China’s Trade Secret Protection: Key Cases and Judicial Innovations in 2024

In 2024, China saw notable advancements in trade secret protection, reflecting increased business demands for enhanced safeguards against misappropriation. These developments encompass significant legislative reforms, more rigorous administrative enforcement, and, most prominently, groundbreaking judicial decisions, collectively reshaping the litigation landscape and substantially improving the position of trade secret holders.

Legislative amendments to the Anti-Unfair Competition Law (AUCL) entered the review stage at the National People’s Congress. A key provision in the proposed amendments doubles the statutory minimum penalty for trade secret infringement, raising it from RMB500,000 to RMB1 million. This adjustment highlights China’s clear legislative intent to strengthen the deterrent effects of administrative sanctions against trade secret misappropriation.

Administratively, Chinese enforcement authorities have intensified their efforts to combat unfair competition. As of October 2024, enforcement bodies nationwide had investigated a total of 11,036 unfair competition cases, including 120 specifically concerning trade secret infringements. The cumulative fines imposed in these cases amounted to RMB35.05 million, underscoring a significantly more active regulatory stance than in previous years.

However, the most transformative changes in trade secret protection emerged from the judicial arena. Historically, plaintiffs in trade secret civil litigation in China have experienced exceptionally low success rates. According to statistics previously released by the Beijing Intellectual Property Court, between 2021 and October 2023, plaintiffs prevailed in only approximately 15% of all trade secret cases adjudicated by the court. This success rate is notably lower compared to the United States, where plaintiffs in trade secret cases win approximately 85% of the time. It is also significantly below the success rate of approximately 65% observed in Chinese patent infringement litigation.

Recognising this challenge, in 2024, the Supreme People’s Court (SPC) issued a series of landmark decisions to reshape litigation practices for trade secret disputes. Notably, in February 2024, the SPC published 100 landmark intellectual property cases, 21 of which directly addressed trade secrets . Remarkably, plaintiffs prevailed in all these trade secret cases. Through these decisions, the SPC sought to fundamentally revise substantive legal standards and procedural rules, substantially enhancing plaintiffs’ prospects of success in trade secret litigation. It is worth noting that although the Chinese legal system is not a case law system, the cases issued by the SPC as guiding cases have binding effects on lower courts in future cases.

Although statistical data on plaintiff success rates following these landmark rulings is not yet available, the number of trade secret-related lawsuits has noticeably increased, indicating that these judicial adjustments have profoundly influenced the litigation landscape.

This article comprehensively examines the key legal and procedural rules established by the SPC through these landmark decisions, addressing critical issues such as the scope of trade secret protection, the required elements for securing protection, rules governing damages, and evidentiary standards.

Expansion in the Scope of Trade Secret Protection

Broader recognition of protectable subject matter

Traditionally, China’s recognition of protectable trade secrets has been relatively conservative. However, recent SPC decisions have significantly broadened this scope.

Several judicial decisions have recently significantly broadened the scope of trade secret protection in China. Several landmark cases merit particular attention, as outlined below.

In the “Wannuo 2000” hybrid corn case (2022 SPC IP Division No 147), the SPC recognised the parent lines of new plant varieties as protectable trade secrets. Traditionally, parent lines were viewed strictly as carriers rather than trade secrets. However, the SPC held for the first time that when the carrier and the underlying trade secret are practically inseparable, the carrier itself may qualify for protection as a trade secret.

In the E-commerce Mini Program source code infringement case (2021 SPC IP Division No 2298), the SPC explicitly affirmed that software source code could constitute a trade secret. The SPC clarified that even if different developers create distinct source codes to achieve the same functionality, each code version may still independently qualify for trade secret protection. This ruling notably expands the potential scope of protection afforded to software-related trade secrets.

In the Oil Data compilation case (2022 SPC IP Division No 901), the SPC determined that an organised compilation of publicly accessible data can constitute a trade secret. The Court reasoned that even though individual data points may be publicly available, the complete database – provided it remains confidential and inaccessible as a whole – can enjoy trade secret protection.

