Recently, China and the U.S. have reached some meaningful
commitments on minimizing trade secrets misappropriation and
protecting intellectual property during their Joint Commission on Commerce and Trade.The
commitments represent a step forward for trade secrets protection
between the U.S. and China. Many U.S. companies, however, still
complain that they are burdened by intricate laws and litigation
regarding trade secret misappropriation in China. Here's a
primer on Chinese trade secrets law, which is often
In order to qualify for trade secrets protection, the
information must first be shown to fit within the statutory
definition of trade secrets. A plaintiff is required to
specifically identify the information it seeks to protect, and then
it must begin the challenging task of proving that the information
it seeks to protect fits within the four-part statutory definition
of the term "trade secrets." Article 10 of the
"Anti-Unfair Competition Law of China"
defines a "trade secret" as technological or business
operational information that (a) is unknown to the public; (b) can
bring economic value; (c) has practical utility; (d) has been
safe-guarded as secret using reasonable measures. Generally, the
plaintiff could easily satisfy the burden to prove the economic
value and utility of the alleged trade secrets. Therefore, the
focus will normally be on the elements of "unknown to the
public" and "reasonable measure" to keep
As a threshold requirement to fit in the statutory definition,
the plaintiff must show that the information is not known to the
public—more specifically, to the relevant people in the
relevant area. However, there are no universal standards on how to
prove that. Depending on the court, plaintiffs have different
burdens to prove trade secrets misappropriation. For example,
Beijing High People's Court holds the opinion that the element
of "unknown to public" is a rebuttable element. The
plaintiff will only be required to identify the trade secrets it
seeks to protect at the early stage of the litigation. Then, the
burden of proof shifts to the defendant, namely, if the defendant
fails to provide rebutting evidence to show the information is
publicly known, the court will recognize the information as
"unknown to public." To the contrary, Fujian High
People's Court does not shift the burden of proof because it
violates the evidence principle of "he who asserts must
prove" in civil procedure. As yet another example, Jiangsu
High People's Court requires the plaintiff to list the specific
content of alleged trade secrets and compare with public knowledge,
placing a higher burden of proof on the plaintiff.
It is not enough that trade secret information is "not
known to the public." A plaintiff must also show that
reasonable protective measures have been taken by the right owner
to keep the information in secret. According to Article 11,
Paragraph 1 of "Interpretation of the Supreme People's Court
on Certain Issues Concerning the Application of Law in the Trial of
Civil Cases Involving Unfair Competition,"
confidentiality measures should be efficient and appropriate to the
value of its business. Similar to the element of "unknown to
public," courts have varying standards on the burden to prove
confidentiality measures. Beijing High People's Court says that
the court should recognize confidentiality measures if the
plaintiff strictly limits people's access to the alleged trade
secret, only gives authority to those who need to use the
information, sets up password to access the information, and takes
other similar measures. The Beijing High People's Court also
recognizes a plaintiff's practice of using confidentiality
clauses or agreements with others who could access confidential
information as a kind of confidentiality measures. Other courts,
however, hold different views on whether confidential clauses could
fit within reasonable measures. A number of courts hold that, if
the plaintiff only requires generalized clauses in its employment
contracts, such as the "employee shall keep the company's
trade secret," but does not specifically describe the scope of
the trade secret, the courts will not recognize the clauses as
reasonable measures or as evidence to prove malice intent of the
other party. Zhejiang High People's Court, on the other hand,
recognizes reasonable measures in accordance with the relevant
industry standards, including the form, objective and scope of the
Disputes regarding identification of alleged trade secrets are
common in trade secrets litigations in China. Courts thus far have
not articulated a uniform set of standards and guidelines to
address the problem.
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.
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