Answer: According to “What kind of information is a trade secret?”, if the right holder of trade secret wants to stop the infringement or pursue the tortfeasor, they must prove the establishment of trade secret, which has three conditions: the relevant information is non-public information, the information has commercial value, and the right holder has taken confidentiality measures for the information.
The key issue to prove the existence of trade secrets is the burden of proof, that is, whether a plaintiff should be responsible to prove the existence of trade secrets or the defendant should prove that trade secrets do not exist. Burden of proof is a complex but key issue in legal disputes, because according to the rules of evidence in Chinese law, the party who bears the burden of proof in a lawsuit heard by the court is likely to bear the consequences of losing the lawsuit if the evidence is insufficient to prove the facts they claim.
The identification of the first condition for the establishment of trade secrets is a very complex issue in law and practice. We conclude that for acquisition and disclosure trade secret torts (please refer to “What are the types of infringement of trade secrets?”), the court shall assign the burden of proof to the defendant to prove the that the information is public information if the right holder has already demonstrated the confidentiality measures taken and the commercial value of the information. For use-based infringement, the court should first make a preliminary judgment on whether the information involved is more likely to be public or non-public information based on the preliminary existing evidence and the proposition and deposition made by both parties. If the prima facie conclusion is that the information is more likely to be public, the court should assign the burden of proof to the plaintiff to prove that the information is not public; otherwise, the defendant should be required to prove that it is public. Please refer to “How to prove the non-publicity of trade secrets?” The legal analysis process of this conclusion involves complex analyses of evolution of legislation and court decisions, and interested readers can refer to it; average reader may only want to look at this conclusion.
As for the second condition (the commercial value of the related information) and the third condition (the right holder has taken confidentiality measures for the information) for the establishment of trade secrets, the current judicial practice has a relatively definite understanding that the right holder of the related information (usually the plaintiff) should bear the burden of proof.
The evidence that the right holder proves that their trade secret has commercial value may includes: research and development process, investment of human resources and material resources, licensing others to use it, collecting technology licensing fees, and providing products or services containing the trade secret for profit. The confidentiality measures taken by the right holder can also prove the value of trade secrets.
The evidence for the right holder to prove that confidentiality measures have been taken includes: signing a confidentiality agreement (which is the most common confidentiality measure), requiring relevant personnel to keep confidential through company rules, taking confidentiality management measures for trade-secret-related sites, and managing trade secrets and their carriers by means of marking, classifying, isolating, encrypting, sealing and restricting, as well as evidence such as confidentiality management measures for other third-party equipment that may be exposed to trade secrets and carriers, and confidentiality management for departing employees. A person in a special position in a company, such as a director, assumes a statutory duty of confidentiality under the company law, so the fact that an employee holds the position itself may make the condition of confidentiality measures fulfilled.1Civil Ruling of the Supreme People’s Court of the People’s Republic of China (2020) Supreme Fa Min Shen No.401, Civil Ruling of the Supreme People’s Court of the People’s Republic of China on Retrial Review and Trial Supervision of Disputes over Infringement of Trade secrets by Qingdao Melville Machinery and Equipment Import and Export Co., Ltd. and Xu Jingqing. “The seventh item of Article 149 of the Company Law of the People’s Republic of China stipulates: ¡®The directors and senior managers of a company shall not disclose the company’s secrets without authorization.’ Liu Yu, as a senior manager of the company, has the statutory obligation of confidentiality.”In addition, the evidence of confidentiality measures also includes the measures taken by the right holder against reverse engineering.
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
Email: wangdong@royalaw.com
- 1Civil Ruling of the Supreme People’s Court of the People’s Republic of China (2020) Supreme Fa Min Shen No.401, Civil Ruling of the Supreme People’s Court of the People’s Republic of China on Retrial Review and Trial Supervision of Disputes over Infringement of Trade secrets by Qingdao Melville Machinery and Equipment Import and Export Co., Ltd. and Xu Jingqing. “The seventh item of Article 149 of the Company Law of the People’s Republic of China stipulates: ¡®The directors and senior managers of a company shall not disclose the company’s secrets without authorization.’ Liu Yu, as a senior manager of the company, has the statutory obligation of confidentiality.”