The Anti-Unfair Competition Law (AUCL) has been revised several times in recent years, and the provisions on trade secrets have undergone some corresponding changes. There are many issues worthy of attention in practice due to changes in the law.
Q: How is the prescription period in trade secret infringement cases determined?
A: The General Principles of the Civil Law stipulates that the ordinary limitation of action is two years, while the General Provisions of the Civil Law stipulates that the limitation is three years. The ordinary limitation of action shall be applied to the trade secret infringement cases, therefore, whether to adopt the two-year or three-year limitation of action shall be determined according to the occurrence time of the plaintiff’s alleged infringement act in specific cases.
The two-year limitation of action shall be applied according to the General Principles of the Civil Law if the infringement act occurred before 1 October 2017, and the three-year limitation of action shall be applied according to the General Provisions of the Civil Law if the infringement act occurred after 1 October 2017. As for a continuing infringement act that prolongs after 1 October 2017, the three-year limitation of action shall be applied according to the General Provisions of the Civil Law.
Q: Which version of the AUCL should be applied?
A: The AUCL came into force on 1 December 1993, and was revised twice, in 2017 and 2019. Several critical changes have been made in the new AUCL, such as the types of infringement acts, the distribution of burden of proof, and the compensation amount. Therefore, it is very important to determine which version of AUCL should be applied.
In practice, it is usually based on the occurrence time of the plaintiff’s alleged infringement to decided which version of the AUCL should be applied. For continuing infringement acts, the occurrence time of the infringement act should be interpreted as the very last time that the infringement act occurred.
Q: How is the burden of proof between the plaintiff and the defendant allocated?
A: There are two main considerations
(1) Distribution of burden of proof in the 1993 version and 2017 version of the AUCL. No changes have been made in terms of the allocation of burden of proof for the trade secret infringement cases in the 2017 AUCL. Therefore, the burden of proof shall be determined in accordance with article 14 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Civil Cases of Unfair Competition, implemented on 1 February 2007, on if the cases will be tried according to the 1993 AUCL or the 2007 AUCL.
This article stipulates: “If a party alleges that the other party has infringed on its trade secret, it shall be responsible for providing proof to verify that its business secret satisfies the statutory requirements, the information of the other party is identical or substantially identical with its trade secret, and the other party has adopted unfair methods. Among others, the evidence for proving that its trade secret satisfies the statutory requirements shall comprise the carrier, specific contents and commercial value of this trade secret, as well as the specific confidentiality measures taken for this trade secret.”
Accordingly, the plaintiff has three burdens of proof: (i) the trade secret owned by the plaintiff shall meet the statutory requirements, which include non-public information, confidentiality and valuableness; (ii) the information of the defendant is identical or substantially identical with the plaintiff’s trade secret; and (iii) the defendant obtained and (or) disclosed, or used the plaintiff’s trade secret by improper means.
The “non-public information” in the above-mentioned clause is a negative fact. In view of the difficulty in proving negative facts, the court usually sets lower standards, and normally the plaintiff only needs to submit the prima facie evidence. If the defendant argues that the information claimed by the plaintiff does not constitute a trade secret, it shall submit the evidence to prove that the information is generally known and easy to obtain by relevant persons in the field. However, in practice, many trade secret holders will claim their trade secrets meet the “non-public information” requirement by conducting a forensic examination, just in case.
(2) Distribution of burden of proof in the 2019 AUCL. Article 32 of the 2019 AUCL has made a major adjustment on the allocation of burden of proof in trade secret infringement cases, reducing the burden of proof for the plaintiff and increasing it for the defendant. According to the first paragraph of this article, the plaintiff’s burden of proof has been greatly reduced in terms of the statutory requirements of trade secrets. The plaintiff only needs to provide prima facie evidence to prove that it has taken confidential measures for the alleged trade secret, and to reasonably indicate that the trade secret has been infringed. If the defendant disagrees, it shall prove that the trade secret claimed by the plaintiff does not institute a trade secret according to this law.
The second paragraph of article 32 stipulates: “If the right holder of a trade secret provides prima facie evidence to reasonably indicate that the trade secret has been infringed upon, and provides any of the following evidence, the alleged tortfeasor (person who commits a tort) shall prove the absence of such infringement:
(a) Evidence that the alleged tortfeasor has a channel or an opportunity to access the trade secret, and that the information it uses is substantially the same as the trade secret;
(b) Evidence that the trade secret has been disclosed or used, or is at risk of disclosure or use, by the alleged tortfeasor; and
(c) Evidence that the trade secret is otherwise infringed upon by the alleged tortfeasor.
The new provisions will substantially favour trade secrets rights holders, since the plaintiff’s burden of proof has been reduced to a great extent in proving the defendant’s infringement act, and part of the burden of proof is shifted to the defendant.
Liu Qinghui is a partner at AnJie Law Firm
19/F Tower D1, Liangmaqiao Diplomatic Office Building
19 Dongfang East Road
Beijing 100600, China
Tel: +86 10 8567 5988
Fax: +86 10 8567 5999