PaRR-Interview-Chief Lawyer Xu Xinming:China SPC’s draft interpretation on trade secret infringement eases burden of proof for plaintiffs – analysis

● Algorithms, data come under definition of trade secrets

● Client info not collated or processed not recognized as trade secret

● Requirements to request injunction specified

The draft judicial interpretation (JI) on trade secrets released by China’s Supreme People’s Court lightens the burden of proof for plaintiffs in trade secret infringement lawsuits, two IP lawyers told PaRR.

The draft – Interpretation on Several Issues Concerning the Application of Law in the Trial of Civil Cases Infringing on Trade Secret Infringements (draft for comment) – was released on 10 June and is soliciting public comment until 27 July.

Compared with Article 32 of the country’s amended Anti-Unfair Competition Law (AUCL), the draft lightens rights-holder’s legal duty by shifting the burden of proof to the alleged infringer, Xu Xinming, chief lawyer at ciplawyer.com, told PaRR.

Article 32 of the amended AUCL states that in civil trade secrets infringement trial, the rights-holder needs to provide “preliminary evidence” to show the claimed trade secret has been infringed. When the rights-holder provides such proof, the alleged infringer is obliged to provide proof that no infringement of trade secrets occurred.

However, Article 8 of the draft JI states that the rights-holder need only submit preliminary evidence to prove there is a “high probability” that the claimed trade secret has been infringed in order to shift the burden to the alleged infringer.

Zou Wen, partner at Anjie Law Firm, agreed the draft JI lowers rights-holder’s burden of proof, yet noted that the draft JI is more ambiguous than Article 32 of the amended AUCL.

Currently, there is no quantitative measurement of “a high probability that the claimed trade secret has been infringed” and therefore it is hard to execute in practice, Zou said.

Range of trade secrets

The draft JI further specifies the range of trade secrets. The trade secrets provision (Article 9) of the amended AUCL defines trade secrets as any technical information or operational information which is not known to the public, has commercial value, and for which its rights-holder has adopted measures to ensure its confidentiality.

Article 4 of the draft JI states that algorithms, data and computer programs may constitute the technical information mentioned in Article 9 of the amended AUCL.

Article 5 of the draft JI states that client information after collation and processing, such as name, address, contact information, trading habits, transaction content, and specific needs of customers, may constitute the operational information mentioned in Article 9 of the amended AUCL.

Notably, Article 5(2) of the draft JI states that if the parties claim the information of a specific client is a trade secret only on the basis of the contract, invoice, document, voucher, etc. or the existence of a long-term transaction relationship, the court will not support the claim.

In other words, the court will not recognize client information unless it is collated or processed as trade secrets, Xu said.

In addition, the clause does not specify what qualifies as “collation” and “processing”, and it remains unclear whether the collation and processing need to be “complicated and in-depth”, Xu added.

Article 5 asks rights-holders to act more proactively in protecting their trade secrets, Zou said.

Injunction

Article 21 of the draft JI states that to apply for an injunction, a rights-holder must clarify specific content of the claimed trade secrets and provide evidence to prove that corresponding measures have been adopted to ensure its confidentiality.

The article sets a “relatively low burden of proof” for the rights- holder, which is consistent with the amended AUCL, Zou said.

When it comes to evidence of infringement, it does not make a compulsory requirement and leaves it to the discretion of the court, Zou added.

Article 22 of the draft JI states that if the alleged infringer proves that the information requested by the rights-holder is not a trade secret or there is no infringement of trade secrets, the court shall nullify the injunction.

Considering the requirements to request an injunction is relatively low, Article 22 of the draft JI aims to strike a balance and prevent the over-protection of a rights-holder, Zou said.