Unlike for patents, trade marks and copyrights, there is no separate Trade Secret Law in China, but instead, a trade secret protection system based on the Anti-Unfair Competition Law, supplemented by the Civil Code (which combines the former General Principles of the Civil Law and the Contract Law), the Law on Promoting the Transformation of Scientific and Technological Achievements, the Labour Contract Law, the Company Law, the Civil Procedure Law and the Criminal Law. In the Civil Code passed in May 2020, trade secrets are, for the first time, explicitly classified as a type of intellectual property right. The types of infringement acts of trade secrets are stipulated in Article 9 of the Anti-Unfair Competition Law. According to this provision, they are:

• obtaining a right-holder’s trade secrets by theft, bribery, intimidation, electronic intrusion or other improper means;
• disclosing, using or allowing others to use a right-holder’s trade secrets obtained by the means mentioned in the preceding paragraph;
• disclosing, using or allowing others to use a right-holder’s trade secrets in violation of confidentiality obligations or the right-holder’s requirements on keeping such trade secrets confidential; and
• obtaining, disclosing, using or allowing any other party to use a right-holder’s trade secrets by instigating, tempting or helping any other party to violate the confidentiality obligations or the right-holder’s requirements on keeping such trade secrets confidential.

According to Article 219 of the Criminal Law, the acts in the first three paragraphs above are subject to criminal punishment when the circumstances are serious.

According to Article 9 of the Anti-Unfair Competition Law, commercial information such as technical and business information that is not known to the public has commercial value and is kept confidential by the right-holder is classified as trade secrets and protected.

According to the relevant judicial interpretation of the Supreme Court:

• structures, raw materials, components, formulas, materials, samples, styles, propagation materials of new plant varieties, processes, methods or steps, algorithms, data, computer programs, and related documents related to technology can constitute the technical information referred to in the fourth paragraph of Article 9 of the Anti-Unfair Competition Law;
• creative, management, sales and finance information, plans, samples, bidding materials, customer information, data and other information related to business activities can constitute the business information referred to in paragraph 4 of Article 9 of the Anti-Unfair Competition Law; and
• the customer information referred to in the preceding paragraph includes the customer’s name, address, contact information, transaction habits, intentions, content and other information.

According to Article 9 of the Anti-Unfair Competition Law, trade secrets must meet three requirements:

• they must not be known to the public;
• they must have commercial value; and
• appropriate confidentiality measures must have been taken by the right-holder.

A trade secret right-holder needs to prove that it has taken reasonable confidentiality measures to protect its trade secrets. Whether the right-holder has taken reasonable confidentiality measures shall be determined according to factors such as the nature of the trade secret and its “carrier” (ie, medium), the commercial value of the trade secret, the identifiability of the confidentiality measures, the reasonability of the confidentiality measures according to the nature of the trade secret, and the right-holder’s will to keep the secret.

According to the relevant judicial interpretations, if one of the following measures has been taken and would be sufficient to prevent the leakage of trade secrets under normal circumstances, it shall be determined that the right-holder has taken reasonable confidentiality measures:

• requiring the signing of a confidentiality agreement or stipulating confidentiality obligations in the contract;
• putting forward confidentiality requirements for employees, former employees, suppliers, customers, visitors, etc, who have access to and are able to obtain trade secrets, through articles of association, training, rules, regulations or written notices, etc;

• restricting visitors or conducting separate management for production and business sites such as workshops involving secrets;
• distinguishing and managing trade secrets and their carriers by marking, classifying, isolating, encrypting, sealing up or limiting the scope of persons who can access or obtain them, etc;
• taking measures such as prohibiting or restricting the use, access, storage, reproduction, etc, of computer equipment, electronic equipment, network equipment, storage equipment, software, etc, that can access and obtain trade secrets; and
• requiring departing employees to register, return, remove and destroy the trade secrets and their carriers that they have accessed or acquired, and to continue to undertake the obligation of confidentiality.

Employers can sign confidentiality agreements with employees or agree on confidentiality clauses in labour contracts. Moreover, even if the employer and employees do not specifically agree on a confidentiality obligation, the employee’s obligation to keep the employer’s trade secrets confidential is an implied and accompanying obligation.

