Stronger Protection for Trade Secrets – But Only with Proper Protection Measures in Place

Just last November, the U.S. Department of Justice charged a Chinese employee who had worked for Monsanto with theft of trade secrets for China. The existence of trade secrets is a prerequisite for winning an infringement lawsuit. Although China’s newly revised anti-unfair competition lawhas strengthened the protection of trade secrets, it is still challenging to prove the trade secret status in front of the court. The most important concerns of trade secret holders are the judgment criteria and the actions that a trade secret holder has to take.

According to the revised Anti-Unfair Competition Law, the concept of „commercial information” was added as the superordinate concept of business information and technical information. Therefore, certain information that was difficult to define as business information or technical information, but has commercial value, such as shareholders’ ratio, entrusted shareholding agreement, employee incentives, or certain financial information might be also protected as trade secrets now.  Although the scope of protection of trade secrets has been expanded, the essential requirements should still be met: Not known to the public, commercial value and confidentiality measures by right holder.

For the identification of not known to the public, the plaintiff must clearly define the object and the scope of trade secrets firstly. In practice, many plaintiffs failed to prove what the specifics of trade secrets are, which led to a lost lawsuit. Especially for technical information, it is necessary to prove the carrier of information. In addition, the technical information on the carrier is not all trade secrets. Therefore the court will also require the plaintiff to clarify specific confidential points as the core of the dispute.

For the identification of commercial value, the list of customers often becomes the focus of controversy. In a much-cited decision of the Guangdong Higher People’s Court is said, that if it is claimed that the list of customers constitutes a trade secret, it is necessary to provide evidence to prove that the list of customers has been invested a certain amount of manpower and material resources in its business process. In addition, the value added after repeated contacts and transactions has not been known to the public, such as a customer list that contains in-depth information, such as transaction habits, special requirements, the frequency of purchases or transaction history. The negative example is a simple list of customer names, addresses, and contact information.

Whether the right holder has taken reasonable measures is one of the statutory requirements for trade secrets protection. But what measures are reasonable? Firstly, the scope of the information protected as a trade secret must be clear, so that employees or partners can clearly recognize a trade secret and confidentiality obligation. Secondly, the measure should be sufficient to prevent the leakage of confidential information under normal circumstances. Just printing the word “Confidential” on paper works or putting a sign “Non-staff prohibited from entering” on the entrance will not be supported by court as a sufficient measure. Finally, the protection concept must be well-documented.

Picture: Unsplash / Roadtripwithraj

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