Matters for Attention in the Trade Secret Lawsuit in China (I)

Recently, a judge from Shanghai No.2 Intermediate People’s Court published an article(Note: the article is in Chinese) Trial Experiences in Trade secret Infringement Cases (the article), and the following is the abstraction of the article and the comments and analysis from Bridge IP Law Commentary. And the essay will be posted in several articles, and today is the first one of the evidence preservation in trade secret lawsuit.

The Article 74 of the Civil Procedure Law of the People’s Republic of China (“Civil Procedure Law”) stipulates that under circumstances where there is a likelihood that evidence may be destroyed or lost, or difficult to obtain later, the parties concerned in the proceedings and agent ad litem may apply to the people’s courts for evidence preservation. The people’s courts may also on its own initiative take measures to preserve such evidence. In practice, the plaintiff of the trade secret infringement case tend to apply for evidence preservation on filing the lawsuit in order to collect the evidences proving the defendant’s infringement by the courts with the reference to Article 74.

In the view of the article, from the perspective of the people’s courts, they would be the tool of the plaintiffs to collect evidence if they approve the application with no examination, which will increase the plaintiffs’ abuse of application for evidence preservation, while decrease the plaintiffs’ risk of burden of proof, additionally, it is unfair to the defendants, damaging the fairness and justice of the court and wasting the judicial resources.

In our opinion, it is suggested to the plaintiff to collect the evidence themselves in such infringements, and the evidence preservation only applied in the case when no way to take such evidences. Furthermore, by our experience, the rate of the approval on the preservation application is less than 50%.

In the view of the article, in general, the people’s courts review and deal with the plaintiffs’ application for evidence preservation from the following aspects.

1. To require the plaintiffs define the details of the trade secrets they claim and fix the evidences

In the view of the article, the people’s courts usually require the plaintiffs define the details of the trade secret they claim when they initiate a lawsuit, for example the trade secret shall not be generally expressed as a list of customers, the production method or ingredient of one product, but be the specific content of it, moreover the relevant evidential materials shall be fixed. The reasons held by the court are that the requirement mentioned above can firstly help the people’s court examine whether the plaintiff owns the trade secrets; secondly provide basis for the examination of consistent between the scope of evidence preservation applied by the plaintiff and the scope of the trade secret the plaintiff claims; finally help to prevent the plaintiff from amending his trade secret according to the evidential material submitted by the defendant.

In our opinion, the requirement described above is in favor of the plaintiffs. When a plaintiff explicitly states the scope and details of the trade secret he claims, the plaintiff definitely knows his claims in the litigation and clears up the facts of the defendant’s infringement. Certainly, to the parties concerned in the proceedings, the disclosure of trade secret is possible. However, the possibility of disclosure of trade secrets by the court is very little and the people’s courts are suggested to be trusted.

2. The plaintiff shall provide the primary evidences to the defendant’s infringement

In the view of the article, due to the fact that the trade secrets generally are embodied in the enterprises’ internal business, which is different from the patent that is directly reflected in the products publicly sold, it is difficult for the plaintiffs bearing the burden of proof to collect the direct evidences proving the defendants’ infringement. In practice, the people’s courts review whether the plaintiff has provided the primary evidences differently from the direct evidences and indirect evidences. For example, when the plaintiff claims for the production method as a trade secret, but if he only provides the same products made by the defendant as those of the plaintiff, it can’t prove the defendant has done infringement unless other evidences corroborated mutually are provided. According to the experiences of our lawyers, in one trade secret infringement case we have dealt with, the client provided the court the background record of the Enterprise Resource Planning (ERP) software, proving the fact that the employee of the company had downloaded much data of the client’s trade secrets from the company’s internal network in a month before he left the company.

3. The scope of evidence preservation shall be in accordance with claims

In the view of the article, plaintiffs practically take advantage of their rights to apply for evidence preservation and take the people’s courts as a tool to collect evidences, as a result they usually list all the matters they have thoughts in their application for evidence preservation. In this situation, the people’s courts insist in the principle that the preservation scope shall not exceed the trade secret the plaintiff claims and the claims of the plaintiff. To those evidential materials can be fixed in the way of notarization or others by the plaintiffs themselves, the courts won’t preserve.

In our opinion, this is just verifies the suggestion proposed above that the parties concerned the proceeding should collect evidences as far as possible.

4. The corresponding guarantee is requested

The Article 23 of the Provisions of the Supreme People’s Court on Evidence in Civil Proceedings provides that in the event a party applies for evidence preservation, the people’s court may request him provide corresponding guarantee. In the view of the article, in the trade secrets infringement cases, due to the materials the plaintiff applies for evidence preservation usually involves important materials of the defendant’s daily operation and the preservation may influence the defendant’s normal business, the people’s court request all the plaintiffs applying for evidence preservation provide guarantees in cash, and the corresponding amount of guarantees shall be decided by the collegiate beach according to the evidences provided by the plaintiff and the possible impacts on the defendant, which is usually no less than 5000RMB. Actually, in accordance with our lawyers’ experiences, when the amount of guarantees requested by the people’s court is rather high, the Chinese specialized guarantee companies can provide relevant services.

5. To define the contents of the financial account applied for preservation and take the measures of seizing and sealing up prudently

In the view of the article, by China laws and regulations, the compensation sum in the IPR lawsuits are usually determined by the losses of the plaintiff or the benefit gained by the defendant, therefore the account book of the plaintiff play a fundamental role in the proofing. However, the defendant’ normal business may be influenced and the evidence rooms of the people’s courts may be occupied due to the poor standard of defendants’ financial accounts, or involve other matters except for the infringing products, hence the people’s courts usually seize in other places or seal up the defendants’ financial account, and fix the relevant data by copying or extracting.

By the experience of Bridge IP Law Commentary’s attorneys, the preservation of financial account is generally applied in the local people’s court, which means that the local people’s court at the place where the enterprise is located are more likely to preserve the local enterprise’s financial account, while it is difficult for a people’s court to preserve the financial account of an enterprise that is not located in the same place as that of the people’s court.

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4. Matters for Attention in Trademark Refusal Review in China
5. Introduction of China’s Legal System of Trademark Renewal
6. Introduction on the Regulations concerning the Capital Contribution in IPR or Domain Name in China
7. The Copyright Registration in China Could Be FREE?
8. China Copyright Protection Term Longer than EU’s?
9. Matters for Attention in the Patent Preliminary Injunction Application in China(I)

Author: Mr. You Yunting
Founder & Editor-in-Chief of Bridge IP Law Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
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Bridge IP Law Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works. And all news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works. You may contact us shall you have any opinions or suggestions.

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