digital world

Protecting the interests of trade secret owners when the remedy of discovery is not available

Publication 3/9/2022 1:06:00 PM

Publication March 2022

The process of discovery (disclosure) is a fundamental feature of civil litigation in common law jurisdictions. Although the legal system of China does not have a corresponding process, the Chinese legal system does have other procedures that litigants are able to utilize to protect their interests. In this article, we will examine these procedures in the context of a civil case filed by a trade secret owner.

I. Behavior preservation orders and injunctions

Before the revision of the Civil Procedure Law in 2012, claims by trade secret owners to cease infringement were often difficult. However, as a result of the revisions made to the Civil Procedure Law in 2017, trade secret owners may now apply for a behavior preservation order1before or during a trial.2 The behavior preservation order is a form of injunction and the use of such orders in intellectual property cases has been considered and upheld by the Supreme Court of China.3

In practice, due to the special nature of trade secret infringement cases, it is rare to find a case where a pre-trial injunction has be used. However, in respect of an injunction during the course of the trial, examples where such injunctions were applied for and granted in cases involving trade secret infringements, can be found in Supreme Court and Intermediate Level Court cases as early as 2018. These cases emphasize that the pre-conditions to the grant of a behavior preservation order are that: (i) there is an urgent need for the order; and (ii) failure to take preservation measures will make it difficult to enforce the relevant judgment, will cause other damage to the rightful owners or, will cause irreparable damage to the legitimate rights and interests of the trade secret rights owners.

II. Protecting trade secrets during the trial

Considering the intangible nature of trade secrets, it is difficult to prevent the spread and dissemination of the information through physical means. During the trial, unless there are measures in place to prevent the leakage of the trade secrets, the rightful owner may be subject to further infringements as a result of the second leakage of information, thereby aggravating potential losses.

However, as a result of the Civil Procedure Law and relevant judicial interpretation, the rightful owner is able to apply to the courts to take steps to maintain confidentiality during preservation, exchange of evidence, cross-examinations, appointed forensic analysis, inquires, court hearings and other stages of the litigation process. In practice, such measures have been taken in trials and have protected the legal rights of trade secret owners.

III. Collecting evidence and the burden of proof

In cases involving trade secrets, it is always a challenge for trade secret owners to discharge their burden of proof. Fortunately, with the recently amended Anti-Unfair Competition Law, we expect that trade secret owners will now find it easier to do so.

Previously, a trade secret owner would usually have difficulty in: (i) proving that the trade secret was “not known to the public”; and (ii) collecting evidence to prove that the defendants had used unfair means to misappropriate the trade secret.

With the amendment of the Anti-Unfair Competition Law in 2019, Chinese legislation now provides relief to trade secret owners by shifting the burden of proof to the defendant once the trade secret owner (as claimant) has discharged their preliminary burden of proof. These developments have been reflected in some cases in practice.

Conclusion

The Chinese legal framework now provides more options, protections and remedies to trade secret owners who are seeking to protect their intellectual property rights. These important developments will benefit parties involved in future intellectual property actions and will also benefit claimants or potential claimants who are within the limitation period to bring an action.

1. A behavior presentation order of the court which directs or prohibits a party from taking certain action.
2. Article 100 or Article 101 of Civil Procedure Law
3. “Provisions of the Supreme People's Court on Several Issues concerning Application of Law in Review of Cases involving Behavior Preservation in Intellectual Property Right Disputes” effective from January 1, 2019 and “Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law to the Hearing of Civil Cases of Trade Secrets Infringement” effective from December 9, 2020.

Authors

Head of Shanghai Pacific Legal, Partner, Intellectual property, Antitrust and competition
Associate, Intellectual property, Antitrust and competition