Protecting corporate business data under IP legal norms

By Ethan Zhang and Nea Liang, Joint-Win Partners
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Corporate business data generally refers to the compilation of historical and real-time information on each important link in the value chain of an industry, including internal data, distribution channel data, consumer market data and other commercially valuable data.

In April 2020, the State Council issued its Opinions on Improving the Market-based Allocation Mechanism of Production Factors, proposing to accelerate cultivation of the data factor market, enhance the value of social data resources, and strengthen the integration and security protection of data resources. For the first time, data were listed alongside land, labour, capital and technology as the five major factors.

“Research on the establishment of protection rules for data intellectual property (IP)” and “strengthening IP protection in the process of production, circulation, utilisation and sharing of data” were included in the National Plan for Protection and Application of Intellectual Property Rights in the State Council’s 14th Five-Year Plan period, issued in October 2021. From the perspective of corporate development, relevant business data is the key object of data IP protection mentioned in the plan.

Case analysis

Ethan Zhang, Joint-Win Partners, Protecting corporate business data under IP legal norms
Ethan Zhang
Senior Partner
Joint-Win Partners

China has not yet issued a specific law on protection of IP rights in business data – and therefore the boundaries of data, scope of rights and interests, and other related issues remain unclear.

At present, enterprises generally adopt system norms in the Intellectual Property Law as the legal basis for protection of rights and interests of business data, of which the main circumstances and legal response measures include: (1) business data constituting a piece of work can be protected by the Copyright Law; (2) business data meeting the conditions of confidentiality, commercial value and security measures can be protected similarly to trade secrets; and (3) business data can be protected by the Anti-Unfair Competition Law.

Upon researching recent disputes over protection of rights and interests of “business data” via public channels, the authors found that due to the special attributes of business data, the number of data-related unfair competition disputes accounted for 74% of the total ‒ much higher than other types such as infringement of trade secrets (12%) and counterfeiting disputes (6%).

In terms of industry, data-related unfair competition disputes are mostly concentrated in manufacturing (23%), followed by scientific research and technology (21%), wholesale and retail (17%), and software and information technology (16%).

Disputes over the protection of rights and interests of business data also indicate annual growth peaking in 2020, and declining slightly afterwards due to the pandemic.

It can be seen that the healthy development of business digitisation depends on free and fair competition of the data industry and platforms, and the good order of competition has become an important topic for the digital economy. Competition norms on business data have also become a significant topic relating to data security laws.

Court considerations

Nea Liang, Joint-Win Partners, Protecting corporate business data under IP legal norms
Nea Liang
Associate
Joint-Win Partners

Compared to the requirements of originality for compilation works and confidentiality and secrecy for trade secrets under the Copyright Law, in practice, the business data of enterprises are often unable to meet the above-mentioned higher standards for various reasons, and cannot be protected through the Copyright Law, or as trade secrets.

Under such circumstances, it is a good strategy to protect business data on the grounds of the legitimate rights and interests under the Anti-Unfair Competition Law. In judicial practice, courts often decide that business data can be protected by this on the basis of examining the scope, attributes, sources and other factors of business data.

Based on the above-mentioned analysis on related judicial cases – and practical experience – it can be seen that in disputes over unfair competition involving business data, courts generally judge whether competition involving corporate business data constitutes unfair competition through the following aspects.

Whether the plaintiff has competitive rights and interests in the business data. In practice, data types claimed by enterprises mainly include raw data provided by users or collected by enterprises, and derivative data formed by enterprises after data collection, processing and analysis. Whether the acquisition of such business data is legitimate and has potential for economic benefits and competitive advantages, thus commercial value, are the main factors considered by the courts.

Whether the conduct involved is improper. Whether it violates the principle of good faith and recognised business ethics is the first step in determining the properness of an accused’s conduct. In cases involving corporate business data, competitive conduct may often be determined improper if it breaks technical restrictions set by the plaintiff, or the Robots Agreement in the process of data collection due to lack of consent of the relevant data subject, or use of data beyond reasonable scope or manner.

Whether the conduct causes substantial damage to the rights and interests of the plaintiff. Whether the data competition conduct causes damage to the competitive rights and interests of the plaintiff is one of the main criteria considered by most courts in determining whether it constitutes unfair competition. Since such conduct may fall under either articles 2 or 12 of the Anti-Unfair Competition Law, the court will also have different criteria in the determination process.

In view of the above-mentioned cases, main considerations include whether it: reduces the commercial interests or trading opportunities of the plaintiff; produces a substantial substitution effect on the plaintiff’s products; disrupts normal operation of the plaintiff’s products; increases the plaintiff’s operating costs; or threatens the plaintiff’s data security.

Whether it disrupts the market competition order and infringes the rights and interests of consumers. Since competition conduct involving business data usually occurs on the internet, courts will also regard any damage to the market competition order as factors that constitute unfair competition – such as violation of business ethics of the internet industry, and destruction of the market competition order of data resources or data products.

In addition, consumers’ rights and interests such as the right to know or the right to choose, or their personal data security, may sometimes also be among factors determining damage results.


Ethan Zhang is a senior partner at Joint-Win Partners. He can be contacted at +86 136 6169 8075 or by email at zhangyichen@joint-win.com
Nea Liang is an associate at Joint-Win Partners. She can be contacted at +86 181 1711 1357 or by email at liangnaihan@joint-win.com

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