These landmark rulings collectively expand the categories of information eligible for trade secret protection, significantly enhancing judicial protection in practice. Guided by these SPC precedents, lower courts have proactively explored extending protection to categories previously unrecognised as trade secrets. For instance, in the Smart Retrieval Algorithm case (2021 Shenzhen IP No 3843), the Shenzhen Intermediate People’s Court protected algorithms as trade secrets for the first time. Similarly, in the Shiitake Polysaccharide case (2019 Nanjing IP No 3444), the Nanjing Intermediate Intermediate People’s Court recognised traditional Chinese medicine formulations as trade secrets.

Relaxation in the standards of reasonable protective measures

In general, the adequacy of confidentiality measures must correspond appropriately to the trade secrets being protected. This correspondence is typically evaluated based on factors such as the nature of the trade secrets and their carriers, the commercial value of the secrets, the identifiability of confidentiality measures, the extent to which the measures align specifically with the trade secrets, and the rights holder’s intent to maintain secrecy. In other words, the burden of proof for plaintiffs is relatively high.

However, recent judicial decisions have demonstrated increased flexibility by relaxing the standards for evaluating confidentiality measures in certain contexts. In the Hybrid Corn Case, the SPC explicitly recognised the practical difficulties inherent in maintaining absolute secrecy for breeding materials, which require exposure to soil, water, air, sunlight, and regular field management. The Court determined that the adequacy of confidentiality measures should be evaluated based on the specific characteristics of the materials that need protection. Therefore, confidentiality measures are deemed sufficient if they effectively prevent disclosure under typical circumstances, even if they do not ensure complete secrecy. Establishing confidentiality systems, signing confidentiality agreements, restricting external dissemination, and using code names for propagation materials may all constitute reasonable protective actions under appropriate circumstances.

Less stringent requirement of secrecy

The requirement that a trade secret must not be publicly known (ie, secrecy) generally means that the information is neither widely known nor easily accessible to persons skilled in the relevant field. Article 4 of China’s judicial interpretation enumerates several scenarios in which information is considered publicly known.

Recent court decisions have further relaxed the evidentiary standards for proving secrecy, building upon existing statutory provisions and judicial interpretations.

In the landmark Optimised Saw case (2019 SPC IP Division No 7), the SPC held that even when a product enters the market, certain internal mechanisms could still qualify as trade secrets if they do not constitute simple technical combinations readily discoverable by direct observation. Specifically, if discerning these mechanisms requires specialised software, electronic hardware, mechanical structures, and substantial experimentation by skilled personnel, the information remains protectable as a trade secret. Furthermore, the SPC clarified that making observations with prior knowledge of a trade secret does not simply count as basic observation. This ruling addresses a longstanding issue: right holders often face difficulties proving infringement because concealed components are hard to document, while visible components are usually publicly accessible.

In the Chunfeng Power case (2022 SPC IP Division No 2501), the SPC explicitly distinguished the standards for trade secret secrecy from patentability criteria of novelty and inventiveness. The Court highlighted that just because a technology lacks novelty or inventiveness compared to the prior art as of its patent application date (or priority date), it does not necessarily mean that the technical information was widely known or easily accessible at the time of the alleged infringement.

Additionally, in the Cover Furnace Lifting Device case (2022 SPC IP Division No 719), the SPC stated that plaintiffs should not be subjected to excessively strict standards when distinguishing their claimed trade secrets from publicly known information. It is sufficient for plaintiffs to initially present preliminary evidence or a reasonable explanation supporting the non-public nature of the information. Once this preliminary showing is established, the burden shifts to the defendant to demonstrate that the contested technical information is publicly known.

Easing the Evidentiary Burden for Right-Holders

In addition to easing plaintiffs’ substantive evidentiary challenges, the Supreme People’s Court has further reduced plaintiffs’ overall burden of proof through a series of landmark cases. These judicial decisions have effectively lowered procedural hurdles, creating more favourable conditions for plaintiffs to prevail in trade secret litigation.

Retrospective application of revised evidentiary rules

The 2019 amendment to China’s Anti-Unfair Competition Law introduced a rule shifting the burden of proof in trade secret litigation. Under this new approach, once the rights holder successfully:

• demonstrate the existence of a trade secret;
• establishes substantial similarity between the defendant’s product and the protected information; and
• shows that the defendant had potential access to the trade secret, and then the burden of proof shifts to the defendant.