However, it should be noted that the employee’s implied duty of confidentiality with respect to trade secrets cannot be regarded as the employer’s taking reasonable confidentiality measures. In a typical case, the Supreme People’s Court held that the accompanying obligation to keep secrets derived from the principle of good faith cannot imply the subjective will of the owner of the trade secret to take confidentiality measures and cannot constitute a positive act of taking confidentiality measures.

According to the relevant judicial interpretations, if the allegedly infringing information is obtained through independent research or reverse engineering, it should be determined that it does not constitute trade secret infringement as stipulated in Article 9 of the Anti-Unfair Competition Law. Here, “reverse engineering” refers to disassembling, surveying and analysing products obtained from public channels, through technical means, in order to obtain relevant technical information about the products.

However, if the party concerned has learned of the trade secrets of others by improper means, and then claims that the acquisition is legal on the grounds of reverse engineering, it shall not be supported.

In China, the protection of computer software and/or technology is mainly through copyright protection, but software, especially related data, can also be protected through trade secret protection. For example, models formed by sorting, processing and analysing data obtained through mass public channels may sometimes not be protected by copyright law because of their low “originality”, but such data and models can be protected through trade secret law.

In theory, as long as the relevant information meets the three requirements for trade secrets, there is no time limit for its protection. According to relevant judicial interpretations, information publicly disclosed in publications or other media, or disclosed through public reports, exhibitions, etc, can no longer be regarded as trade secrets due to the loss of confidentiality. Accidental disclosure does not result in loss of confidentiality. Furthermore, controlled disclosure, such as disclosure with a signed non-disclosure agreement (NDA), does not result in a loss of confidentiality. After accidental disclosure, steps should be taken as soon as possible to prevent further disclosure, such as signing an NDAs with a persons with knowledge.

Right-holders of trade secrets have the right to license their trade secrets to others in a non-exclusive, sole or exclusive manner and charge licensing fees. There is usually a confidentiality clause in the licence contract. Even if there is no obligation of confidentiality in the licence contract, the licensee is obliged to keep the confidentiality according to the principle of good faith. Therefore, generally speaking, licensing does not affect the protection of trade secrets. In order to ensure that the licensee of trade secrets takes reasonable confidentiality measures, it is recommended that the licensor of trade secrets agrees on confidentiality obligations with the licensee when licensing, and verifies that the licensee has taken confidentiality measures.

Trade secrets are often associated with the protection of new technologies that are often also protected by patents. But the nature of trade secrets and patents is very different.

• Trade secrets include all types of information, not just technical information. For example, a company’s contact list may be the subject of trade secret protection, but it is not protected by patents.
• For a technology to be patented, it must meet the requirements of novelty, inventiveness and utility. Trade secrets, on the other hand, are not required to be novel or inventive. In general, any non-public information that a party has taken reasonable steps to keep confidential is a trade secret assumed to have utility. For example, any know-how can be protected as a trade secret, even if it is not patentable due to lack of inventive step.
• Patent rights and trade mark rights are subject to administrative review and approval (eg, a Chinese patent must be filed and granted by the State Intellectual Property Office of China), while trade secrets are not. Protection can be established as long as the three requirements of trade secrets are fulfilled.
• Protection for trade secrets is indefinite, whereas a patent or trade mark right has a certain term. For example, in China, the term of protection for invention patents is 20 years, the term of protection for utility model patents is ten years, and the term of protection for design patents is 15 years, counting from the date of patent application. The protection of trade secrets has no time limit, as long as the trade secret remains unknown to the public.
• Protection for trade secrets is relative. A right-holder of a patent right, a trade mark right or copyright can exclude others from implementing their right. However, the right-holder of a trade secret has no right to prohibit others from obtaining the information independently through lawful means (eg, through independent research or reverse engineering).
• A trade secret aims to protect non-public information, while the objects of other intellectual property rights are public. For example, patent and trade marks are published during administrative reviews, while trade secrets remain unknown to the public during their whole life span.

Trade secrets are often different from other types of intellectual property in the subject matter to be protected, so theoretically, intellectual property rights can be protected by combining trade secrets and other types of intellectual property at the same time. However, due to the different ways of obtaining trade secrets and patents, because the former requires the relevant technology to be kept secret, while the latter requires the technology to be disclosed in exchange for monopoly protection, the same technical content cannot be protected by both trade secrets and patents. In addition, although software, for example, can be protected by both trade secrets and copyrights, two lawsuits would be concursus actionum, and hence only one of them can be chosen to pursue.

