Infrastructural Expectation of Trade Secret Protection

By Jody Lu, China IP,[Trade Secrets]

The 2007 elaborate interpretational definition of trade secrets by the 2007 Supreme People’s Court’s Interpretation on Certain Issues Relating to Application of Law Concerning Civil Trials of Unfair Competition Cases has proven inadequate to compensate legislative retardation and incomprehensiveness. To tackle the judicial awkwardness in dealing with trade secret issues, the industry is making stronger and stronger calls for legislative improvement. Meanwhile, the Supreme Court has completed its year-long research on trade secrets, together with the Strategies of Administrative Protection of Trade Secrets to be promulgated by State Administration for Industry & Commerce (SAIC), trade secrets protection may expect a breakthrough at judicial and administrative levels.
Supreme People’s Court: Judicial Interpretation Coming Soon
In February 2010, the Supreme People’s Court IP Tribunal initiated its own study on the subject of judicial solution for the protection of trade secrets, for which not only a special study group was formed, but also support was received from high courts of various provinces. Judge Kong Xiangjun, Chief Judge of the IP Tribunal, explained, “In recent years, more and more trade secret cases are filed in courts. Due to the special nature of the subject matter which requires a balance between the proprietary interest of trade secrets protection and workmen’s freedom of choice in job movement, many hard problems exist in the trial of trade secret cases. In order to provide guidance for the trial of trade secret cases, the Supreme People’s Court IP Tribunal decided to set up this special group to carry on studying the subject of judicial solution to the protection of trade secrets.
After more than a year, the study was completed in mid-April of 2011, resulting in a 500 page report (“Report”). It is said that the Report has covered all aspects of judicial protection of trade secrets, and proposed many solutions to, or feasible proposals for, difficult and complicated situations in judicial practices in cases involving trade secrets.
For example, the complaining party must carry the day on the issue of whether the proprietary information is “not known to the public.” However, because of the difficulties in carrying the burden, this standard may be lowered on a case by case basis. As to the issue of regulating expert testimony in trade secret cases, which has never received consensus, Judge Kong stressed, in conjunction with the Report, that the expert testimony is not necessarily the primary or the only means for determining technical facts; a judge must first of all make his own finding of facts, and the expert opinion is needed only when all other means have been exhausted in making such a finding on key issues of technical facts; that the subject matter of expert testimonies must be a specific technical issue under dispute, rather than issues of law or their application; that the application of law is the bread and butter for the judge, that it is judicially wrong to place the issues of application of law, including legal issues of ascertaining the proprietary right, the finding of infringement and determining trade secrets in the hand of an expert; and that the expert opinion, as a technical conclusion, must be subject to cross-examination and judicial scrutiny before it could be admitted as evidence.
However, the Court made no comment on whether a new judicial interpretation will be promulgated on the basis of the Report.
SAIC: Administrative Enforcement Strategy Is on the Way
Many enterprises choose to seek administrative remedies when facing trade secrets infringement.
Industrial and commercial administrative organs may issue injunction against the infringer from further sales or destruction of the infringing products produced under the trade secrets, to return the documents of trade secrets, or impose a fine between 10,000 to 200,000 yuan.
In fact, administrative enforcement has many obstacles to trade secrets protection because of the difficulties in the identification and obtaining of evidence. From 1993 to 2010, there were fewer than 1000 cases involving trade secrets investigated by industrial and commercial organs in China though they had nearly 500 thousand staff in total, which was less than 1% of all the cases involving unfair competition.
The Antimonopoly and Anti-unfair Competition Enforcement Bureau of SAIC has played an important role in trade secrets protection as administrative law enforcement institutions. Wei Li, Deputy Director of the Bureau commented, “Although there are many difficulties in and obstacles to our law enforcement, we have made our continuous efforts to push the amendment of Law of the People’s Republic of China against Unfair Competition.
Furthermore, we have drafted the Administrative Enforcement Strategy for Trade Secret Protection to overcome the obstacles before amendment.”
“To push the amendment is what we can do for the betterment of the trade secrets protection system at present. We started the work at the end of 2008 and have just reported its amendment to the State Council,” said Wei Li.
It is said that there are several changes and breakthroughs in the amendment in comparison with the current Law of the People’s Republic of China against Unfair Competition. Under the current law, infringement upon trade secrets refers to the means of: (a) obtaining an obligee’s trade secrets by stealing, luring, intimidation or any other unfair means; (b) disclosing, using or allowing another person to use the trade secrets obtained from the obligee by the means mentioned in the preceding paragraph; or (c) in violation of the agreement or against the obligee’s demand for keeping trade secrets, disclosing, using or allowing another person to use the trade secrets he possesses; (d) obtaining, using or disclosing another’s trade secrets by a third party who clearly knows or ought to know that the case falls under the unlawful acts listed in the preceding paragraph shall be deemed as infringement upon trade secrets.
However, many trade secret cases have something to do with the provisions of employment contracts, which have no clear regulations to follow. Therefore, the amendment was added in some articles in this regard. Meanwhile, the amendment also includes an article that states “He shall bear the burden of proof of legitimacy for his use of information where the obligee can prove that there is consistence or similarity between the information he used and the trade secrets of the obligee and that he has the convenience to obtain the trade secrets.” Therefore, there comes a breakthrough in trade secrets protection law by way of shift of burden of proof.
Meanwhile, an article was added in the amendment with foreign legislation as reference and learning from Japan’s trade secret law. The added article in the amendment (draft) provides that the governmental departments shall not disclose those experimental data and other requirements submitted by the obligee in application for chemical composition of the drugs or permission for the sale of agricultural chemicals. As for the new draft, Wei Li made the following remarks.
“There are many new measures in the new revised version for the solution to difficulties in trade secrets protection at present. They are good ideas and have been discussed by many experts and scholars and received many suggestions. It is believed that it will greatly promote the legal protection of trade secrets after promulgation. However, there are many disagreements. Therefore, it is still under discussion although it has been submitted to the Legislative Affairs Office of the State Council for two years. It is unknown when it will be approved and promulgated up to the present. We shall do our best for its promulgation.”
The protection of trade secrets belongs to the 22 strategies of the China National IP Strategy formulated in 2005. The Law against Unfair Competition has provisions for the protection of trade secrets. Therefore, SAIC undertook the strategic research on the protection. According to Wei, Administrative Enforcement Strategy for Trade Secret Protection has been finished and sought suggestions three times from industrial and commercial organs, experts and scholars, and many foreign-invested enterprises at hone and abroad.
“We put forward two new concepts in the strategy, namely, secret-keeping measures and evidence obtaining. We had a less mature idea that such measures and means of obtaining may be empowered to intermediary organizations. We think it will be very convenient for enterprises to obtain evidence through a professional intermediary if it registers its trade secrets for record in advance.
However, this idea has aroused much controversy and has not reached a consensus yet.” Wei said, “Anyway, we shall strive for the promulgation of an Administrative Enforcement Strategy for Trade Secret Protection in 2012.”
(Translated by Yuan Renhui)

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