table of contents
1. Employee behavior management is an important part of trade secret management
2. Employees and former employees may become trade secret infringers alone
3. Legal evaluation of employees' disposition of enterprise trade secrets beyond their authority
4. Suggestions on prevention and remedial measures for enterprises
V. Conclusion
preface
The situation to be discussed in this article is that an in-service employee who has the authority to access, hold and use the company's trade secrets in a specific way disposes of the company's trade secrets in a manner that violates the will of the enterprise, violates the company's management norms, and exceeds his or her authority, but has not disseminated or disclosed the information beyond his or her personal possession and control, and has no other use behavior. In the aforesaid circumstances, there are no easily characterized infringement facts such as disclosure or use, and although such acts are more likely to be "preparations" for disclosure or use, separate prevention and remedies for such acts can cut off the path of external disclosure of trade secrets as soon as possible, seek and obtain legal determinations and injunctions favorable to the enterprise in advance, and prevent irreparable losses caused by the further evolution of internal risks.
1. Employee behavior management is an important part of trade secret management
As an important intangible asset and intellectual property of an enterprise, trade secrets have a stronger "intangible" attribute than other types of intellectual property rights, and their ownership cannot be determined and publicized through application and authorization, nor can the scope of their rights be effectively confirmed without judicial review. In recent years, trade secret infringement cases with high damages have been continuously issued by the Supreme People's Court due to substantial revisions and adjustments to the content of laws and judicial interpretations related to trade secrets, and enterprises have become more and more intuitively aware of the value of trade secrets. However, due to the above-mentioned characteristics of trade secrets, it is often difficult to properly protect trade secrets by setting simple confidentiality measures, and the management of trade secrets cannot be managed one by one according to the authorization certificates. Many enterprises have many doubts about the protection and management of trade secrets, especially for employees who must master trade secrets due to the exercise of their duties, although enterprises can require them to undertake confidentiality obligations by signing a confidentiality agreement, on the one hand, it is difficult for enterprises to delineate the detailed content and scope of trade secrets in advance, and on the other hand, it is often difficult to accurately restrain employees' access to, use and disposal of trade secrets. In addition, in practice, the performance and termination of some employment contracts are accompanied by other legal disputes between employers and employees, and existing disputes between enterprises and employees or former employees will lead to further loss of trust relationship, so enterprises are generally concerned about the disclosure and infringement of trade secrets by employees and former employees.
Statistics in judicial practice show that the number of cases in which employees or former employees are defendants or co-defendants in unfair competition cases of trade secret infringement accounts for the vast majority of all trade secret infringement cases[1]. However, most of these trade secret infringement dispute cases involve competitors who use trade secrets, that is, they involve the common and typical factual background of the use of the trade secrets of the original company due to the employee's job change to the new company. Enterprises have more questions about how to reasonably restrain and deal with employees' behaviors, that is, how to safeguard and manage the rights and interests of trade secrets before they have been disclosed and used, and how to prevent the risk of subsequent leakage of secrets through effective self-reliance or public remedies.
2. Employees and former employees may become trade secret infringers alone
When the Anti-Unfair Competition Law of the People's Republic of China (hereinafter referred to as the "Anti-Unfair Competition Law") was revised in 2019, a paragraph was added to the article defining and regulating trade secret infringement, clarifying that "if a natural person, legal person or unincorporated person other than a business operator commits the illegal acts listed in the preceding paragraph, it shall be deemed to have infringed trade secrets." Article 1.3 of the Economic and Trade Agreement between the Government of the People's Republic of China and the Government of the United States of America requires that "both parties shall ensure that all natural and legal persons are legally liable for infringement of trade secrets." The above-mentioned provisions of the Anti-Unfair Competition Law shall be applied to conduct legal evaluations of the behaviors of employees and former employees without barriers. However, this provision cannot be directly applied to the evaluation of alleged infringements before its entry into force.