The types of infringement acts of trade secrets are stipulated in Article 9 of the Anti-Unfair Competition Law. According to this provision, they are:

• obtaining a right-holder’s trade secrets by theft, bribery, intimidation, electronic intrusion or other improper means;
• disclosing, using or allowing others to use a right-holder’s trade secrets obtained by the means mentioned in the preceding paragraph;
• disclosing, using or allowing others to use a right-holder’s trade secrets in violation of confidentiality obligations or the right-holder’s requirements on keeping such trade secrets confidential; and
• obtaining, disclosing, using or allowing any other party to use a right-holder’s trade secrets by instigating, tempting or helping any other party to violate the confidentiality obligations or the right-holder’s requirements on keeping such trade secrets confidential.

Article 9 also stipulates that other natural persons, legal persons and unincorporated organisations other than the business operators who commit the illegal acts listed in the preceding paragraph shall be deemed as infringing trade secrets.

Therefore, an employee who violates the fiduciary duty by stealing trade secrets can be subject to a lawsuit for either breach of contract or infringement of trade secrets. Trade secret infringement claims can also be brought against defendants who induce employees to breach their contractual confidentiality obligations to the right-holder/employer.

According to Article 219 of the Criminal Law, anyone who commits one of the following acts of infringing trade secrets, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years together with a fine, or solely a fine; if the circumstances are especially serious, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and a fine for:

• obtaining a right-holder’s trade secrets by theft, bribery, intimidation, electronic intrusion or other improper means;
• disclosing, using or allowing others to use a right-holder’s trade secrets obtained by the means mentioned in the preceding paragraph; or
• disclosing, using or allowing others to use a right-holder’s trade secrets in violation of confidentiality obligations or the right-holder’s requirements on keeping such trade secrets confidential.

At the same time, where a party with full knowledge that a trade secret was acquired through illegal or improper means as set out in the preceding paragraph still proceeds to obtain, disclose, use or allow others to use the trade secret, it shall be regarded as infringement of trade secrets.

According to the relevant judicial interpretations, if the implementation of the infringement of trade secrets stipulated in the Criminal Law (i) causes losses to the right-holder of the trade secrets or illegal gains from the infringement of trade secrets of more than CNY300,000, or (ii) directly causes bankruptcy or closing down of the right-holder of the trade secret due to major operational difficulties, it shall be deemed as “causing heavy losses to the right-holder of the trade secret”. If the amount of loss caused to the right-holder of the trade secret or the amount of illegal gains due to infringement of the trade secret is more than CNY2.5 million, it shall be deemed as “causing especially serious consequences” as stipulated in Article 219 of the Criminal Law.

For the infringement of trade secrets, both civil and criminal proceedings can be brought. Due to the stronger ability of the police to investigate and collect evidence, many plaintiffs will choose to report the case to the police first and obtain relevant evidence from them before proceeding with civil litigation.

Generally, trade secrets are territorial rights, and people cannot be prosecuted in China for misappropriation that occurs in other countries. However, if, eg, the trade secrets of a company located in China were stolen by electronic intrusion outside of China, it is possible that Chinese courts would have jurisdiction since the result of the infringement occurred in China. In addition, if an infringer steals a trade secret abroad and uses it in China in the course of business, the right-holder can sue before a Chinese court for infringement due to the infringer’s use of the trade secret. In addition, according to the principle of lex personalis applied in Chinese criminal law, if the perpetrator of the misappropriation is a Chinese company or individual, even if the misappropriation occurs in another country/region, a criminal lawsuit against the Chinese company or individual can be instigated.

In China, the condition for filing a trade secret infringement lawsuit is to prove that the plaintiff is the holder or interested party (generally the licensee) of the trade secret; the alleged trade secret meets the definition of trade secret in Article 9 of the Anti-Unfair Competition Law, namely, it belongs to technical or business information not known to the public, has commercial value and been kept confidential by the right-holder by reasonable confidentiality measures; and the defendant has infringed trade secrets as stipulated in Article 9 of the Anti-Unfair Competition Law. For non-employees, it needs to be proven that the defendant used improper means.

