Compared to 2023, there has been a remarkable increase in the number of patent enquiries, which reflects the growing awareness of intellectual property rights (IPR) among enterprises, as well as a stronger emphasis placed on the protection of technologies due to technological advancement. In addition to regular arrangements of patent confirmation, such as domestic application and overseas planning, the enquiries received also include dispute settlement concerning technical infringements. Given that the specific perspective taken by holders on the disposal of their rights and action plan may lead to vastly different outcomes of the case, a tailor-made overarching strategy of IPR protection is crucial.
In technology-based IPR disputes, it is a common scenario that the rights holder claims its technical secret has been stolen by a former employee, who is now making similar products in another company to compete with the rights holder at lower prices. Sometimes the former employee may even apply for a patent for the stolen technical secret so as to launch an attack on the rights holder’s products.
Understandably, rights holders under these circumstances are eager to pursue the liabilities of infringers. Despite the urge to seek prompt and severe punishment, due consideration should always be given to such aspects as the prerequisites for pursuing liabilities, the success rate and the possible impacts of actions taken. Otherwise, inappropriate strategies adopted may often backfire.
Think before you leap
Partner
Shanghai Pacific Legal
In the case of infringement, some rights holders are so eager to pursue criminal liability that they fail to consider the other civil liabilities of the infringer. It is often based on personal judgement that a rights holder presumes the action constitutes an infringement and warrants criminal prosecution, while gathered evidence does not necessarily suffice.
At this point, making hasty decisions may leave the rights holder in a passive position where the criminal case fails to be initiated (See China Business Law Journal, volume 13, issue 5: Pursuing criminal liability in intellectual property).
Despite intensified efforts made in judicial practice to pursue liabilities of trade secret infringers, a case may end up being dismissed if the rights holder rushes to file a criminal complaint without sufficient evidence. What’s worse, the unprotected technical secret might be made public during this process.
Even if the rights holder then turns to pursue the civil liabilities of the infringer, the confrontation aroused makes it hard to gather the required evidence. In this sense, the case may eventually run counter to the rights holder’s intentions, resulting in a triple failure of criminal case initiation, evidence collection for civil liabilities and technical protection.
Measures for technical protection
Rights holders should distinguish each technological solution by classifying and determining whether it is better protected by patent or know-how, with corresponding measures taken in advance (See China Business Law Journal, volume 12, issue 9: Technology IP protection on the rise). In the case of an infringement, make sure to prioritise technical preservation rather than pursuing emotional compensation.
For instance, when the infringer has applied for a patent and thus disclosed the technology during the process, instead of initiating a trade secret infringement lawsuit, a patent ownership lawsuit to seek confirmation on the patent right could prove more beneficial to the protection of technology.
On the contrary, if the infringer has kept the technological use all to itself, with no patent applied, pursuing legal liability for trade secret infringement should be considered. Another option is to apply to the court for measures against further disclosure of the trade secret throughout the process, so as to ensure the relative confidentiality of the technology in the market.
Pursuing liabilities
Before taking action, identify whether pursuing criminal or civil liabilities is more beneficial to the rights holder. Pursuing criminal liability, which is the most critical legal liability concerning personal repercussions, may impose the most severe punishment and greatest deterrence on the infringer.
Attempts to pursue severe consequences can possibly spur heated confrontation, in which case the rights holder may fail to obtain economic compensation even after winning the criminal case, or the trade secret may be left disclosed by the infringer without effective protection. Such an aftermath should not be neglected in the process of initiating a criminal complaint.
Labour law is another option and liabilities can be pursued by resorting to the employment contract, or the non-compete or confidentiality agreement. Thanks to easier collection of evidence, this approach tends to yield a higher success rate.
However, as this approach is usually restricted to former employees, the rights holder may find it difficult to obtain effective economic compensation, and the impact on the actual infringer is limited.
In summary, whether it is for the protection of the right or for pursuing the liabilities of infringement, IPR protection requires a comprehensive consideration of the rights holder’s situation, the nature of the infringement, and the potential positive and negative impacts of various action plans.
This calls for a tailor-made strategy to provide overarching guidance for subsequent action. Also, the strategy needs to be adjusted in response to the case progress and constant changes. In the end, only with a suitable and flexible strategy can we ensure the most effective IPR protection.
Frank Liu is a partner at Shanghai Pacific Legal
Shanghai Pacific Legal
Room 2709, 27/F, Plaza 66 II
1266 Nanjing Road West
Shanghai 200040, China
Tel: +86 21 6086 0199
Fax: +86 21 6086 0111
Email: frank.liu@shanghaipacificlegal.com
