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Source: US Global Legal Monitor

(Nov. 5, 2020) On September 10, 2020, China’s Supreme People’s Court (SPC) issued a judicial interpretation (JI) on civil enforcement of trade secrets. (SPC, Provisions on Several Issues Concerning the Application of Law in Handling Civil Cases of Trade Secret Infringement, Fa Shi [2020] No. 7.) This is the first JI issued by the SPC that covers solely civil trade secret cases, which were previously governed by the 2007 JI on unfair competition cases.

Trade secrets are “technical information (ji shu xin xi), business operation information (jing ying xin xi), and other commercial information that is not known to the public, has commercial value, and for which the trade secret owner has adopted corresponding measures to maintain its confidentiality,” according to article 9 of China’s 2019 revised Anti-unfair Competition Law.

Neither the Anti-unfair Competition Law nor the 2007 JI on unfair competition cases, however, specifies what information is technical information or business operation information. The new JI provides a list of examples of types of such information protected by the law. According to the JI, technical information includes “technology-related information such as structure, raw materials, components, formulas, materials, samples, patterns, new plant-variety breeding materials, techniques, methods or their steps, algorithms, data, computer programs and relevant documents.” Business operation information includes “information related to business activities such as original ideas, management, sales, financial affairs, plans, samples, bidding materials, customer information, and data.” (Art. 1.)

Article 2 of the JI states that if the party concerned claims that a particular customer is its trade secret only because the party maintains a long-term and stable trading relationship with the customer, the court must not uphold it. Moreover, if it can be proved that customers who have based their patronage of a company on the personal trust they hold for an employee of the company voluntarily choose to conduct transactions with that employee or the employee’s new company after the employee has left the first company, the court must not hold that the employee has used unfair means to obtain trade secrets from the first company.

The new JI further elaborates the meanings of the following elements of a trade secret defined by the Anti-unfair Competition Law: “not known to the public” under articles 3 and 4, “has commercial value” under article 7, and “the trade secret owner has adopted corresponding measures to maintain its confidentiality” under articles 5 and 6.

According to article 9 of the JI, the following activities constitute the illegal use of a trade secret: (1) directly using the trade secret in production or business activities; (2) using the trade secret after amending or improving it; or (3) adjusting, optimizing, or improving relevant business activities on the basis of the trade secret.

In civil proceedings, where the holder of the trade secret rights is unable to collect on its own any evidence in criminal proceedings related to the claimed trade secret infringement—such evidence is kept by the competent public security authority, procuratorial authority, or the court—the rights holder may apply to the court to investigate and collect such evidence, as long as doing so would not affect the ongoing criminal proceedings. The JI also requires that courts uphold rights holders’ claims to determine the damages in the civil case on the basis of the actual losses or illegal gains identified in the criminal judgment regarding the same trade secret infringement. (Arts. 22, 23.)

The new JI took effect on September 12, 2020. Where there is a discrepancy between provisions of any previous JIs and those of the new JI, the provisions of the new JI prevail. (Art. 29.)

China’s legal system is primarily based on the model of civil law, and decisions are binding only on the parties in the case. However, according to the Law on Legislation, the SPC and the Supreme People’s Procuratorate may issue JIs on the application of laws. JIs issued by the SPC have legal binding force, according to the 2007 Provisions of the Supreme People’s Court on the Work Concerning Judicial Interpretation.

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