To file a trade secret infringement lawsuit, the right-holder does not need to prove that their trade secret has been used, but only that the defendant obtained the trade secret without permission.

If the infringer of a trade secret is an employee who breaks the duty of confidentiality or disobeys the right-holder’s requirement to keep trade secrets and discloses, uses or allows others to use the trade secrets in their possession, it is an act of infringement of trade secrets. For employees, if there is a confidentiality agreement signed with the employer, the confidentiality obligation must be fulfilled. If there is no confidentiality agreement, the employee has a negative obligation of inaction – ie, to keep the trade secret, not to use it beyond the scope or authority, nor to disclose or allow others to use the trade secret.

Based on the principle of good faith, joint venturers have a negative obligation of inaction – ie, the obligation to keep each other’s trade secrets that become known during co-operation.

At present, there are no special provisions for industrial espionage in Chinese laws. Acts of stealing trade secrets are still dealt with in accordance with the Anti-Unfair Competition Law and Criminal Law. Similar to other intellectual property rights, remedies for trade secret infringement include damages and injunctions.

Regarding the best practice for protecting trade secrets, the relevant judicial interpretations give some suggestions:

• requiring the signing of a confidentiality agreement or stipulating confidentiality obligations in the contract;
• putting forward confidentiality requirements for employees, former employees, suppliers, customers, visitors, etc, who have access to and are able to obtain trade secrets, through articles of association, training, rules, regulations or written notices, etc;
• restricting visitors or conducting separate management for production and business sites such as workshops involving secrets;
• distinguishing and managing trade secrets and their carriers by marking, classifying, isolating, encrypting, sealing up or limiting the scope of persons who can access or obtain them, etc;
• taking measures such as prohibiting or restricting the use, access, storage, reproduction, etc, of computer equipment, electronic equipment, network equipment, storage equipment, software, etc, that can access and obtain trade secrets; and
• requiring departing employees to register, return, remove and destroy the trade secrets and their carriers that they have accessed or acquired, and to continue to undertake the obligation of confidentiality.

Best practices vary by different technical fields. For example, in the field of computer software, the right-holder is usually advised to divide the development of the software into different modules, whereby each module is developed by different personnel, so as to avoid the developer mastering all the source code as much as possible. Another example is in the field of chemistry, where codification is usually adopted for raw materials, intermediates, products, etc.

Different companies have different strategies for exit interviews. Typically, an exit interview should include the following:

• reviewing the terms of the NDA with departing personnel and asking them to contact the company if they have questions with respect to the NDA;
• reminding the employee/contractor of their duty not to use or divulge the company’s trade secrets;
• requiring that the employee sign a termination certificate, if possible, acknowledging the employee’s understanding and duty not to disclose trade secrets or confidential information;
• obtaining trade secret materials and documents in the employee’s possession or control, including, without limitation, hard copies, soft copies, home computer files, home office files, laptops, cell phones, etc; and
• requiring that keys and access cards be returned.

At present, there is no specific definition of “employee’s general knowledge and skills” in China’s trade secret legislation. In principle, the knowledge and skills acquired by an employee in working for the employer become part of their personality, and the employee has the right to apply the knowledge and skills acquired in a new job, but the employee should not use trade secrets learned from the previous employer in their work for a new employer. Usually, if an employer is concerned about the possible use of trade secrets by an employee after their employment finishes, the employer will enter into a non-compete agreement with the employee, requiring the employee not to engage in an industry that competes with the employer for up to two years, during which time the employer must pay a reasonable fee to the employee.

A new employer should strictly manage the employment of employees hired from competitors and recruit such employees through legal and proper means, by firstly checking whether the employee to be hired has terminated their labour contract with the former employer and whether they have any obligation of non-compete and/or confidentiality of trade secrets, and asking the employee to be hired to make a written statement or commitment. The new employer should investigate the similarities and differences between the original and prospective position of the employee to be hired and arrange the prospective position carefully, fully investigate the actual performance of such employee, and require such employee to promise not to use the trade secrets of the previous employer in the course of their work. At the same time, most importantly, the new employer should preserve and archive relevant evidence, such as keeping all the materials proving that it obtained the trade secrets of others through lawful means, such as reverse engineering.

Since there is no discovery in the civil procedure in China, the plaintiff should collect evidence, including evidence of infringement and damage, before filing a lawsuit.

