Answer: Proving that the defendant has infringed upon trade secrets is another necessary condition for right holder to pursue their legal liability. Different types of trade secret infringements have different evidentiary characteristics.
The Anti-Unfair Competition Law of 2019 stipulates that the infringement of trade secrets includes acquiring trade secrets by unlawful means (theft, bribery, fraud, coercion, etc.), disclosing trade secrets, or using or allowing others to use trade secrets in violation of laws or agreements, and that a third party acquiring, disclosing, using or allowing others to use trade secret knowing of other¡¯s unlawful infringement of trade secret.1The first paragraph of Article 9 of the 2019 Anti-Unfair Competition Law stipulates: “An operator shall not commit any of the following acts of infringing upon trade secrets: (1) obtaining the trade secrets of the right holder by theft, bribery, fraud, coercion, or other unjustified means; (2) disclosing, using or allowing others to use the trade secrets of the right holder obtained by the means mentioned in the preceding item; (3) disclosing, using or allowing others to use the trade secrets in violation of the agreement or the requirements of the right holder to keep the trade secrets. The second paragraph of this article stipulates: “If a third party knows or should have known that the acts of an employee or former employee of the right holder of a trade secret or of other companies or individuals has committed the illegal acts listed in the preceding paragraph, but still obtains, discloses, uses or allows others to use the trade secret, it shall be deemed to infringe upon the trade secret.”Therefore, we can categorize infringements of trade secrets into three types: acquisition infringement, disclosure infringement, and use (including allowing others to use) infringement.
Acquisition and disclosure infringements only involve the initial stage of any use infringements. Tortfeasors illegally obtains the trade secret of the right holder or unlawfully discloses it to a third party, while the tortfeasors or the third party have not yet used the trade secrets. The right holder needs to provide evidence of the tortfeasor’s acquisition or disclosure of trade secrets.2Beijing Anbiqi Biotechnology Co., Ltd. and Tang yuanyuan Labor Dispute Retrial Review and Trial Supervision Civil Ruling Beijing High Court Civil Ruling (2022) Jing Min Shen No.7501. The court held that the employer had the obligation to prove that employees had access to trade secrets and that employees had used and disclosed trade secrets.
For example, in the case of Li Yuanli before Shenzhen Intermediate Court in 2015, the employee transferred financial data and confidential technical materials of the listed companies to his personal mailbox, and established a company for the same business as the employer, before his resignation. The court found that the plaintiff had proved that the employee had stolen trade secrets and that the employee must compensate for RMB 30,000.3Shenzhen Huatai Testing Technology Co., Ltd. and Kong Lei, Li yuanli, Shenzhen Yingbo Testing Technology Co., Ltd. Civil Judgment of the Second Instance of Infringement of Trade Secrets Civil Judgment of Shenzhen Intermediate People’s Court of Guangdong Province (2015) No.1222. The employee transferred the financial data and confidential technical materials of his employer, a listed company to his personal mailbox and then set up a company with the same business as the company. The court found that the plaintiff had proved the trade secret and the theft of trade secret by the employee, and that the employee should compensate RMB 30,000.
These two types of cases rarely involve the comparison between the right holder’s trade secrets and the information the tortfeasor acquired or disclosed, and the focus of proof is on the tortfeasor’s behavior of acquisition or disclosure and the evidence of their illegal possession of the trade secrets.
The third type is use infringement. That is to say, the tortfeasor not only acquires or discloses trade secrets (mainly technical secrets), but also actually has used the trade secrets. Use infringement is the most common type of infringement, which is characterized by the fact that the tortfeasor’s unlawful acts of acquisition or disclosure are difficult to detect, and that the right holder can only trace the infringement from the production process or results of the tortfeasor¡¯s use of trade secrets.
The right holder pursuing use infringement usually needs to prove that the tortfeasor’s production equipment, process, and final products or service process are relevant to the use of the trade secret. The proving process is usually to compare the trade secret with the aforementioned production equipment, service type, and the final product or service result to see whether the confidentiality points of the right holder¡¯s trade secret is identical or substantially identical as the technical features of the information accused of infringement, 4The civil judgment (2013) Hu Gao Min San (Zhi) Zhong Zi No.93 of Shanghai High Court in the case of the dispute over the infringement of trade secrets between ST International Group and Xu Jie. The court held that in order to determine whether the trade secret of the right holder is infringed, it is first necessary to determine whether the technical information actually used by the alleged tortfeasor is identical or substantially identical as the trade secret of the right holder.comparing the differences in content features, uses, purposes, and effects while considering the influence of public information, third party owned information, and creative or non-creative changes.5Article 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 (FaShi (2020) No.7). ¡°Where there is no substantial difference between the alleged infringing information and the trade secret, the people’s court may determine that the alleged infringing information and the trade secret are substantially identical as referred to in Paragraph 2 of Article 32 of the Anti-Unfair Competition Law. The people’s court may consider the following factors when determining whether the alleged infringing information is substantially identical as the trade secret as mentioned in the preceding paragraph: (1) the degree of similarities and differences between the alleged infringing information and the trade secret; (2) whether the relevant persons in the field are likely to think of the difference between the accused infringing information and the trade secret at the time of the alleged infringement; (3) Whether there are substantial differences in the use, mode of use, purpose, and effect between the alleged infringing information and the trade secret; (4) the information related to the trade secret in the public domain; (5) other factors that need to be considered.¡±For the technical secrets of the source code of computer software, the court can even use the specific technology of comparing software to compare the computer software of the plaintiff and the defendant.6The High Court of Guangdong Province Released the Fourth of Six Typical Cases of Protecting Trade Secrets: Weidi Company v. Li Mouliang and Bell Company Infringement of Technical Secrets ¡ª Solving the “Difficulty of Infringement Comparison” in the Protection of Software Source Code Technical Secrets.
