HTC workers held by Taiwan authorities

HTC employees were detained by Taiwan authorities after the smartphone maker alleged that some of its trade secrets were breached.

Five people, including four employees in research and development at HTC, were questioned as defendants after a complaint by the company, deputy chief prosecutor Huang Mou-hsin said by phone.

Two workers were detained while the others were released on bail, according to Huang. Shares fell as much as 6.7 per cent in Taipei before trading 5.1 per cent lower at NT$148.50 as of 11.32am.

HTC, which peaked in 2011, has plunged 88 per cent since then as it lost market share in smartphones to Samsung Electronics and Apple.

The Taoyuan City, Taiwan-based company has revamped marketing strategy and shuffled executives to rebuild the brand after its global ranking in smartphones fell to ninth.

“We believe the investigation and detention of HTC’s key R&D executives will have damaging impact on its new model roll- out in the next 6 months,” Richard Ko, an analyst at KGI Securities in Taipei, said in report to clients today.

HTC, the first maker of phones using software from Google, said its operations aren't affected and its fourth quarter products are on schedule, according to an e-mailed statement today.

The company filed complaints to the Ministry of Justice’s Investigation Bureau last month, accusing employees of leaking commercial secrets and using fake receipts to seek reimbursement, Huang said August 31.

Investigators searched HTC offices and the employees’ homes on August 30, according to Huang. Calls to Huang today weren’t immediately returned.

“Protecting the company’s proprietary and intellectual properties, privacy and security is a core fundamental responsibility of every employee,” HTC said in a statement on its website.

“The company expects employees to observe and practice the highest levels of integrity and ethics.”

The company didn’t specify what secrets were involved in the alleged breach.