To file a lawsuit for infringement of trade secrets, the following work should be done:

• determining the parties of the lawsuit – ie, the plaintiff and the defendant;
• determining the court of jurisdiction: territorial and level jurisdiction, distinguishing between technical and business information;
• carrying out necessary preservation, including evidence and conduct preservation;
• determining the scope of trade secrets;
• determining the constituent elements of trade secrets, ie, not being known to the public, having commercial value and taking corresponding confidentiality measures;
• identifying basic types and scope of infringement acts; and
• determining the litigation claims and the type of civil liability, eg, stop the infringement, compensate for losses, return or destroy the trade secret carrier, remove the trade secret information in possession.

The statute of limitations does not apply to claims for cessation of the infringement of trade secrets; for claims for damages from infringement, the limitation period begins when the right-holder knows or should have known the scope of infringement, the infringer and the infringing acts. In principle, the limitation period is three years, but shall not exceed 20 years from the date of infringement. At the same time, trade secret cases, like other civil cases, are subject to the relevant provisions on the suspension and interruption of the limitation of action.

As mentioned above, in China, there is no discovery in the civil procedure. Therefore, after collecting the evidence and finishing other preparations (see 5.1 Prerequisites to Filing a Lawsuit), the plaintiff should file a lawsuit with the court. Generally, after accepting a case, the court will give both parties a time limit for producing evidence, and then organise evidence exchange and a pre-trial conference. Furthermore, the court will organise at least one formal trial before reaching a conclusion. Trade secret litigation cases also often involve forensic appraisal, such as appraisal of whether the alleged “secret point” (ie, an individual secret element of a project) is known to the public, and whether the information in question is the same as the secret point information. Forensic appraisal can be unilaterally entrusted by the plaintiff or the defendant, or may be entrusted by the court.

In terms of territorial jurisdiction, the court of jurisdiction for cases of infringement of trade secrets may be the court at the place where the infringement is committed (including the place where the infringement is carried out and the result of the infringement occurs) or the court at the place where the defendant is domiciled. In terms of level jurisdiction, first-instance civil cases involving trade secret infringement are generally under the jurisdiction of intermediate people’s courts, according to judicial interpretations. Provincial high people’s courts may designate certain basic-level people’s courts to hear cases involving unfair competition in their jurisdictions, with the approval of the Supreme Court. Basic-level people’s courts that have already been approved to handle intellectual property civil cases can continue to do so. In addition, the level of jurisdiction is affected by the amount of damages claimed. For example, for cases with a damages claim amount exceeding CNY5 billion, the provincial high court has jurisdiction.

In China, civil cases follow the principle of “he who asserts must prove”. Therefore, for trade secret cases, the plaintiff is required to have conclusive evidence to prove the existence of infringement. However, due to the difficulty of obtaining evidence in trade secret cases, the current trend in legal and judicial practice is to reduce the difficulty of proof for plaintiffs and appropriately reallocate the burden of proof. For example, according to Article 32 of the new Anti-Unfair Competition Law, in the civil trial procedure concerning infringement of trade secrets, the owner of trade secrets shall provide prima facie evidence to prove that they have taken confidentiality measures for the claimed trade secrets and reasonably show that the trade secret has been infringed, while the accused infringer shall prove that the trade secret claimed by the right-holder does not constitute a trade secret as stipulated in this law.

Where the right-holder of a trade secret provides prima facie evidence reasonably showing that the trade secret has been infringed, and provides one of the following as evidence, the accused infringer shall prove that they have not infringed the trade secret:

• there is evidence that the accused infringer had channels or opportunities to obtain the trade secret, and the information used is substantially the same as the trade secret;
• there is evidence that the trade secret has been or is at risk of being disclosed or used by the accused infringer; or
• there is other evidence that the trade secret has been infringed by the accused infringer.

These provisions reduce the difficulty of the plaintiff’s proof and reallocate the burden of proof to the defendant after the plaintiff provides prima facie evidence.

