the employer is fined as well, unless its representative made every effort to prevent it. In the scene above, the employer is the parent's own Taiwan subsidiary. The group can end up as victim and defendant in the same file.

Closer to the Economic Espionage Act than it looks?

Not quite. The federal economic espionage offense in 18 U.S.C. § 1831 turns on intending or knowing that the theft will benefit a foreign government, foreign instrumentality or foreign agent, with a fine of up to $5 million, up to 15 years in prison, or both, for individuals and, for organizations, the greater of $10 million or three times the value of the secret. Taiwan's Article 13-2 asks a different factual question: where was the secret meant to be used? A commercial customer in Jiangsu is enough. No state beneficiary is required.

Taiwan's version of the state-linked offense sits in the National Security Act, and only for "national core key technologies" that the Executive Yuan has announced. Article 3, paragraph 1 covers acts done for foreign, mainland, Hong Kong or Macau actors or hostile forces, or for organizations they set up or substantially control; paragraph 2 covers intended use in those places. Article 8 sets five to twelve years for the first and three to ten for the second, and its paragraph 7 fines the employer too, with the same prevention defense.

A license to a mainland customer can need a permit

Now set the customer's identity against a different statute. Article 35 of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area lets Taiwan people, juristic persons and other bodies invest or engage in "technical cooperation" in the mainland with a permit from the Ministry of Economic Affairs (MOEA), with projects split into prohibited and general categories. A U.S.-owned subsidiary incorporated in Taiwan is a Taiwan juristic person; the Company Act, Article 1 defines a company as a juristic person organized and registered under that Act.

Technical cooperation is broader than a joint venture. Article 4 of the implementing Regulations defines it as directly or indirectly transferring or licensing know-how, patent rights or computer program copyrights to mainland people or entities. A paid software license to the Jiangsu plant fits. The definition also says "directly or indirectly," and for technical cooperation the Regulations do not say where "indirectly" stops.

The permit comes first (Regulations, Article 6). After approval, the company reports the start date within six months of starting (Article 8, paragraph 3) and reports any suspension within two months (Article 10, paragraph 1). Skipping the permit brings Article 86 of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area into play: an administrative fine of NT$50,000 to NT$25 million in either category. For general-category projects, the authority may also set a deadline to stop or correct and impose repeated fines if the deadline is missed. For prohibited-category projects, it may set a deadline to stop; failing to stop by then, or repeating the same violation after stopping, exposes the person responsible to up to two years in prison or short-term detention, a criminal fine of up to NT$25 million, or both.

Beijing's draft points the other way

China's Ministry of Commerce published a draft "Special Provisions on Protecting Chinese Trade Secrets" for public comment on October 26, 2026, with comments due November 24 (MOFCOM notice; Central News Agency report). It targets "foreign entities," defined in draft Article 3 as foreign enterprises, other organizations or individuals, that infringe Chinese trade secrets in international business in a way that harms or actually threatens China's sovereignty, security or development interests. Draft Article 5 lists responses: limits on trade in goods, technology and services, on new investment in China, on entry of personnel, and on their work permits and residence status, plus fines.

Your U.S. parent is plainly a foreign enterprise. Whether a Taiwan subsidiary is one, the draft does not say. Draft Article 9 matters to any customer relationship: a Chinese company that needs to deal with a sanctioned foreign entity must apply to the ministry and obtain consent.

Timing gives context, not proof of motive. Six days before the draft, on October 20, a MOFCOM spokesperson objected to sanctions that, in the ministry's account, the United States imposed on five Chinese companies on October 19 local time under the Protecting American Intellectual Property Act, citing trade secret theft (MOFCOM statement). The draft itself is not law. Its Article 10 says the rules would take effect on promulgation; there is no final text.

What the paperwork can carry

The intercompany license is the first document to reread. Does it allow the subsidiary to let customers use source code, and in which places? The customer agreement can then name the site, the equipment and the term, which is what Article 7 lets the parties set. A schedule of each side's background technology, plus dated records of independent development, answers a future claim from either direction, including one under the Chinese rules if they are adopted.

Deletion is worth a clause of its own. Article 13-1, paragraph 1, item 3 punishes a holder who, after the owner has told it to delete or destroy a trade secret, fails to do so or hides it, again only with the intent described above. A written deletion demand at the end of the project gives that provision something to attach to. Where an MOEA permit is needed, making it a condition before any code is delivered keeps the support ticket from becoming the license.

A Taiwan lawyer can review the intercompany license and customer agreements, map which transfers to mainland parties need an MOEA permit and handle the application and reports, update internal trade secret controls, and respond when an investigation or complaint begins. Consultations with an English-speaking lawyer in Taipei are available through Hovering International Law Firm at wei@hoveringlaw.com.tw; see our intellectual property and investment pages. Taipei office: 7F-2, No. 35, Sec. 1, Chengde Rd., Datong Dist., Taipei City 103 (臺北市大同區承德路一段35號7樓之2). Civil remedies after a leak, including injunctions, are covered in Trade Secret Litigation in Taiwan.

That shared folder link has an access log. In Taiwan, it may be the first exhibit for both the permit question and the trade secret one.

Sources

Checked October 27, 2026.

• Trade Secrets Act (營業秘密法), Article 7
• Trade Secrets Act, Article 13-1
• Trade Secrets Act, Article 13-2
• Trade Secrets Act, Article 13-3
• Trade Secrets Act, Article 13-4
• National Security Act (國家安全法), Article 3
• National Security Act, Article 8
• Act Governing Relations between the People of the Taiwan Area and the Mainland Area (臺灣地區與大陸地區人民關係條例), Article 35
• Act Governing Relations between the People of the Taiwan Area and the Mainland Area, Article 86
• Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area (在大陸地區從事投資或技術合作許可辦法), Article 4
• Regulations, Article 6
• Regulations, Article 8
• Regulations, Article 10
• Company Act (公司法), Article 1
• 18 U.S.C. § 1831, Economic espionage (U.S. Government Publishing Office, govinfo)
• Ministry of Commerce of the PRC, Department of Treaty and Law, notice seeking comments on the draft Special Provisions on Protecting Chinese Trade Secrets, with draft attached (October 26, 2026)
• Ministry of Commerce of the PRC, spokesperson's remarks on U.S. sanctions against Chinese companies (October 20, 2026)
• Central News Agency (中央社), report on the draft (October 26, 2026)