It should be noted that the defendant’s use of the right holder’s trade secrets does not necessarily mean that the comparison results of the two are identical or substantially identical. If the defendant uses the trade secret of the right holder with partial innovation and transformation, the result of comparison may not be substantially identical. In this case, the defendant still constitutes an infringement of trade secrets.7 Jiaxing Zhonghua Chemical Co., Ltd., Shanghai Xinchen New Technology Co., Ltd. and Wanglong Group Co., Ltd., Ningbo Wanglong Science and Technology Company Limited, Xifu Shiwanglong Spices (Ningbo) Company Limited, Fu Xianggen, the Civil Judgment of the Supreme People’s Court of the People’s Republic of China (2020) ZGFZMZ No.1667. “Use of a trade secret after modification or improvement of it, or adjustment, optimization, or improvement of relevant production and operation according to trade secrets, shall generally be found as use of the trade secret.”
That is to say, the key to comparison is to see whether the suspected infringing products (or production process) contain the confidentiality points of trade secrets, not necessarily all technical features of them.
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
Email: wangdong@royalaw.com
- 1The first paragraph of Article 9 of the 2019 Anti-Unfair Competition Law stipulates: “An operator shall not commit any of the following acts of infringing upon trade secrets: (1) obtaining the trade secrets of the right holder by theft, bribery, fraud, coercion, or other unjustified means; (2) disclosing, using or allowing others to use the trade secrets of the right holder obtained by the means mentioned in the preceding item; (3) disclosing, using or allowing others to use the trade secrets in violation of the agreement or the requirements of the right holder to keep the trade secrets. The second paragraph of this article stipulates: “If a third party knows or should have known that the acts of an employee or former employee of the right holder of a trade secret or of other companies or individuals has committed the illegal acts listed in the preceding paragraph, but still obtains, discloses, uses or allows others to use the trade secret, it shall be deemed to infringe upon the trade secret.”
- 2Beijing Anbiqi Biotechnology Co., Ltd. and Tang yuanyuan Labor Dispute Retrial Review and Trial Supervision Civil Ruling Beijing High Court Civil Ruling (2022) Jing Min Shen No.7501. The court held that the employer had the obligation to prove that employees had access to trade secrets and that employees had used and disclosed trade secrets.
- 3Shenzhen Huatai Testing Technology Co., Ltd. and Kong Lei, Li yuanli, Shenzhen Yingbo Testing Technology Co., Ltd. Civil Judgment of the Second Instance of Infringement of Trade Secrets Civil Judgment of Shenzhen Intermediate People’s Court of Guangdong Province (2015) No.1222. The employee transferred the financial data and confidential technical materials of his employer, a listed company to his personal mailbox and then set up a company with the same business as the company. The court found that the plaintiff had proved the trade secret and the theft of trade secret by the employee, and that the employee should compensate RMB 30,000.
- 4The civil judgment (2013) Hu Gao Min San (Zhi) Zhong Zi No.93 of Shanghai High Court in the case of the dispute over the infringement of trade secrets between ST International Group and Xu Jie. The court held that in order to determine whether the trade secret of the right holder is infringed, it is first necessary to determine whether the technical information actually used by the alleged tortfeasor is identical or substantially identical as the trade secret of the right holder.
- 5Article 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 (FaShi (2020) No.7). ¡°Where there is no substantial difference between the alleged infringing information and the trade secret, the people’s court may determine that the alleged infringing information and the trade secret are substantially identical as referred to in Paragraph 2 of Article 32 of the Anti-Unfair Competition Law. The people’s court may consider the following factors when determining whether the alleged infringing information is substantially identical as the trade secret as mentioned in the preceding paragraph: (1) the degree of similarities and differences between the alleged infringing information and the trade secret; (2) whether the relevant persons in the field are likely to think of the difference between the accused infringing information and the trade secret at the time of the alleged infringement; (3) Whether there are substantial differences in the use, mode of use, purpose, and effect between the alleged infringing information and the trade secret; (4) the information related to the trade secret in the public domain; (5) other factors that need to be considered.¡±
- 6The High Court of Guangdong Province Released the Fourth of Six Typical Cases of Protecting Trade Secrets: Weidi Company v. Li Mouliang and Bell Company Infringement of Technical Secrets ¡ª Solving the “Difficulty of Infringement Comparison” in the Protection of Software Source Code Technical Secrets.
- 7Jiaxing Zhonghua Chemical Co., Ltd., Shanghai Xinchen New Technology Co., Ltd. and Wanglong Group Co., Ltd., Ningbo Wanglong Science and Technology Company Limited, Xifu Shiwanglong Spices (Ningbo) Company Limited, Fu Xianggen, the Civil Judgment of the Supreme People’s Court of the People’s Republic of China (2020) ZGFZMZ No.1667. “Use of a trade secret after modification or improvement of it, or adjustment, optimization, or improvement of relevant production and operation according to trade secrets, shall generally be found as use of the trade secret.”