The Civil Procedure Law grants the parties a right to apply to the people’s court for preservation of evidence when the evidence may be lost or difficult to obtain in the future. Plaintiffs in trade secret infringement cases often take advantage of this provision of the Civil Procedure Law to file an application for evidence preservation while suing, hoping to obtain direct evidence of the defendant’s infringement and relevant evidence of damage through the court. When the court examines the plaintiff’s application for evidence preservation, it mainly considers the following factors:

• the plaintiff should clearly claim the specific content of the trade secret and attach relevant evidence;
• the plaintiff should provide prima facie evidence of the defendant’s infringement;
• the scope of evidence preservation should be consistent with the claim. Generally, the scope of preservation shall not exceed the trade secrets claimed by the plaintiff nor the claims of the plaintiff. Evidence that the plaintiff can obtain by themselves or secure through notarisation will not be preserved by the court; and
• the guarantee provided by the plaintiff.

As mentioned in 5.5 Initial Pleading Standards and 5.6 Seizure Mechanisms, even if an evidence preservation mechanism can be applied, the plaintiff should have prima facie evidence of the defendant’s infringement. The plaintiff should complete the acquisition of prima facie evidence by themselves and cannot rely on other mechanisms. After the prima facie evidence is presented, on the one hand, the plaintiff can obtain further evidence through the court’s evidence preservation mechanisms; on the other hand, if the defendant infringes trade secrets to a serious extent and is suspected of committing a crime, the plaintiff can also report this to the police. Because the police have strong investigative capabilities, the plaintiff can also obtain evidence through this channel for civil proceedings.

The evidence that the plaintiff can furnish includes evidence relating to infringement and damage.

According to the relevant judicial interpretation, when the applicant believes that their trade secret is about to be illegally disclosed, it should be determined whether it is “urgent” as stipulated in Articles 100 and 101 of the Civil Procedure Law; if so, the applicant can require the court to make a conduct preservation ruling – ie, an injunction to order the defendant not to disclose, use or allow others to use the trade secret allegedly stolen from the applicant. Since trade secret cases are not heard in public, if the court conducts evidence preservation, the process will not be made public, and the trade secrets involved and their carriers will not be disclosed to third parties.

Common defences in trade secret cases include the following:

• Defence against trade secrets:
1. the scope of the trade secret is unclear or its carrier is not specified;
2. the secret point is unclear or incorrect;
3. the trade secret was known to the public before the defendant obtained or used it; and
4. the owner or the licensee of the trade secret involved did not take the corresponding confidentiality measures for the trade secret.
• Independent research or reverse engineering defence:
1. where the allegedly infringing information is obtained through independent research or reverse engineering, the people’s court shall determine that it is not an act of infringing trade secrets as stipulated in Article 9 of the Anti-Unfair Competition Law; and
2. the term “reverse engineering”, as mentioned in the preceding paragraph, refers to the disassembly, surveying and analysis of products obtained from public channels, through technical means, in order to obtain relevant technical information about the products.
• Client trust defence:
1. paragraph 2 of Article 13 of the judicial interpretation of unfair competition – if a client enters into market transactions with an employee’s company based on personal trust in the employee and, following the employee’s departure, voluntarily chooses to transact with the employee or with a new entity established or joined by the employee, such conduct shall not be regarded as improper means,unless otherwise agreed between the employee and the original employer; and
2. paragraph 2 of Article 2 of the judicial interpretation of trade secrets – if a client enters into market transactions with an employee’s company based on personal trust in the employee and, following the employee’s departure, the employee can prove that the client voluntarily chose to transact with the employee personally or with a new entity established or joined by the employee, the people’s court shall determine that the employee has not used improper means to obtain the trade secret of the right-holder.

There are no procedures relating to dispositive motions in China’s civil litigation framework. However, as is the current trend, before entering a formal proceeding, the parties can directly conduct a mediation, and the court may also preside over the mediation. If a settlement is reached between both parties, the court can make a mediation statement accordingly, which has legal effect.

For trade secret litigation, the attorney fees usually range from hundreds of thousands to millions of yuan depending on the difficulty of the case. For example, in the “Vanillin” case recently heard by the Supreme People’s Court, the court supported a reasonable fee of CNY3.5 million for rights protection. The defendant may be liable for compensatory and punitive damages, as well as the plaintiff’s reasonable expenses for rights protection, such as attorney fees and notarisation, translation and appraisal costs.

In China, intellectual property infringement insurance is allowed for civil cases. As for litigation financing or third-party funding, there is currently no clear determination of whether it is legal or not, but litigation financing already exists in practice.

