What Receives Protection as a Trade Secret in China?

By Albert Chen

In an essay posted several days ago, we discussed how infringing another’s trade secret is a kind of unfair competition. Although the Anti Unfair Competition Law contains a definition of trade secret in principle, this definition is not very detailed, and there might still be a fair number of differences between understanding and actual practice. Today’s essay will share the author’s research and analysis on whether Chinese law contains any further regulations on the term “trade secret.”

I. The scope of the trade secret in Chinese law

According to Article 10 of the Anti Unfair Competition Law, trade secret is defined as “technical information and operational information which is not known to the public, which is capable of bringing economic benefits to the rights holder, which has utility, and over which the rights holder has adopted confidentiality measures.” The Regulations on Prohibition of Trade Secret Infringement (“Regulations”) issued by State Administration of Industry and Commerce (“SAIC”) in 1996 further defines trade secret:

1) “Not known to the public” means the information is not available through public channels.

2) “Which is capable of bringing economic benefits to the owner of rights, which has utility” means the information has definite applicability and can bring the rights holder actual or potential economic benefit or competitive advantage.

3) “Over which the rights holder has adopted confidentiality measures” refers to conclusion of a confidentiality agreement, establishment of a confidentiality system, or other proper measures to maintain confidentiality.

4) “Technical information and operational information” includes designs, procedures, recipes, manufacturing crafts, manufacturing methods, know-how, customer lists, product origin information, sales and marketing strategies, opening bids, and contents of bidding documents.

5) “Owner of rights” refers to those citizens, legal persons, or other organizations with ownership or usage rights over the trade secret.

The Interpretations on Several Issues Concerning Application of Law in Hearing Civil Cases of Unfair Competition Disputes (“Interpretations”), published by the Supreme People’s Court in 2007, inherits the above definitions but offers further explanation of the terms “not known to the public” and “confidentiality measures.”

First, the Interpretations exclude the following situations from “information not known to the public”: 1) the information completely falls within common knowledge or industry conventions of those in the technical or economic field; 2) the information only involves size, structure, material, or simple combination of parts, which could be directly gained by the public through observation of the product in the market; 3) the information has already been publicly revealed through public publications or other media; 4) the information has already been made public by seminars or exhibitions; 5) the information can be obtained through other public channels; 6) the information can be easily obtained without the need to pay a definite cost.

II. The scope of confidentiality measures in Chinese law

With regard to “confidentiality measures,” the Interpretations demand they be appropriate to the commercial value and related factors. At the same time, the court can judge whether the rights owner has taken measures by evaluating “the features of the place of the information, the intention of the rights holder, how recognizable the confidentiality measures are, and the difficulty of obtaining the information by proper means”

Moreover, the Interpretations also regulate several standards for judging confidentiality measures:

1) The scope of the information’s spread is limited, and its contents have only been disclosed to those staff that must know it;

2) The place of the confidential information has locks or other protective measures;

3) The place of the confidential information is labeled with “confidential”;

4) The confidential information is ciphered with code or password;

5) A confidentiality agreement has been signed;

6) Equipment, factories, workshops, vehicles, or other places have limited visitor access or make confidentiality demands;

7) Other proper measures to maintain confidentiality of the information.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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