In such a situation, if the defendant fails to provide evidence establishing a legitimate source for its use of the information, the defendant will be held liable for trade secret infringement.

Although the reversed burden of proof was a new measure introduced in the 2019 AUCL, according to the principle of non-retroactivity, this provision ordinarily would not apply to acts committed before the amendment’s effective date. However, in the landmark Adjustable Roller Skates case (2022 SPC IP Division No 1981), the SPC ruled that Article 32 of the 2019 AUCL has both substantive and procedural characteristics and was explicitly intended to strengthen protections afforded to trade secret holders. Thus, the SPC determined that this provision constitutes an exception to the non-retroactivity principle under China’s Legislation Law. Moreover, the SPC emphasised that courts retain discretion regarding the distribution of evidentiary burdens. Consequently, courts may apply Article 32 of the amended 2019 AUCL to trade secret infringement disputes arising from acts committed before the law’s revision, thereby allowing plaintiffs to benefit from this procedural advantage.

Presumption of comprehensive infringement

Under conventional evidentiary rules, plaintiffs bear the burden of proving the scope and extent of infringement. If the plaintiff can demonstrate infringement regarding only a portion of the defendant’s products or processes, the defendant is typically liable only for that specific portion.

The SPC significantly modified this principle in the landmark Vanillin case (2020, SPC IP Division No 1667). In this case, the trial court initially determined that only a portion of the defendants’ products infringed upon the plaintiff’s trade secrets. However, upon review, the SPC recognised minor differences between the accused products and the plaintiff’s protected technology regarding specific production processes and equipment.

Despite these differences, the SPC concluded that the defendants had failed to present credible evidence of their independent research and development efforts and their ability to quickly establish and operate a production line for vanillin. The court determined that these differences were merely evasive or adaptive modifications made intentionally after the defendants acquired the plaintiff’s confidential information. As a result, the SPC inferred that the defendants effectively used all equipment and process diagrams that had been unlawfully obtained from the plaintiff, ultimately ruling that the entire product line was infringing.

Trade secret does not have to be recorded in tangible media

Generally, trade secrets must be stored or recorded on specific tangible media, such as computer hard drives or physical documents, to be eligible for legal protection.

However, the SPC has recently broadened this traditional requirement by recognising oral communications or records as valid carriers of technical trade secrets. In the landmark Banyitong case (2023) SPC IP Division No 593), the SPC explicitly acknowledged that certain trade secrets, by their very nature, might not always be documented in internal written records but rather reside exclusively in an individual’s memory, demonstrated through practical technical operations or orally transmitted instructions (such as unique culinary techniques). The SPC has ruled that courts should avoid placing overly strict requirements on plaintiffs concerning the specific form of the trade secret’s carrier during litigation. The SPC emphasised that as long as plaintiffs can clearly establish the precise content of the secret information and demonstrate its objective existence before the infringement occurred, the carrier does not need to be a physical or original medium. This flexible approach significantly broadens the types of evidence that can be used to support trade secret claims.

Expanding Liability Beyond Intent and Gross Negligence

Traditionally, courts viewed trade secret infringement as an intentional act or requiring gross negligence. Joint infringement generally required intentional acts by all participants involved; negligence alone was usually considered insufficient. Moreover, joint infringement typically requires clearly showing intentional collaboration or coordination among infringers.

Recent SPC decisions have significantly reshaped these traditional interpretations.

In the E-commerce Mini Program Source Code Case, the SPC recognised for the first time that infringement could arise from negligent behaviour. Further clarifying the standard in the landmark Melamine case (2022) SPC IP Division No 541), the SPC delineated three distinct scenarios of joint infringement based on subjective intent:

• acts jointly committed intentionally;
• acts jointly committed negligently; and
• acts involving a combination of intentional and negligent conduct.

In the third scenario, joint infringement can still be established even if actors possess varying degrees of subjective fault, provided their combined conduct collectively causes harm.

Moreover, the SPC held that joint intentional infringement does not require explicit prior conspiracy or subsequent coordination. It is sufficient if multiple parties are mutually aware of each other’s acts and sequentially engage in coordinated behaviour to form a complete chain of infringement. Thus, parties who possess mutual awareness, share intent, and engage in complementary acts contributing to the infringement are jointly liable for trade secret infringement.