There is no jury fact-finding procedure in China. China adopts a unique system of people’s assessors. In some cases, people’s assessors can participate in the trial of cases. People’s assessors have the same rights and obligations as judges.

In China, there is no difference between the trial of trade secret cases and the trial of general civil cases, except that trade secret cases are usually not heard in public. The trial process generally includes stages such as evidence exchange and cross-examination, court investigation and court debate. Court investigation and court debate are often carried out together. Except in a few cases, a witness who has given testimony shall appear and testify in court, otherwise their testimony cannot be used as the basis for independent determination of facts. Generally, trade secret cases are the same as other civil cases: the second instance is final, and the trial period is six months for the first instance and three months for the second instance. The above periods may be extended.

In trade secret cases, the plaintiff and the defendant may hire expert witness to give testimony on the technical issues for which they are responsible. An expert witness can provide answers to professional and technical questions and ask questions of the other party’s expert witness. However, in trade secret cases, it is more common to ask a professional judicial appraisal institution to issue an appraisal report, such as whether the alleged secret point is unknown to the public and whether the defendant’s information is the same as that of the trade secret. The appraisal expert shall appear in court. Although the cost of appraisals varies according to their contents, it is usually several hundred thousand yuan.

According to the relevant judicial interpretation, when the applicant believes that their trade secret is about to be illegally disclosed, it should be determined whether it is “urgent” as stipulated in Articles 100 and 101 of the Civil Procedure Law; if so, the applicant can require the court to make a conduct preservation ruling – ie, injunction to order the defendant not to disclose, use or allow others to use the trade secret allegedly stolen from the applicant. The preconditions for the preservation ruling include:

• the trade secret claimed by the applicant meets the constitutive requirements;
• the fact of infringement exists or is about to happen;
• irreparable damage will be caused if such an injunction is not granted;
• a guarantee has been provided by the applicant according to law (see below); and
• the injunction shall not harm the public interest.

If the people’s court orders conduct preservation measures to be implemented, it shall reasonably determine the duration of those measures according to the request of the applicant, the specific circumstances of the case and other factors.

The effect of any ruling to stop the infringement of intellectual property rights is generally maintained until the judgment of the case takes effect.

The amount of guarantee provided by the applicant shall be equivalent to the losses that the respondent may suffer from the implementation of the conduct preservation measures, including reasonable losses such as lost sales income and storage expenses of the products involved.

In the process of implementing the conduct preservation measures, if the losses that the respondent may suffer as a result exceed the guarantee provided by the applicant, the people’s court may order the applicant to increase the guarantee correspondingly.

The amount of compensation for business operators that have suffered damage due to unfair competition shall be determined according to the actual loss suffered due to the infringement. If the actual loss is difficult to calculate, the compensation shall be determined according to the profits obtained by the infringer due to the infringement. The amount of compensation shall also include the reasonable expenses spent by the operator to stop the infringement.

In order to obtain the above compensation, the plaintiff shall provide corresponding evidence. In order to determine the amount of compensation, the people’s court may order the infringer to provide the account books and materials related to the infringement when the plaintiff has tried their best to furnish evidence and the account books and materials related to the infringement are mainly in the possession of the infringer. If the infringer fails to provide or provides false account books and materials, the people’s court may determine the amount of compensation with reference to the claims of the plaintiff and the evidence provided.

If it is difficult to determine the actual losses suffered by the right-holder due to the infringement and the profits obtained by the infringer due to the infringement, the people’s court shall make a judgment to compensate the right-holder less than five million yuan according to the circumstances of the infringement.

If an infringer maliciously commits an act of infringing trade secrets and the circumstances are serious, the amount of compensation may be determined at an amount between one and five times the amount determined in accordance with the above methods.

Trade secret cases in which plaintiffs win usually result in a cessation of infringement and damages, unless the trade secret has already been disclosed so that any judgment prohibiting the disclosure of the trade secret is meaningless. Generally, unless the case is settled through settlement or mediation, the plaintiff cannot ask the defendant to recall the products. Since employees have the freedom of employment, it is generally impossible to restrict their subsequent employment; employers can only restrict the subsequent employment of a departing employee through a non-compete agreement for a period of no more than two years and for a fee. An injunction to cease infringement generally has no time limit until the invalidation of the trade secret.

