Zhao Shuo
WANG JING & GH LAW FIRM
Intellectual Property
Senior Legal Consultant
IP Layout: Manage Your Trade Secrets！
Wang Jing & GH Law Firm has presented the topic of enterprise decompression during the epidemic period — Intellectual Property Layout, aiming at helping the managers and executives enhance your enterprise value without the need to go out during the epidemic and at the same time, realize profits from intellectual property rights. Today we will introduce trade secret management.
According to Article 9 of the Law of the People's Republic of China Against Unfair Competition:
The operators shall not commit the acts in infringement of trade secrets as follows: A business operator shall not use any of the following means to infringe upon trade secrets:
(I) Obtaining an obligee's trade secrets by stealing, luring, intimidation or any other unfair means;
(II) Disclosing, using or allowing another person to use the trade secrets obtained from the oblige by the means mentioned in the preceding paragraph;
(III) 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;
(IV) Instigating, enticing and helping others to obtain, disclose, use or allow others to use the obligee's trade secrets in violation of confidentiality obligations or the obligee's requirements for preservation of trade secrets.
Any other natural person, legal person or unincorporated organizations other than the operators, who commits any of the illegal acts listed in the preceding paragraph, shall be deemed to have infringed upon the trade secrets.
A third party who obtains, discloses, uses or allows others to use the trade secrets, when it knows or ought to know that the employees, former employees or other units/individuals of the obligee are committing the illegal acts listed in the first paragraph of the article, shall be deemed to have infringed the trade secrets.
Trade secrets mentioned in the Law refer to any technical information or business operation and other trade information, which is unknown to the public, can bring about commercial value and for which the obligee has adopted secret-keeping measures.
Trade secrets are a kind of intellectual property right under the protection of the Law of the People’s Republic of China Against Unfair Competition, whose legal constitutive elements are “unknown”, “value” and “secret-keeping measures”.
Unknown
“Unknown” refers to that the information is not known by the public, which is in a non-public state. The public information generally is divided into two parts, one part can be freely used and not monopolized by anyone; the other part is IPR granted under other laws, such as patent rights granted according to the Patent Law, which obtain protection in exchange of the disclosure of the patent documents to the public. Only the information unknown to the public is necessary to be given relevant legal protection as trade secrets. “Unknown” is a negative element that is difficult to be proved during litigation. Article 32 of the revised Law of the People’s Republic of China Against Unfair Competition in 2019 stipulates that an obligee of trade secrets shall provide preliminary evidence that he/she has taken secret-keeping measures for the claimed trade secrets and prove reasonably that the trade secrets were infringed; the suspected infringer shall prove that the trade information claimed by the obligee does not constitute the trade secrets stipulated in the Law. If the obligee of trade secrets has provided proper preliminary evidence to prove that his/her trade secrets were infringed, and relevant infringement evidence as well; the suspected infringer shall prove its innocence. To some extent, the burden of proof is inverted, which has reduced the difficulty in the right protection for the obligee.
Value
Value refers to that the information can provide economic benefits or competitive advantages for the operators. At present, the value measurement criteria are not fixed. The information that can be directly monetized is undoubtedly valuable, while some unpublished information able to maintain the production and management may also be valuable. The value-oriented benefits and advantages may be direct and realistic, such as customer channels, customer list designs, marketing plans; they may also be indirect and potential, such as failed project data and experimental data which can reduce the cost by modifying the scope of technical solutions or helping operators adjust their thinking, thus realizing their value.
Secret-keeping measures
“Secret-keeping measures” refer to the confidentiality measures taken by the obligee and can vary greatly, such as confidentiality rules, confidentiality agreements signed with employees, encryption for classified information, the addition of confidentiality tips, limiting the access scope and controlling the contact authority. Secret-keeping measures should be relevant to other elements such as the commercial value and the difficulties of independent obtainment. The greater the value and the difficulties in independent obtainment of trade secrets, the stricter secret-keeping measures the operators shall take.
Trade secrets are an object of intellectual property right without such administrative procedures as application, registration, filing and granting. As long as an enterprise can provide evidence convincing that the information conforms to three elements (“unknow”, “value” and “secret-keeping measures”), such information will be deemed as trade secrets. Therefore, whether the information claimed by the obligee constitutes trade secrets will inevitably become one of the focuses in such disputes. Among the aforesaid three elements, “unknown”, i.e. whether such information is known by the public, is a relatively objective criterion. For the other two elements, the obligee's initiative can play a significant role, which can be actively arranged through a company's management system. Regarding “secret-keeping measures”, for instance, the watermark on the document writing "Classified, and Exclusive for Internal Use", and the confidentiality clauses in employment contracts are both legally recognized confidentiality measures; the value, on the other hand, can be proved by the honors awarded to a company or related products, which requires the company to cultivate its goodwill and product popularity.
Enterprises shall establish a complete monitoring system of intellectual property rights and ensure that the relevant information basically conforms to the value and secret-keeping requirements through good enterprise management strategies. In case of disputes, they shall carry out the judgment of secrecy and collect relevant evidence as soon as possible, which is conducive to gaining advantages in the right protection.
