Does it infringe on trade secrets if an employee grasps key information and becomes a competitor of the old employer?

After grasping the company's key information, employees start anew, set up the same type of company, and become competitors of the "old employer"; salespeople join the group to change jobs, resulting in the leakage of the company's trade secrets...... How to define the relationship between reasonable talent turnover and employee infringement of trade secrets? Whether customer information is a trade secret? How to determine the amount of compensation in a trade secret infringement case? Can a non-compete clause alone effectively protect an enterprise's trade secrets? On April 25, Beijing Xicheng Court held a press briefing on "Typical Cases of Employee Job Hopping and Infringement of Trade Secrets", and answered these questions one by one in combination with typical cases.

Does the customer information taken away by employees who grasp key information and become competitors of the "old club" is considered a trade secret?

On April 25, on the occasion of "World Intellectual Property Day" and "May Day", Xicheng Court held a press briefing on "Typical Cases of Employee Job Hopping and Infringement of Trade Secrets". At the meeting, Dong Linming, vice president of the Third Civil Division of Xicheng Court, released four typical cases around the infringement of trade secrets by job-hopping employees.

In the case of "copying the contract, it is not a coincidence that the contract was signed before and after", Company A was a contracted customer of Company B, and it was agreed that Company B would provide cleaning services to Company A, and the contract between the two parties was not renewed after it expired. Later, Company A signed a new cleaning service contract with Company C, and Company C provided cleaning services to Company A. In addition to the basic information such as the contracting party, the signing time, and the collection account, the main terms of the contract, such as the service location, the number of service personnel, the service fee standard, and the liability for breach of contract, are consistent with the cleaning service contract signed by Company B and Company A. At the same time, the person who provided cleaning services in Company C was also the original service personnel of Company B. According to another investigation, Guo, a one-person shareholder of Company C, is the husband of Chang, a former employee of Company B. Chang used to be the manager of the operation department of Company B, responsible for the bidding of the operation department and the renewal of contracts with customers. The "Labor Contract", "Confidentiality Agreement" and "Employee Handbook" signed between Company B and Chang stipulate that Chang shall strictly keep the company's trade secrets that he knows due to his identity, position, occupation or technical relationship. In the end, the court ruled that Chang and Company C should compensate Company B for economic losses of 16,000 yuan, for which Guo was jointly and severally liable. This case clarifies that the court shall follow the determination rule of "constituting a trade secret + possibility of contact + substantial identity - legal source" when determining whether an employee who changes jobs infringes trade secrets.

In the case of "The Sea 'Picks the Needle', Industry Norms Do Not Allow", the plaintiff Company E claimed that it and Company F were both service providers of a large network company and had a competitive relationship. In March 2018, Yu joined Company E as a sales director and resigned in May 2020. In April 2018, Mr. Sun and Mr. Zhao also joined Company E as sales, and resigned in June 2020. Company E signed confidentiality agreements with all three of them. After their resignations, all three joined Company F in the same month of their resignation. During their work in Company E, Yu took advantage of his position to allocate important customer resources of Company E to Zhao and Sun. Under the instruction of Mr. Yu, Mr. Zhao and Mr. Sun released a large amount of the customer resources into the "customer high seas", that is, the customer resource pool, and at the same time, Company F selected the customer resources released into the "customer high seas" into the company's customer resource pool within a few minutes, and carried out follow-up services to these customers. After Company E found out, it filed a complaint, and the upstream manager network company issued a notice confirming that Company F had violated the "Partner Management Specification" and the "Customer's High Seas Operation Rules". The court found that the defendants Yu, Sun, Zhao, and F had infringed on the trade secrets of Company E, and awarded compensation of 50,000 yuan for economic losses. This case clarifies that the determination of "acquisition by improper means" can be referred to and applied by reference to industry norms in some fields.

The Xicheng Court reminded that the customer information in the trade secret includes the customer's name, address, contact information, transaction habits, intentions, content and other information. Factors to be considered in determining whether customer information constitutes a trade secret include: the specificity of the customer information. Customer information protected by law should be specific and clear, as distinct from ordinary customer information that can be obtained through public channels; Customer information generally includes the customer's transaction habits, payment methods, purchase intentions and special needs, etc., and the enumeration of individual customer information does not constitute a trade secret, and the customer information is stable. Customer information is a customer that is relatively fixed for a certain period of time and has unique trading habits after the right holder's investment of human, material, financial and time resources, and the party claims that the specific customer is a trade secret only on the grounds that it has maintained a long-term and stable trading relationship with the specific customer.

