Burden of Proof and Damage Assessment for Trade Secrets

In the rapidly changing innovative fields of technology, the protection of trade secrets is becoming increasingly important. Legislation in China currently offers different approaches to better protect one’s know-how. 

For example, the Interpretation (III) of Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases Involving Infringements upon Intellectual Property Rights, dated to september 12, 2020 provides, among other things, that in the case of infringement of trade secrets, investigation may be commenced if the damage caused to the right holder or the amount of illegal revenue reaches RMB 300,000, which has now been reduced from the previous judicial interpretation of RMB 500,000.

The amount of damage can be determined by a reasonable license fee for the trade secret. If there are no licensees through which the value of the trade secret can be determined, there is the possibility of an appraisal report by an appraisal body. This has already happened in 2019 in a case between two Chinese companies. The Jiangsu Provincial Higher Court ruled in favor of Sennics, a plastic additives manufacturer whose trade secrets were used without permission, in the first instance, and accepted the determined amount of damages from the appraisal report.

The latest version of the Anti-unfair Competition Law also redefines the burden of proof in trade secret litigation. If the injured party can prove sufficient measures to protect its know-how and the use of its trade secrets on a prima facie basis, the burden of proof shifts to the defendant.

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