By Xu Jing, Zhang Chao, King & Wood Mallesons’ Intellectual Property group

The Supreme People’s Court and the Supreme People’s Procuratorate of the People’s Republic of China promulgated the two following judicial interpretations (see Annex) formally in in September 2020, which are related to trade secrets:

  1. Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Trade Secret Infringement (“Provisions on Trade Secret Civil Cases”);
  2. Interpretation (III) of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning Specific Application of Law in Handling Criminal Cases of Intellectual Property Infringement (“Interpretation (III) on IP Criminal Cases”)

Compared with the Draft for Public Comments published on June 10, 2020, the title of Provisions on Trade Secret Civil Cases was amended into “Provisions” from “Interpretation”. As regards the contents, Provisions on Trade Secret Civil Cases adjusted and refined some terms and expressions of several articles, incorporated the provisions relating to trade secret in the Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition (“2007 Interpretation”), with the main amendments as follows:

  • Article 2 of Provisions on Trade Secret Civil Cases incorporates the second paragraph of Article 13 of 2007 Interpretation. That is, “where a client enters into any transaction with the entity for which an employee works based on his/its trust in the employee, after such employee resigns, if it can be proven that the client, of his/its own accord, chooses to enter into any transaction with such employee or the new entity for which such employee works”, the people’s court shall determine that such employee did not adopt improper means. Meanwhile, Article 2 deleted the exception of “unless the former entity and the employee have an agreement otherwise”.
  • Provisions on Trade Secret Civil Cases deleted the original Article 8 of the draft in relation to allocation of evidence proof burden, which has been stipulated in the Anti-Unfair Competition Law (2019 Amendment), and deleted the original Articles 28 and 29 in relation to jurisdiction, which is regulated by the Civil Procedure Law and relevant judicial interpretations.
  • Provisions on Trade Secret Civil Cases deleted the original Article 12 of the draft, which provided that the authorized keeper or user of a trade secret constitutes the act of “disclosing” trade secrets if the trade secret is obtained by others because of its willfulness or gross negligence.
  • Provisions on Trade Secret Civil Cases deleted the original Article 19 of the draft, which provided that the infringement liabilities may be exempted if a trade secret is disclosed to relative authorities for public interests or prevention of crimes.
  • Provisions on Trade Secret Civil Cases deleted the original Article 21 of the draft, which provided that the right owner shall specify the contents of the trade secret when applying for a preliminary injunction, and deleted the original Article 22 in relation to revocation of a preliminary injunction.
  • Provisions on Trade Secret Civil Cases deleted the original Article 30 of the draft, which provided that the Chinese law shall apply when a Chinese court tries a trade secret civil case.
  • Provisions on Trade Secret Civil Cases deleted the first paragraph of the original Article 30 of the draft, which provided that the damages shall be determined based on the proportion, contribution of the trade secret to the entire technical solution, the entire complete product or the business activities.
  • In Article 13 of Provisions on Trade Secret Civil Cases (the original Article 14 of the draft), “whether there is any substantial difference between the accused infringing information and the trade secret in terms of use, method of use, purpose or effect, etc.;” is added as one factor which a court may consider when determining whether the accused infringing information and the trade secret are substantially identical.

Compared with the Draft for Public Comments published on June 17, 2020, the main amendments to articles relating to trade secret of Interpretation (III) on IP Criminal Cases are as follows:

  • The acts of “illegal copying, unauthorized use or use beyond authorization of a computer information system” are categorized to an act of “stealing”.
  • The monetary threshold for concluding a crime of trade secret infringement is lowered from RMB 0.5 million to RMB 0.3 million[1].
  • Interpretation (III) on IP Criminal Cases deleted the original Article 6 of the draft, which provided that the losses or the illegal gains shall be determined based on the proportion, contribution of the trade secret to the entire technical solution, the entire complete product or the business activities.

The above judicial interpretations came into force respectively as of September 12 and 14. The formally promulgated Provisions on Trade Secret Civil Cases is the first comprehensive and systematic judicial interpretation that is specialized for trade secrets, which will be helpful for unifying the criteria of law application for the Chinese courts in trying civil cases of trade secret infringement. The two judicial interpretations added many provisions that are favorable for right owners of trade secrets, especially for the monetary threshold for concluding the crime of trade secret infringement is lowered from RMB 0.5 million to RMB 0.3 million, which will increase the chance for right owners in successfully enforcing trade secret and will definitely strengthen the strikes against trade secret infringement and crimes in China.

 

Annex: Reference translations of texts of the two interpretations.

 


[1] Correspondingly, the Supreme People’s Procuratorate and the Ministry of Public Security published Decision on Amendments to Criteria for Acceptance and Prosecution of Criminal Cases of Trade Secret Infringement on September 17, 2020, which also lowered the monetary threshold to RMB 0.3 million for pursuing criminal cases of trade secret infringement.