How to determine the amount of compensation in a trade secret infringement case where a former employee impersonated the old employer and signed a customer for his old employer was awarded 3.55 million yuan?

In the case of "impersonation, it is not advisable to violate good faith", Wang was a former employee of Company A and was responsible for the cooperation between Company A and Company C, and Wang later informed the two parties that the cooperation was terminated. During his tenure, Mr. Wang signed a confidentiality agreement with Company A. After Mr. Wang's resignation, Company A learned that Company C's business had not stopped, but the partner had been changed from Company A to Company B. Company B contacted Company C through Wang, and appended the name of Company A after the name for contract approval, and Company B was actually jointly operated by Wang and his friend Zhang, while Company C mistakenly believed that Company B was an affiliate of Company A. The court found that the acts of Wang and Company B jointly infringed on the trade secrets of Company A, and ruled to stop the infringement, publish a statement, eliminate the impact, and compensate for losses of 3.5 million yuan and reasonable expenses of 50,000 yuan.

This case clarifies that in the case of infringement of trade secrets by "impersonating" the original employer after the employee changes jobs, the counterparty to the contract is completely misidentified, and this business behavior that violates the principle of good faith should be regulated. Compared with other typical cases, the amount of compensation finally confirmed in this case is very high, how to determine the amount of compensation in the case of employee infringement of enterprise trade secrets? Xicheng Court introduced that the amount of damages should be determined in the principle of being able to make up for the losses suffered by the right holder due to the infringement, unless otherwise provided by law. The amount of damages shall be determined in the order of the actual losses of the right holder, the infringer's profits from infringement, and the statutory compensation, of which the actual losses may be determined with reference to the trade secret license fees. If it is difficult to determine the actual losses of the right holder or the infringer's profits from infringement, a judgment may be made to give the plaintiff statutory damages of up to RMB 5 million based on factors such as the nature of the trade secret, its commercial value, the cost of research and development, the degree of innovation, the competitive advantage it can bring, the subjective fault of the infringer, and the nature, circumstances and consequences of the infringement.

How does a company protect trade secrets? Court: There is a greater risk in only the non-compete clause

In the case of "general protection, the company's rights protection is at risk", the plaintiff, a trading company, claimed that it had an employment contract relationship with Zhou from August 2017 to October 2019, and that Zhou served as the company's salesman. The company's costs and other costs are all trade secrets, and Zhou must abide by confidentiality regulations, and shall not disclose them to the outside world without consent, and it is absolutely forbidden to use these trade secrets for the benefit of himself or others, and Zhou has a non-compete obligation and shall not work for himself or to other employers that are competitive with the trading company that operate similar products and engage in similar business. In October 2019, Zhou resigned from the trading company. Later, the trading company discovered that Zhou and his spouse jointly established a sales company in 2006, and after Zhou left the company, he provided the sales company with customer information obtained during his tenure at the trading company. So the trading company sued Zhou and the sales company to the court, demanding to stop the infringement and compensate for economic losses of 45,000 yuan. In this case, firstly, the scope of business information that the plaintiff trading company wanted to protect as a trade secret was not clear, secondly, the defendant's sales company was established before Zhou joined the trading company, and finally, the confidentiality measures of the plaintiff trading company were only the "non-competition and confidentiality" clause in the labor contract. Taking into account the above factors, the court finally rejected the plaintiff's claim.

The above-mentioned typical cases suggest that there is a greater risk in protecting trade secrets only by adopting non-compete clauses, and enterprises must take appropriate and appropriate measures to protect their own technical and business information. The scope and authority of employees in different positions to access the corresponding level of trade secrets shall be attached to the confidential carriers of the enterprise; It attaches great importance to the protection of trade secrets in foreign business dealings, and shall file and conduct internal review in advance for confidential information that employees may be involved in external exchanges, and remind employees to avoid leaking enterprise trade secrets, and if it is necessary to provide confidential documents and materials to third parties, the confidential information should be declassified to prevent the leakage of enterprise trade secrets to the greatest extent。 At the same time, Liu Yijun also reminded employees that they should abide by the statutory and agreed confidentiality obligations whether they are on the job, when they leave the company, or after they leave the company.

Text/Beijing Youth Daily reporter Dai Youqing

Editor/Ni Jianing