Generally, the plaintiff can claim for the reasonable expenses to stop the infringement, including reasonable attorney fees, notarisation fees, translation fees, appraisal fees, etc. Claims for such expenses require relevant evidence, usually including contracts, payment vouchers and invoices.

Successful plaintiffs can obtain compensatory and punitive damages and reasonable expenses, including reasonable attorney fees, notarisation fees, translation fees, appraisal fees, etc. The plaintiff shall list the above claims in the indictment, and the judge will hear the case according to the claims. Successful defendants generally cannot obtain compensation unless the plaintiff abuses intellectual property rights.

Either the plaintiff or the defendant, or both, if they are dissatisfied with the first-instance judgment, may appeal to the higher court. As explained in 5.4 Jurisdiction of the Courts, first-instance civil cases involving trade secret infringement are generally under the jurisdiction of intermediate people’s courts. Hence, for most cases, the appellate court is the corresponding provincial high court overseeing the intermediate court. For judgments, the appeal period is 15 days from the date of receipt of the judgment; for rulings, the appeal period is ten days from the date of receipt of the ruling, and for a party that has no domicile in China, the appeal period is 30 days from the date of receiving the judgment or ruling. The trial period of the second instance is three months, which can be extended. The appeal procedure will not vary between courts.

The court of second instance focuses more on legal issues, but usually also ascertains factual issues. If the second-instance court finds out that the basic facts determined by the first-instance judgment are unclear, it will usually send it back to the first-instance court for retrial; if other facts are unclear, the second-instance court can also revise the judgment after finding out the facts. Usually, the second instance is not de novo and will be tried according to the appellant’s grounds of appeal. For issues that need to be reserved, the appellant should clearly record it in the grounds of appeal. For most trade secret cases, the court of second instance does not merely conduct a written hearing, instead, it usually gives both parties an opportunity to present and debate.

To file a criminal lawsuit in a trade secret case, it is necessary to report the case to the police first and provide preliminary evidence of the trade secret held and the infringement of the trade secret.

According to Article 219 of the Criminal Law, if the circumstances of the infringement of trade secrets are serious, the infringer shall be sentenced to fixed-term imprisonment of not more than three years together with a fine, or solely a fine; if the circumstances are particularly serious, the infringer shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and shall also be fined.

The defences in criminal cases are basically the same as those in civil cases. However, it should be noted that the standard of proof in criminal cases is guilt beyond reasonable doubt, while civil cases adopt the high probability standard. Therefore, what is recognised as infringement in civil cases is not necessarily recognised as infringement in criminal cases. Holders of trade secrets can actively provide preliminary evidence, but once the police open a case, the investigation will be completed by them.

Regarding alternative dispute resolution (ADR) for trade secret disputes, the more mature mechanism in China is mediation, which includes not only court mediation but also people’s mediation and administrative mediation. The main pros of mediation include:

• mediation is simple, fast and flexible;
• the general cost of mediation is low; and
• mediation can resolve disputes in a relatively mild way, while also reflecting fairness and justice.

However, mediation also has cons, including:

• the limitations of mediation cases – ie, it is only suitable for cases with a clear legal relationship and minor disputes;
• mediation cases may make the parties lose the best time to litigate; and
• poor execution of non-court mediation.

Due to the difficulty in proving evidence and the low success rate in trade secret cases, the plaintiff may consider mediation to achieve the purpose of protecting trade secrets to a certain extent for cases with pessimistic prospects for litigation. Usually, the mediation process can guarantee confidentiality to avoid further disclosure of trade secrets.

In addition, as another ADR mechanism, if a “contract” has been signed between the right-holder and the alleged infringer and both parties voluntarily reach an arbitration agreement, they can apply for arbitration to the local arbitration institution or the arbitration institution agreed in the arbitration agreement in accordance with the Arbitration Law of the PRC.

ADR mechanisms can be used as a pre-procedure to litigation and are not inconsistent with litigation proceedings, so interim measures can be obtained from the courts.

In addition, a mediation statement issued by the court according to the mediation agreement of the parties is enforceable, and the parties may apply for enforcement to the court of first instance or the court at the same level where the property subject to enforcement is located. An arbitration award issued by an arbitration institution is also enforceable, and the parties may apply for enforcement to the intermediate people’s court in the place where the person subject to enforcement has their domicile or where the property subject to enforcement is located.