Prior to the revision and entry into force of the Anti-Unfair Competition Law in 2019, it was difficult for employees and former employees to be directly identified as "operators"[2] as defined in Article 2 of the Anti-Unfair Competition Law, making it somewhat controversial whether they could be "qualified defendants" in trade secret infringement disputes. For example, in the earlier typical case of Company L et al. v. Huang, a dispute over infringement of technical secrets[3], the defendant employee Huang raised a defense that he was "an ordinary worker, did not operate or participate in the business of others, had no competitive relationship with the two plaintiffs, and did not belong to the business operators under the Anti-Unfair Competition Law". In essence, it refers to the entity that participates in or influences market competition activities, and the defendant in the case, as an employee of the plaintiff, obtains the plaintiff's technical secrets, which can affect the plaintiff's market competition strategy, and is the object of adjustment of the law. At the same time, although the 2017 revision of the Anti-Unfair Competition Law still involved different opinions on this issue and did not finally include provisions for employees and former employees into the law[4], whether from the perspective of judicial practice or from the perspective of relevant academic circles[5], even if the 1993 version of the Anti-Unfair Competition Law is applied, there should be no substantial obstacle to the separate investigation of the acts of employees and former employees.
3. Legal evaluation of employees' disposition of enterprise trade secrets beyond their authority
When employees and former employees alone are the subject of infringement, but their acts have crossed the boundary of "use", the infringement evaluation of their acts has been successfully established, and the participating legislators have also affirmed this. "If an employee or former employee illegally obtains trade secrets, or violates the agreement to keep trade secrets, and uses trade secrets for production and business activities, the employee or former employee becomes a 'business operator' and constitutes unfair competition against the right holder of trade secrets"[6]. That is, when conducting a legal evaluation of an employee's or former employee's conduct with business attributes, it can be determined that they are "business operators" based on the business attributes of their conduct.
However, this article further focuses on the special situation of an employee who has the authority to access, hold and use the trade secrets of an enterprise in a specific way, and dispose of the trade secrets in a manner that exceeds the will of the enterprise, violates the management norms of the enterprise, or exceeds his or her own position or authority, but has not yet disseminated or disclosed the information beyond the scope of his or her personal possession and control, and has no other use behavior. For example, an employee carries trade secret information from the confidential area to the non-confidential area, an employee steals trade secret documents to his personal device, and an employee forwards trade secrets to a personal mailbox or personal external device. When consulting and dealing with the above-mentioned situations, some enterprises believe that such acts only violate the corporate norms but do not constitute violations of laws and infringements. However, according to the judgments in judicial practice, the employee's act of disposing of the company's trade secrets beyond his authority also constitutes infringement, and the enterprise can pursue its tort liability, and may also try to prevent the subsequent disclosure, use, or subsequent use of the enterprise by applying for act preservation in civil litigation.
In addition to the above-mentioned earlier typical case of Company L et al. v. Huang, a dispute over infringement of technical secrets, the Intellectual Property Tribunal of the Supreme People's Court has also recently made a judgment in a similar case.
In addition to the above-mentioned public judicial judgments, the author has also represented an enterprise in handling the administrative investigation and handling procedures for trade secrets involving similar facts, in which the reported party copied the company's trade secret documents by himself or by instructing others to steal production operation cards and product drawings, and used other people's computers to forward the trade secret documents to his personal email address through other people's mailboxes , confirming that the reported party's theft of trade secrets constitutes infringement, ordering it to stop the illegal act and imposing a fine on it. Although the situation discussed in this article is more often characterized in the judiciary as "obtaining the trade secrets of the right holder by other improper means", from the content of the corresponding provisions of the Criminal Law of the People's Republic of China, "theft of trade secrets" and "acquisition of the trade secrets of the right holder by other improper means" The legal assessment is the same, and there is a sufficient legal basis for pursuing criminal responsibility for the latter.
