PaRR-Interview-Chief Lawyer Xu Xinming:China species measures to prevent trade secrets disclosure during administrative licensing – analysis

· Draft document gives recourse to applicants 

· Economic compensation not mentioned in guidance 

China introduced measures to prevent trade secrets from being leaked during administrative licensing in draft guidance published by the Ministry of Justice last month, two IP lawyers told PaRR. 

The document – ‘Guiding Opinions on Strengthening the Protection of Trade Secrets and Condential Business Information in the Process of Administrative Licensing (draft guidance)’ – was published on 14 August and is open for public comment until 30 September. 

According to the draft, applicants for administrative licensing are to identify trade secrets and condential business information when submitting applications, and the administrators will take measures to prevent condential information from leaking, including signing non-disclosure agreements with third-parties and setting up a channel for applicants to raise objections to public disclosure when appropriate. 

The draft guidance is the rst document published by ministrylevel government agencies to protect trade secrets in administrative licensing, Xu Xinming, chief lawyer at ciplawyer.com, told PaRR. 

Previously trade secrets protection focused on contractual disputes and infringement lawsuits among market players, Xu said, adding that it is the rst time for China to pay attention to trade secrets protection involving administrative agencies. 

Xu noted that given the unbalanced power relationship between administrators and applicants, applicants often nd themselves in a comparatively weak position and face difculties in protecting their intellectual property rights. 

Chen Mingtao, professor at Law School of Beijing Foreign Studies University and partner at Lantai Law Firm, also recognized the potential negative impact of the unbalanced relationship and told PaRR that in practice, applicants may worry that requesting trade secrets protection could add an extra burden on administrators and slow down their applications. 

Damages 

Article 10 of the draft guidance states that if an administrative agency and its staff abuse its power, neglect its duty, give unfair preferential treatment, or violate non-disclosure agreements, which result in the leakage of trade secrets or condential PROPRIETARY Sector: Government Topics: Intellectual Property, Policy Developments Grade: Confirmed Agencies China's Ministry Of Justice There are no les associated with this Intelligence business information, disciplinary action will be taken against those who have broken the rules. 

The draft guidance further states that if the misconduct constitutes a crime, relevant criminal liability will be sought. 

However, the draft guidance did not mention whether economic penalties will be imposed to compensate applicants for losses as a result of the leakage, Xu noted, adding that economic compensation often serves as the best safeguard for rightsholders. 

The legal basis of economic compensation can be found in the State Compensation Law, Xu said. 

Article 4(4) of the State Compensation Law points out that when an administrative agency or its staff conducts illegal activities that result in damages to property while exercising their power, the victim has the right to seek compensation. 

It is also noteworthy that Article 10 of the draft guidance refers to internal accountability of the administrative agency, and when the misconduct constitutes a crime, relevant investigative leads will be transferred to the People’s Procuratorate, Xu said. 

Rights-holders whose trade secrets have been leaked can report the misconduct to higher-level government agencies to trigger internal reviews, or le an administrative lawsuit against the agency under the Administrative Litigation Law. 

Article 12 (12) of the Administrative Litigation Law states that a citizen, a legal representative, or other entities may le administrative lawsuits when they think their personal rights or property rights have been violated by an administrative organ.