Countering misappropriation of trade secrets by ex-employees

Q: What are the primary sticking points for employers in taking legal action against ex-employees for trade secret misappropriation?

A: According to the Anti-unfair Competition Law of the People’s Republic of China, “trade secret” is defined as technical information and commercial information that is unknown to the public, which could bring economic benefits to the owner, which has practical applicability and which the owner has taken measures to keep secret.

Determination of the scope of trade secret and evidence collection of trade secret misappropriation are two major obstacles for the owner to enforce its trade secret. In practice, whether a former employer’s claims are supported by a court are significantly determined by whether it can present a clear scope of its trade secret and provide evidence proving that it has taken appropriate measures to protect its trade secret.

Given the secret nature of trade secret misappropriation, a fundamental principle broadly adopted by courts is whether information possessed by a former employee is at least substantively similar as that claimed by a former employer, whether the former employee did, or did likely, get access to such information, and whether the former employee can provide a legitimate source for his or her information.

However, this principle does not mean that the former employer can simply rely on a court to make a judgment and/or the former employee to prove his or her innocence. Instead, it should take appropriate and effective action to collect evidence against the ex-employee, especially when it suspects the ex-employee anonymously shared its trade secrets with its competitors.

Li Binxin and Liu Zhenghe are partners at AnJie Law Firm