4. Suggestions on prevention and remedial measures for enterprises
Enterprises that initiate civil litigation or administrative whistleblowing procedures against employees need to pay costs including attorney fees and litigation costs, and may also involve expenses such as entrusting searches and appraisals to prove the establishment of trade secrets, and it is difficult for employees to claim damages against employees when such disposition constitutes infringement, but there is no disclosure or use (or the enterprise has not yet grasped the clues and evidence of their disclosure and use). As a result, some enterprises are shy away from public remedies and rights protection measures, and instead handle and settle matters through termination of labor relations, internal notification, etc. However, in fact, judging from the judgments of the above-mentioned cases, the court is generally able to make a judgment requiring the employee to stop the infringing act, prohibit subsequent disclosure and use, and pay the reasonable expenses of the enterprise to protect its rights. The reasonable costs incurred by an enterprise in initiating a legal proceeding can generally be recovered in a civil litigation case. In the above-mentioned case of Company L et al. v. Huang for infringement of technical secrets, the court made a ruling on the act preservation of "prohibiting Huang from disclosing, using or allowing others to use the 21 documents claimed by Company L as trade secrets" before the judgment and executed it immediately after it was served, so that Company L could ensure that its trade secret documents were protected by the effective judgment documents as soon as possible and to the greatest extent possible. In recent judicial cases, a people's court has also ordered the defendant to bear the legal responsibility to stop the infringement even though it has been preliminarily confirmed that the defendant has deleted or destroyed the document carrier, and ordered the defendant in the case to "not disclose, use or allow others to use the trade secrets involved in the case"[11], giving the trade secret rights holder more comprehensive legal protection.
Based on the above-mentioned cases and the author's experience, this article gives the following suggestions for enterprises to prevent and remedy employees' unauthorized disposal of trade secrets:
(1) Suggestions for prevention:
1. In addition to signing a confidentiality agreement with employees, an enterprise should clarify clear specifications for employees' acts involving trade secrets through the Employee Handbook, Confidentiality Code or other similar documents, which can be used as a direct basis for claiming that employees' behaviors are "ultra vires" and "violations" in subsequent legal disputes, in addition to informing and restraining employees.
2. Enterprises should make full use of IT and other management resources to establish management and monitoring measures for important confidential documents and information through automated office systems and internal network environments, such as setting up access to specific files only in the company's internal network environment, and conducting internal alarms for abnormal access and download behaviors of employees, so as to detect employees' ultra vires disposal behaviors in a timely manner and ensure that corresponding evidence can be retained;
3. Enterprises should take physical measures that can be coordinated with confidentiality rules and regulations to remind and restrict behaviors that employees may intentionally or unintentionally carry out with the risk of leakage of secrets, such as posting reminders in specific places, taking specific measures to restrict the shooting function of mobile devices, setting up the internal LAN of the enterprise, restricting the use of external storage devices on work equipment, etc., so as to implement the paper confidentiality system into practical and effective confidentiality measures.
(2) Suggestions for relief:
1. If the enterprise prefers to choose self-remedies to resolve disputes, it also needs to consult a lawyer to fully consider the scope of trade secrets, the characterization and fixation of infringements, the method of termination of labor relations, the return and destruction of confidential information, exemption conditions and terms of agreements, and non-compete agreements.
2. If the enterprise has sufficient evidence and can protect its rights and interests by initiating a civil lawsuit, the judgment of the trade secret infringement civil litigation case can "confirm" the trade secret rights of the enterprise, and the enterprise can also apply for act preservation during the litigation procedure, so as to achieve "advance protection" by obtaining an effective civil ruling to avoid further circulation of trade secrets;
3. If the enterprise has limited ability to collect evidence and has not yet mastered sufficient evidence in civil litigation, it may, on the basis of preserving and submitting existing evidence, complete further evidence collection through investigation by administrative organs in the form of administrative reports, so as to achieve the purpose of protecting its own rights and punishing infringers;
4. In the above-mentioned civil litigation and administrative investigation procedures, if the court or administrative organ can obtain relevant information and clues about the employee's disclosure of trade secrets to competitors or the use of trade secrets in other forms due to the investigation and collection of evidence by the court or administrative organ, further legal measures may be taken according to the corresponding circumstances. If the economic value of the trade secret meets the standard of accountability set by the criminal law, or if there is a reasonable license fee that can be used for reference and meets the corresponding standards of the criminal law, criminal legal remedies can also be sought by reporting the case to the public security organs.
