I could be incorrect, and I don't normally advocate the spreading of misinformation, so please correct me if I'm wrong.
However, I was talking to a few high level players a few days ago and I think I finally have an understanding of Latent Effect.
Unlike a "Passive" effect which is constantly on, I BELIEVE Latent effect only triggers when you Hitpoints are in Orange or Red phase.
This would make sense from a logical point of view. After all, there isn't really an Active side to an item; if an item has +10 accuracy, this IS a perpetual, always on bonus. Thus, Latent would only get triggered if your health is in the low.
I apologize if I'm incorrect.