Causes and solutions to difficulties in protecting trade secrets

By Wang Yadong and Lu Lei, Rui Bai Law Firm
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In commercial activities, civil subjects may face the risk of trade secret leaks by ex-employees, hackers and partners, and valuable trade secrets can be abused to undercut their competitiveness. Not all secrets are protected by the law. “Trade secrets” mentioned in the Law Against Unfair Competition refer to any technology information or business operation information that is unknown to the public, that can bring about economic benefits to the owner, that has practical utility and that the owner has adopted appropriate measures to protect.

Wang YadongPartnerRui Bai Law Firm
Wang Yadong
Partner
Rui Bai Law Firm

In practice, it is difficult to safeguard the rights to trade secrets, as evidenced by the imbalance between rampant infringements and the relatively small number of legally settled cases, the low winning rate of plaintiffs, and insufficient compensation to damage caused by trade secrets theft.

There were only 37 cases of trade secret infringement crimes in 2014. The number of patent cases tried by the Supreme People’s Court was 227 in 2016, but only 12 were related to trade secret infringement. A study shows that plaintiffs in trade secret infringement cases are much less likely to win a lawsuit than victims in other intellectual property infringement cases.

Several factors are to blame:

It is hard to define trade secrets and provide solid proof against trade secrets theft. A prerequisite for stopping trade secret infringement through legal means is to define trade secrets. Unlike patents and trademarks with a clear scope of ownership, trade secrets are usually mixed with existing technologies and public information. In most cases, the infringed submits a lot of unscreened information to relevant authorities and claims them to be its trade secrets. However, when asked to define the scope of its trade secrets, the infringed is often unable to give a convincing explanation or evidence.

Lu LeiSenior attorneyRui Bai Law Firm
Lu Lei
Senior attorney
Rui Bai Law Firm

It is difficult to prove infringement. In civil cases of trade secret infringement, the plaintiff is obligated to present evidence to prove that it has legitimate ownership of the trade secrets, the defendant did infringe its trade secrets and the defendant’s infringement caused damage to it. In patent and trademark infringement cases, the plaintiff can prove the infringement by providing infringing products purchased on the open market.

In trade secret cases, direct evidence of infringement is usually at the hands of the defendant or a third party, which is difficult for the plaintiff to obtain. In many cases, the plaintiff can only cite indirect evidence, such as former employees joining rival companies, the termination of cooperation by long-term customers, and the defendant’s launch of new products that are directly competing with those of the plaintiff.

It is more difficult to handle cases involving technologies. Technology cases have been a challenge to legal professionals as they are more difficult to be investigated than other kinds of cases.

A considerable part of trade secrets involve technologies, which are sometimes harder to be proved and understood than public patent information. Though there is a tendency to concentrate technology cases to be handled by professionals, many basic-level courts have the rights to handle trade secret cases. It’s a great challenge for authorities to understand abstruse and sophisticated technologies.

These factors have made it a challenging job to protect trade secrets. The trade secret owners should be more proactive to defend their rights.

Review the system to emphasize prevention. Trade secret owners should focus on protecting their trade secrets from leakage and abuse by taking precautions, such as: establishing a complete system to protect intellectual property; separate management of technological data, business information, existing technologies and public information during research or business operation; patenting technological solutions vulnerable to leakage; adopting secret-keeping measures for technological solutions that are difficult to be hacked; and making the use, disclosure and circulation of secrets traceable with the help of management and technological methods.

Make good use of evidence rules to protect rights. The infringed should strive to protect their rights after collecting as much evidence as possible, even if there may be some flaws in the evidence. We have noted that in more and more civil cases of trade secret infringement, the judge would order the defendant to offer evidence if the plaintiff has shown convincing evidence, and the defendant would be subject to legal consequences if failing to submit relevant evidence.

Choose competent courts favourable to the protection of rights. Given that trade secret cases involve highly professional knowledge and technologies, the infringed should not only choose from different ways to settle disputes, such as criminal, administrative, civil actions or reconciliation, but also select a competent court most favourable to them based on the understanding of the diversified, multi-layered and transitional jurisdiction structure of technology-related infringement cases and its latest development.

Author: Wang Yadong is a partner and Lu Lei is a senior attorney at Rui Bai Law Firm

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