What to do if your Trade Secrets are infringed in China

When your trade secret is out, before going the Chinese court, you need to preserve as much as possible evidence of its existence, then talk with your lawyer to find the best way to solve the problem in your case. Here are a few potential solutions to consider:

First, if there is an arbitration agreement or arbitration clause in your contract with the party allegedly responsible for unauthorized disclosure of your trade secret, you can choose to submit your case to be resolved by arbitration. It is normally faster and cheaper than litigation.

Second, if the unauthorized disclosure come from your employees, it can be regarded as a matter for a labor dispute. You must first apply to the local labor dispute arbitration commission for arbitration before going to the court according to Chinese Labor Dispute Mediation and Arbitration Law.

Third, you can make an application to the local Administration for Industry and Commerce (“AIC”) for administrative enforcement. The AIC shall order the counterparty to cease their illegal act and may impose a fine ranging from RMB 100,000 to RMB 5,000,000, depending on the circumstances, according to Chinese Anti-Unfair Competition Law.

Fourth, of course, you can always go to the Chinese court to claim damages and seek an order to stop the infringement based on tort or breach of contract. In this case, you need enough evidence to prove your case, namely:

• you need to prove you have and own the trade secret,
• you need to prove the defendant possesses your trade secret; and
• you need to prove the defendant obtained the trade secret improperly.

Finally, if you have difficulty getting evidence and the infringement brings you significant losses, you may choose to report a case to the local security bureau, because theft of trade secret is a crime under Chinese Criminal Law. Then, if the local public security bureau decides to conduct a criminal investigation, they will collect the evidence by themselves. In this case, you can even claim supplementary civil compensation in a criminal proceeding.

This publication has been prepared for general informational purposes only. Nothing contained herein is legal advice, nor does your use of or reliance upon it create an attorney-client relationship with Semeion Group.