Answer: When an infringement of trade secret reaches a certain severe level, it may constitute a criminal offence. Criminal liability for infringement of trade secrets is the most severe form of liability and the most powerful means for the right holder of trade secrets to stop infringement. Minor trade secret infringements of course only attract civil liability (please refer to “What civil liabilities are trade secret infringers subject to?”) and/or administrative liability (please refer to “What administrative liabilities are trade secret infringers subject to?”)
According to the provisions of Article 219 of the Criminal Law of 2020 [Article 219 of the Criminal Law. “Whoever commits any of the following acts of infringing upon trade secrets, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years and shall also, or shall only, be fined; If the circumstances are especially serious, the person shall be sentenced to fixed-term imprisonment of not less than three years but not more than 10 years and shall also be fined: (1) obtaining the right holder’s trade secrets by theft, bribery, fraud, coercion, electronic intrusion, or other unjustified means; (2) disclosing, using, or allowing others to use the right holder’s trade secrets obtained by the means mentioned in the preceding paragraph; (3) disclosing, using, or allowing others to use the trade secrets in violation of the obligation of confidentiality or the requirements of the right holder to keep the trade secrets. Whoever, knowing the acts listed in the preceding paragraph, obtains, discloses, uses or allows others to use the trade secrets shall be regarded as infringing upon the trade secrets. “Right holders” as mentioned in this Article refers to the owner of trade secrets and the person who is permitted by the owner to use the trade secrets.”]and the supreme court¡¯s judicial interpretation of intellectual property criminal cases in 2020,[Article 4 of the Interpretation of the Supreme People’s Procuratorate of the Supreme People’s Court on Several Questions Concerning the Specific Application of Law in Handling Criminal Cases of Infringement of Intellectual Property Rights (III) (Fashi (2020) No.10). “Any of the following circumstances in committing the acts specified in Article 219 of the Criminal Law shall be deemed as ¡®causing great losses to the right holder of the trade secret¡¯ (1) having caused losses to the right holder of the trade secret, or having obtained illegal gains, of more than RMB 300,000 due to infringement of trade secrets; (2) having directly caused the right holder to go bankrupt or close down due to major operational difficulties; (3) having caused other great losses to the obligor of the trade secrets. If the amount of loss caused to the right holder of trade secrets or the amount of illegal gains from infringement of trade secrets is more than RMB 2,500,000, it shall be recognized as ¡®having caused especially serious consequences¡¯ as stipulated in Article 219 of the Criminal Law.”]the acts of criminal suspects that meet the following three conditions constitute a crime:
Firstly, the suspect’s behavior constitutes the infringement of trade secrets, including acquisition, disclosure, and use infringement. These three types of trade secret infringement under criminal law seem to be completely consistent with the trade secret infringements under civil law. Through the analysis of the two, we believe that the nature of trade secret tort under criminal law and civil law is completely the same
There are two differences between the statutory provision wordings of the civil infringement of trade secrets stipulated in the Anti-Unfair Competition Law of 2019 and the criminal infringement of trade secrets under the Criminal Law of 2020: the first is that the latter has one more illegal act, electronic intrusion, than the former. This does not constitute a difference between the two because obtaining other people’s trade secrets by means of electronic intrusion certainly constitutes a civil tort of infringing trade secrets. Second, on the issue of confidentiality obligation, the former stipulates “breach of agreement” (that is, confidentiality agreement) and the latter stipulates “breach of confidentiality obligation”. This again does not constitute a difference between the two, because the civil tort case before the Supreme Court of Qingdao Melloway Machinery and Equipment Import and Export Co., Ltd shows that infringing on statutory confidentiality obligation, even if no confidentially is in place, still constitutes an infringement of trade secret. Therefore, the two are completely consistent in the definition of the objective nature of tort.
Of course, civil and criminal cases are distinct in the standard of evidence. The former is subject to the standard of balance of probability, while the latter the principle of being beyond reasonable doubt, rendering the establishment of criminal infringement acts having a much higher threshold than the civil one.
Secondly, the infringement has caused certain consequence, including causing illegal income of the infringer or damages to the right holder at more than RMB 300,000 (around US$ 40,000), or directly resulting in bankruptcy of, or other major damages to, the right holder.
Thirdly, the criminal consciousness of the criminal suspect is “being knowing”. This is different from the state of “being knowing or should have known” of civil infringement of trade secrets stipulated in the Anti-Unfair Competition Law, which reflects the higher standard of illegality identification in criminal law than that in civil law. In fact, in the previous version of the Criminal Act 2017, the criminal consciousness for the crime of infringing trade secrets stipulated was still “being knowing or should have known” as that of the civil infringement.
If all the above criteria are met, the criminal suspect shall be found to have committed a crime and shall be sentenced to fixed-term imprisonment of not more than three years. The criminal suspect’s infringement of trade secrets causing losses to the right holder, or resulting in illegal gains of, more than RMB 2,500,000, shall be deemed as “causing particularly serious consequences”, and thus the criminal suspect shall be sentenced to three to seven years’ imprisonment.
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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