Know-how protection and countermeasures for litigation

Recent years have witnessed a growing number of trade secret infringements and a gradual increase in the amount of damages. Enterprises have learned to use trade secrets as a weapon to protect technological achievements.

As someone who has represented a large number of trade secret cases involving the chemical industry, information technology, new materials, the pharmaceutical industry and other fields, the author finds there are blind spots in the way many enterprises determine the object of know-how protection and how they summarise the secret points that may directly lead to losing cases.

Article 9.4 of the Anti-Unfair Competition Law provides that trade secrets refer to any technology information, business information and other commercial information that is unknown to the public, can bring about economic benefits to the rights holder, and about which the rights holder has adopted secret-keeping measures.

Therefore, when it comes to know-how infringement disputes, it is technical information that is protected. But first, what is technical information? And what kind of technical information can be protected by law?

In the trial of trade secret infringement cases, the plaintiff (rights holder) should first clarify the secret point, which refers to the content of technical information that it advocates to protect. A secret point is the scope of protection claimed by the plaintiff, and the basis of the defendant’s defence. If the secret point is uncertain, the defendant will be unable to defend.

If the secret point is certain, the judge needs to further verify whether it meets the requirements of trade secrets, namely, whether it is confidential (non-public knowledge) and valuable (economic value and technical value) and confidentiality measures are taken. After meeting these conditions, the judge needs to determine whether a trade secret infringement has been committed by finding out if the defendant has been provided with the secret point (or has access to the information), whether the defendant has used it, or whether the defendant has illegally disclosed it to a third party.

Thus, the summary and determination of secret points is the basis for trial of trade secret cases. Without secret points, it is impossible to try a case and the plaintiff will lose the possibility of winning the litigation.

With regard to the scope of secret points, article 1 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Laws in the Trial of Civil Cases of Infringement on Trade Secrets provides that courts may determine the information related to technology – such as structures, raw materials, components, formulas, materials, samples, patterns, new plant variety propagation materials, processes, methods or their steps, algorithms, data, computer programs and related documents – to constitute technical information under article 9.4 of the Anti-Unfair Competition Law. However, in practice, many enterprises still have the following problems.

Confusing information with the information carrier and mistaking the carrier of technical information as the secret point are common errors in trade secret infringement cases. In these cases, technical drawings are often stolen, and the rights holder may directly claim protection of the technical drawings as trade secrets.

However, drawings are merely carriers of technical information, and not all information on them can be protected as trade secrets. Part of the information belongs to the public domain, which is public knowledge and does not fall into the scope of trade secret protection.

However, the process-flow information designed by the rights holder is unique and creative, and can produce unique technical effects, and thus belongs to the domain of non-public information, and can be protected as trade secrets.

Too general a scope of trade secrets, making it impossible to determine the specific technical information to be protected. The plaintiff often defines the scope of infringed trade secrets too broadly, claiming the defendant has infringed all its technical drawings or technological processes. This is because the plaintiff is usually unaware of whether, or how much, the defendant uses its technical information and is thus unable to judge whether all its technologies constitute trade secrets. To avoid leaving anything out, plaintiffs adopt the strategy of casting a wide net.

This strategy creates obstacles to the court’s trial and the plaintiff’s claims. During the trial, as facts become clear and under the guidance of the court, the plaintiff will narrow the scope of protection it claims, and gradually focus the secret point until it is finally on the plaintiff’s technical information being used by the defendant. After the secret point advocated by the plaintiff is clarified, the defendant can make a targeted defence and defend from the aspects of whether the secret point constitutes a trade secret, and whether it has been accessed and used.

Although it is difficult to determine the secret point, the plaintiff should try to define the scope to improve the trial’s efficiency and the plaintiff’s chances of winning the case. In practice, there have been cases where the court dismissed the plaintiff’s case because they failed to define their secret points.

As a secret point, technical information should have technical value (effect). In addition to confidentiality, technical information protected as trade secrets also needs to have value, which is reflected internally by its technical effects and externally manifested as the ability to bring technological competitive advantages to the rights holder, thereby realising economic value.

In judicial practice, courts will consider the technical effect of technical information. For example, if the design of the external dimension of a reaction tower has no technical effect solely due to the limitation of road transportation width, it is difficult to identify the dimension as technical information (secret point) that can be protected as trade secrets.

To sum up, the rights holder of trade secrets should sort out its own know-how before filing a lawsuit and determine as a secret point the technical information that meets the requirements of trade secrets according to the specific circumstances of the infringed trade secrets, so as to seek legal protection.

Sun Yan is a partner at Tian Yuan Law Firm. He can be contacted by phone at +86 139 1076 3881 or by e-mail at sy@tylaw.com.cn