Technology IP protection on the rise

By Frank Liu, Shanghai Pacific Legal
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With the strengthening of intellectual property (IP) protection, and constant updates to legislative and judicial interpretations, technology IP protection has never been so strong in China. However, not every owner of technology IP rights is fully aware of the issues, and rights infringements continue to occur. It is worthwhile for owners to consider how they can best make use of the latest developments in protection to safeguard their IP.

Technology IP rights are generally protected through know-how or patents. However, many companies have not clearly defined their technology IP rights. In some cases, technological solutions have not been properly organised or identified, let alone protected. This can easily lead to gaps in the technology IP line of defence and difficulty in finding effective relief for infringements.

Distinguished is protected

Singling out and defining technology IP rights is a fundamental responsibility for companies. Technological solutions put forward by the production and R&D departments should be distinguished and classified by the technicians and patent and legal professionals of the company. In many projects, technology IP is protected by a combination of know-how and patents. For technological solutions suitable for protection by patents, companies are advised to apply for the patent as soon as possible; for those more suitable for protection as know-how, companies should take steps to strengthen confidentiality and establish a tradesecret protection system.

For technology IP rights imported from abroad, rights owners must also consider the different means of IP protection in other jurisdictions. For example, there may be technological solutions best protected in Europe as know-how, but which might be more effectively protected in China through patents.

Main concerns

As discussed in China Business Law Journal: “Trade secret protection: taking precautions is key”, for technology IP rights protected as know-how, the most important thing is still to strengthen confidentiality measures and prevent any leakage. Once the know-how is leaked, even if the company is able to find relief by winning the subsequent lawsuit, it is unlikely to recover the losses caused by the trade secret being made public. The leaked know-how would have also permanently lost its patentability. This is why, even with improved means for judicial relief, protecting the know-how with effective internal confidentiality measures is still the best option.

刘建强, Frank Liu , Shanghai Pacific Legal-s
Frank Liu
Partner
Shanghai Pacific Legal

It is not uncommon for know-how to be patented by former employees or partners. At this point, it is obviously no longer possible to continue with know-how protection. However, if the aggrieved party attempts to go directly to court against the infringer, not only is there no basis of right, but it may also fall victim to counter-measures by the infringer who successfully obtained the patent.

Therefore, in such cases, one must first and foremost determine patent ownership and, through judicial relief for patent ownership disputes or negotiation and other means as appropriate, switch the primary goal to regaining the technology IP rights. While by no means a perfect solution, it is still far better than rushing into a lawsuit only to be backed into a corner. Alternatively, if the patent ownership dispute cannot be won due to insufficient evidence or other reasons, it is also possible to invalidate the stolen patent and stifle the counter-measures of the infringer.

Ride the wave

Since 2018, there has been a tremendous upgrade in China’s protection of trade secrets. The General Principles of the Civil Law, which took effect on 1 October 2017, has been replaced by the Civil Code since 1 January 2021. Article 123 of the code affirms trade secrets as being subject to IP protection. The Anti-unfair Competition Law was again revised in 2019, further upgrading rules on infringement, confidentiality obligations, burden of proof and compensation in connection with trade secrets.

These changes have subsequently been reflected in court judgments. On 24 August 2020, the Supreme People’s Court (SPC) adopted the Provisions on Several Issues Concerning the Application of Laws in the Trial of Civil Cases Involving Infringement on Trade Secrets, providing detailed judicial interpretations regarding the core challenges in initiating and winning trade secret cases.

Although it may take some time for courts to fully revamp their approach to trade secret infringements, companies finding themselves victims of such wrongdoing should nevertheless seek to take advantage of the trend towards a stronger crackdown. Meanwhile, legislators and courts are shifting away from previous harsh requirements for rights owners in terms of confidentiality measures and burden of proof, and are instead imposing a heavier burden of proof and more stringent penalties on the infringers. Rights owners thus stand a better chance at safeguarding their rights.

Even in the traditionally much more troublesome cases of modifying or improving on stolen trade secrets, or adjusting, optimising or improving production and operations based on a stolen trade secret, rights owners will also benefit from the SPC interpretations.

While technology IP rights owners undoubtedly stand to benefit from the positive legislative and judicial trends, it is ultimately up to them to protect their own interests. Only rights owners familiar with their own technology, who have set up protection after appropriate classification, and who are able to resort to the latest legal remedies as soon as an infringement occurs, can effectively safeguard their technology IP.

Frank Liu is a partner at 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

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