Increased Compensatory Damages

Historically, intellectual property damages awarded by Chinese courts have been relatively low compared to international standards, though recent trends indicate significant upward adjustments. According to third-party data, between 2012 and 2023, compensation amounts awarded in invention patent infringement cases in China have notably increased, with median damages rising from approximately USD 14,280 to USD 28,000, and average damages increasing from approximately USD31,000 to USD300,000 . While precise third-party statistics specifically for trade secret damages are lacking – primarily due to historically low plaintiff success rates – it is commonly accepted that damages in trade secret cases are generally similar to those in patent infringement cases.

However, recent landmark trade secret cases decided by the SPC demonstrate a clear judicial shift toward significantly higher compensation awards, often dramatically surpassing those traditionally granted in patent infringement cases that are outlined below.

• In the landmark New Energy Vehicle Chassis case (2023) SPC IP Division No 1590), the first-instance court awarded only RMB5 million (approximately USD700,000). On appeal, the SPC identified malicious infringement by the defendant and applied punitive damages at twice the established amount, ultimately awarding a record-breaking RMB640 million (approximately USD90 million), setting the highest damages ever awarded in a Chinese trade secret infringement case.
• Similarly, in the prominent Melamine Case, the trial court initially awarded RMB218 million (approximately USD31 million). After the court judgment, parties reached a global settlement, adding RMB440 million (approximately USD62 million), resulting in a total compensation of RMB658 million (approximately USD94 million).
• In the Vanillin case (2020) SPC IP Division No 1667), the first-instance judgment awarded RMB3.5 million (approximately USD500,000), but on appeal, the SPC increased this compensation dramatically to RMB218 million (approximately USD31 million).
• In the Rubber Antioxidant case (2022) SPC IP Division No 816), the SPC awarded RMB202 million (approximately USD20.2 million) upon final appeal.

These cases clearly illustrate the SPC’s determination to substantially elevate the compensation standards for trade secret infringement, thereby significantly strengthening the enforcement and deterrence of trade secret protection in China.

Refined Litigation Process

Beyond substantive improvements, the SPC has also introduced significant procedural optimisations to streamline the litigation process, enabling rights holders to enforce their trade secrets more efficiently and at lower costs.

Parallel Civil and Criminal Proceedings

Traditionally, in China, initiating a civil trade secret infringement action depended heavily on the prior conclusion of any related criminal proceedings. As criminal proceedings typically last one to two years, this procedural sequence significantly delayed civil remedies for trade secret holders. However, in the landmark Bivo trade secret licensing dispute, the SPC modified this “criminal first, civil later” approach. The SPC clarified that disputes over trade secret licensing resulting from breach of confidentiality obligations involve different legal relationships and factual bases compared to those in criminal cases. As a result, civil courts can handle trade secret-related contract disputes while criminal investigations occur.

Consolidation of Patent Ownership and Trade Secret Infringement Claims

Under traditional procedural practices in China, rights holders were required to separately initiate patent ownership disputes and trade secret infringement claims when infringers improperly patented stolen trade secrets. Such parallel litigation had to be filed in different courts, increasing procedural complexity and costs.

The SPC addressed this issue in the landmark Dalian Bomai Case, holding that lawsuits concerning patent ownership and trade secret infringement arising from identical facts or interconnected legal outcomes could be consolidated into a single proceeding. This adjustment significantly simplifies litigation, enabling rights holders to achieve comprehensive remedies in one unified judicial procedure.

These procedural innovations substantially reduce the complexity and duration of trade secret litigation, markedly enhancing the effectiveness of trade secret enforcement in China.

Conclusion

2024 marks a transformative era for China’s trade secret jurisprudence, driven by pivotal SPC cases refining key doctrines, significantly reducing plaintiffs’ evidentiary burdens, expanding liability concepts, and considerably increasing compensation amounts. These judicial developments reflect China’s firm commitment to enhancing trade secret protection and signal a more robust, plaintiff-friendly judicial landscape. Western practitioners and enterprises operating in or with China must closely follow these trends to protect their valuable trade secrets under Chinese law effectively.