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03 June 2019
The revision of the Anti-unfair Competition Law is part of the new effort to enhance the protection of intellectual property in China. It also reflects the ongoing negotiations between China and the United States on various topics, including IP protection.
On 20 April 2019 the State Council proposed the revision of several articles of the Anti-unfair Competition Law which relate to the protection of trade secrets. On 23 April 2019 the National People's Congress adopted new versions of Articles 9, 17 and 21 and added a new Article 32.
'Trade secret' definition
Article 9 (now 9.4) provides a wider definition of a 'trade secret'. In addition to "technical or operational information", "other business information" has been added so that the scope of secret information covers everything of value.
Method of illegal acquisition
The method of illegally acquiring trade secrets has become more sophisticated, which is recognised by the addition of the words "electronic intrusion" in Article 9.1.1.
Article 9.1.3 addresses the frequent instances of trade secret theft, which breaches the "obligations of confidentiality".
A new sub-paragraph (9.1.4) has been added, which introduces the concept of "instigating, inducing or assisting others in violation of their obligation of confidentiality".
Whereas Article 9 starts with "A Business Operator shall not", an additional paragraph (9.2) specifies that trade secret infringement may be committed by "natural persons, legal persons or unincorporated organisations, other than the Business Operator". Thus, employees who are not, strictly speaking, business operators are now designated by the law as potentially liable.
Similar to the Trademark Law, the revised Article 17 of the Anti-unfair Competition Law introduces the concept of punitive damages. Thus, in cases where the circumstances are serious, the amount of damages calculated according to the law may be multiplied by up to five times.
This article also increases the maximum amount of statutory damages that the courts may grant in cases where it is difficult to calculate the damages according to the law (illegal gains or level of prejudice). The maximum amount has been raised to Rmb5 million.
The administrative penalties have also been strengthened in the new Article 21. In terms of the confiscation of the illegal proceeds, the fines have increased so that they range from Rmb100,000 to Rmb1 million or even from Rmb500,000 to Rmb5 million, depending on the seriousness of the circumstances.
Burden of proof
The new Article 32 introduces the inversion of the burden of proof.
Provided that the trade secret owner proves that it has taken confidentiality measures to protect its trade secret, the alleged infringer should prove that the information in question is not a 'trade secret', as defined by the law.
An alleged infringer will need to prove that it has not engaged in the infringement of trade secrets if the trade secret owner can provide preliminary evidence to prove that infringement has been committed, including:
For further information on this topic please contact Hui Huang or Paul Ranjard at Wanhuida Peksung by telephone (+86 10 6892 1000) or email (email@example.com or firstname.lastname@example.org). The Wanhuida Peksung website can be accessed at www.wanhuida.com and www.peksung.com.
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