In the last article, we sorted out the main provisions on the scope of application, definition and infringement of trade secrets in the Draft. 

For the second part, we will brief the followings of the investigation and punishment of suspected infringement of trade secrets and the legal responsibility for infringement of trade secrets.

Chapter IV - Investigation and punishment of suspected infringement of trade secrets

  1. Legal conditions of trade secrets and preliminary evidence of infringement of trade secrets

When the obligee thinks that his trade secret has been infringed, he shall provide the relevant Market Supervision Administration ("MSA")  with the business information that meets the legal conditions of trade secret, including but not limited to:

  • development process and completion time of trade secret;
  • the carriers, forms and contents of trade secrets are unknown to the public;
  • the commercial value of trade secrets;
  • the protection measures of trade secrets.

Meanwhile, if the obligee submits one of the following materials, which shall be deemed that he has provided preliminary evidence reasonably indicating that his trade secret has been infringed:

  • there is evidence that the suspected infringer has channels or opportunities to obtain trade secrets, and the information used by the suspected infringer is essentially the same as that of the oblige;
  • there is evidence that the suspected infringer has channels or opportunities toobtain trade secrets, and the confidential facilities are damaged by thesuspected infringer by improper means;
  • there is evidence that the trade secrets have been disclosed or used by the suspected infringer, or there is a risk of disclosure and use;
  • the obligee has submitted statements, confessions, expert opinions, evaluation reports and other evidences formed in civil, criminal or other legal procedures related to the case, which are used to reasonably show that his trade secrets have been infringed.

COMMENT: When the obligee claims that his trade secrets have been infringed, firstly he should prove to the relevant department that the business information he owns conforms to the three characteristics of trade secrets, that is, it is unknown by the public, has commercial value  and the obligee takes corresponding confidentiality measures. 

This is also consistent with the determination of trade secrets stipulated in the Anti-unfair Competition Law. 

Secondly, for the infringement of the obligee's trade secrets, the weight of evident of the materials submitted by the obligee only needs to reach "the preliminary evidence reasonably indicates that his trade secret has been infringed", and no damage result is required.

As for the requirement to prove that the information used by the infringer is essentially the same as the obligee's trade secrets, we can refer to Article 13 of the provisions of the Supreme People's Court on Several Issues concerning the application of law in the trial of civil cases of infringement of trade secrets implemented in September 2020. 

In determining whether the information used by the infringer is essentially the same as that of the obligee, the following factors can be considered, including but not limited to:

  • the similarities and differences between the accused infringing information and trade secrets;
  • whether it is easy for the relevant personnel in the field to think about that the difference between the accused infringement information and the trade secrets when the accused infringement occurs;
  • whether there is any substantial difference between the accused infringing information and trade secrets in terms of use, use mode, purpose and effect;
  • information related to trade secrets in the publics.

Compare with litigation, it is more flexible and convenient for the obligee to report the infringement of trade secrets to the MSA. If the administrative intervention is carried out earlier, the trade secrets of the obligee can be protected in time.

  1. Circumstances in which the suspected infringer is unable to provide or refuses to provide evidence:
  • the suspected infringers, interested parties and witnesses shall truthfully provide relevant evidence to the MSA;
  • if the obligee can prove that the information used by the suspected infringer is essentially the same as the trade secrets claimed by himself, and can also prove that the suspected infringer has the right to obtain his trade secrets.

However the suspected infringer cannot provide or refuse to provide the information used by him is evidence obtained or used legally, the MSA may, on the basis of relevant evidence, determine that the suspected infringer has infringement behavior.

COMMENT: The above-mentioned defines the distribution of burden of proof. The obligee should prove that the information used by the suspected infringer is essentially the same as the trade secrets claimed by himself, and the infringer has the conditions to obtain the trade secrets. 

The proof of the foregoing said contents by the obligee is the requirement of the above "preliminary evidence". 

After that, the burden of proof will be on the suspected infringer. If the suspected infringer fails to provide or refuses to provide evidence, the infringement can be deemed to be established.

  1. Evidence preservation
  • Upon application and preliminary proof provided by the obligee, the MSA may seal and detain the evidence which may be found as infringement of trade secrets during the process of law enforcement investigation, including but not limited to the email, chat record, storage medium, infringing goods and equipment, internal sending and meeting minutes, etc.
  • If the infringement of trade secrets involves computer technology, the relevant computer server, host computer, hard disk and other storage devices shall be seized, and the evidence shall be fixed in time by means of copying, mirror image, camera shooting, screen capture and data recovery.

COMMENT: The MSA may adopt administrative compulsory measures to preserve the relevant evidence. For the infringement of trade secrets involving computer technology, the storage equipment must be seized to fix the evidence. 

For the computer technology, which includes the basic principle of operation method and arithmetic unit, instruction system, CPU design, pipeline design and storage system etc.

  1. Guarantee of ordering to stop infringement

In the process of investigating and dealing with trade secrets infringement cases, if the suspected infringer illegally discloses, uses or allows others to use the trade secrets, which will cause irreparable loss to the obligee, the obligee may request and shall issue a written guarantee of voluntary liability for the consequences of compulsory measures, and the MSA may order the suspected infringer to stop selling and using the obligee's trade secrets to produce the products.

COMMENT: The above-mentioned makes it clear that under the premise that the obligee meets the conditions, even if the infringement fact of the suspected infringer has not been found out, the obligee can apply for the MSA to intervene in advance to protect his own rights and interests by issuing a written guarantee of liability for the consequences of compulsory measures.

Chapter V - Legal Responsibility

For the act of infringing on trade secrets, it shall be punished in accordance with Article 21 of the Anti-unfair Competition Law. That is, order to stop the illegal act, confiscate the illegal income, and impose a fine of 100,000-1,000,000 yuan. If the circumstances are serious, a fine of 500,000-5,000,000 yuan shall be imposed. 

The following main circumstances can be regarded as "serious circumstances"  mentioned above:

  • where the loss of the obligee exceeds 500,000 yuan due to infringement of trade secrets;
  • where the profit exceeds 500,000 yuan due to infringement of trade secrets.

COMMENT: In Article 4 of the Interpretation of the Supreme People's court and the Supreme People's Procuratorate on Several Issues concerning the specific application of law in handling cases involving infringement of intellectual property rights (3), which is clear that if the amount of loss caused to the obligee of trade secrets or the amount of illegal gain of the infringer is more than 300,000 yuan, it shall be deemed as "causing significant loss to the obligee of trade secrets". 

In this draft, the amount of loss or profit is set at more than 500,000 yuan. Therefore, in terms of strengthening the crackdown on the infringement of trade secrets, it is more conducive to the protection of trade secrets to revise the amount of loss and profit to 300,000 yuan.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.