CHINA Law and Practice Contributed by: Chuanhong Long, Ji Liu and Xiao Jin, CCPIT Patent and Trademark Law Office
ing down of the right-holder of the trade secret due to major operational difficulties, it shall be deemed as “causing heavy losses to the right-holder of the trade secret”. If the amount of loss caused to the right- holder of the trade secret or the amount of illegal gains due to infringement of the trade secret is more than CNY3 million, it shall be deemed as “causing espe - cially serious consequences” as stipulated in Article 219 of the Criminal Law. For the infringement of trade secrets, both civil and criminal proceedings can be brought. Due to the stronger ability of the police to investigate and col - lect evidence, many plaintiffs will choose to report the case to the police first and obtain relevant evidence from them before proceeding with civil litigation. 1.15 Extraterritoriality Generally, trade secrets are territorial rights, and peo - ple cannot be prosecuted in China for misappropria - tion that occurs in other countries. However, if, eg, the trade secrets of a company located in China were stolen by electronic intrusion outside of China, it is possible that Chinese courts would have jurisdic - tion since the result of the infringement occurred in China. In addition, if an infringer steals a trade secret abroad and uses it in China in the course of business, the right-holder can sue before a Chinese court for infringement due to the infringer’s use of the trade secret. In addition, according to the principle of lex personalis applied in Chinese criminal law, if the per - petrator of the misappropriation is a Chinese company or individual, even if the misappropriation occurs in another country/region, a criminal lawsuit against the Chinese company or individual can be instigated. 2. Misappropriation of Trade Secrets 2.1 The Definition of Misappropriation In China, the condition for filing a trade secret infringe - ment lawsuit is to prove that the plaintiff is the holder or interested party (generally the licensee) of the trade secret; the alleged trade secret meets the definition of trade secret in Article 10 of the Anti-Unfair Competi - tion Law, namely, it belongs to technical or business information not known to the public, has commercial value and been kept confidential by the right-hold -
er by reasonable confidentiality measures; and the defendant has infringed trade secrets as stipulated in Article 10 of the Anti-Unfair Competition Law. For non- employees, it needs to be proven that the defendant used improper means. To file a trade secret infringement lawsuit, the right- holder does not need to prove that their trade secret has been used, but only that the defendant obtained the trade secret without permission. 2.2 Employee Relationships If the infringer of a trade secret is an employee who breaks the duty of confidentiality or disobeys the right- holder’s requirement to keep trade secrets and dis - closes, uses or allows others to use the trade secrets in their possession, it is an act of infringement of trade secrets. For employees, if there is a confidentiality agreement signed with the employer, the confiden - tiality obligation must be fulfilled. If there is no con - fidentiality agreement, the employee has a negative obligation of inaction – ie, to keep the trade secret, not to use it beyond the scope or authority, nor to disclose or allow others to use the trade secret. 2.3 Joint Ventures Based on the principle of good faith, joint venturers have a negative obligation of inaction – ie, the obliga - tion to keep each other’s trade secrets that become At present, there are no special provisions for indus - trial espionage in Chinese laws. Acts of stealing trade secrets are still dealt with in accordance with the Anti- Unfair Competition Law and Criminal Law. Similar to other intellectual property rights, remedies for trade secret infringement include damages and injunctions. 3. Preventing Trade Secret Misappropriation 3.1 Best Practices for Safeguarding Trade Secrets Regarding the best practice for protecting trade secrets, the relevant judicial interpretations give some suggestions: known during co-operation. 2.4 Industrial Espionage
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