V. Conclusion
Returning to the issues to be discussed in this article, the author believes that the act of disposing of the trade secrets of the enterprise by an employee who has the authority to access, hold and use the trade secrets in a specific way is separately responsible, but in order to reduce the difficulty and cost of subsequent rights protection, the enterprise needs to consider this situation in advance and set up certain preventive systems and measures. Judicial practice and effective cases are often the most vivid teaching materials for enterprises to manage trade secrets, from which enterprises can learn not only the methods and conclusions of dispute handling, but also how to take effective measures to avoid the risk of internal mismanagement from turning into trade secret leakage incidents and trade secret legal disputes.
Annotations (scroll up and down to view)
[1] According to the statistics of trade secret infringement cases involving trade secret infringement in courts across the country from 2013 to 2017, the research team of the Intellectual Property Division of the Beijing Higher People's Court conducted data statistics on the cases of infringement of trade secrets in courts across the country, and among the 338 cases within the scope of its research, there were 281 cases of employee infringement, accounting for 83% of all cases. See "<反不正当竞争法>Research Report on the Judicial Trial of Trade Secrets after the Amendment", Intellectual Property Rights, No. 11, 2019, p. 72.
[2] Article 2 of the Anti-Unfair Competition Law of the People's Republic of China: Business operators shall follow the principles of voluntariness, equality, fairness and good faith in their production and business activities, and abide by laws and business ethics. "Acts of unfair competition" as used in this Law refers to conduct by business operators in their production and business activities in violation of the provisions of this Law, disrupting the order of market competition, and harming the lawful rights and interests of other business operators or consumers. "Business operators" as used in this Law refers to natural persons, legal persons, and unincorporated organizations engaged in the production or sale of commodities or the provision of services (hereinafter referred to as "commodities include services").
[3] See the (2013) Hu Yi Zhong Min Wu (Zhi) Chu Zi No. 119 Civil Judgment of Shanghai No. 1 Intermediate People's Court, which is the first case in mainland China in which act preservation measures were applied in trade secret infringement litigation under the new Civil Procedure Law, and is one of the top ten innovative intellectual property cases released by the Supreme People's Court in 2014.
[4] During the revision of the Anti-Unfair Competition Law in 2017, the Chinese National People's Congress published the full text of the revised draft to solicit public comments, which contained direct provisions on infringement of trade secrets by employees and former employees, but after subsequent deliberation and research, the Law Committee of the National People's Congress recommended that the provision be deleted. See "Report of the Law Committee of the National People's Congress on the > Amendments to the <Anti-Unfair Competition Law of the People's Republic of China (Revised Draft)" http://www.npc.gov.cn/zgrdw/npc/xinwen/2017-11/04/content_2031357.htm, last accessed January 3, 2024.
[5] See Kong Xiangjun, "On the Spirit of the Times of the New Revision<反不正当竞争法>", Oriental Jurisprudence, No. 1, 2018, pp. 77-78.
[6] Wang Ruihe, ed., Interpretation of the Anti-Unfair Competition Law of the People's Republic of China, Law Press, 2018, p. 31.
[7] Ibid., note 3.
[8] See the Civil Judgment of the Supreme People's Court (2020) Zui Gao Fa Zhi Min Zhong No. 1276.
[9] See the Supreme People's Court (2021) Supreme Court Zhi Min Zhong No. 1687 Civil Judgment.
[10] See the WeChat public account of Wuhan Jiang'an District Court: "Media Attention | Is it a crime to "steal and unuse" the trade secrets in the company https://mp.weixin.qq.com/s/h3mz5YOosGE9yHRylkmTog's e-mail address?
[11] See the WeChat public account of the Guangxi High Court: "Engineer Jumps Job, Copies 292 Documents of the Old Employer", https://mp.weixin.qq.com/s/piuu98eqeg4NrBmxek-Qlg
Author: Ma Dongxiao Fang Yao
Edited by Eleven