table of contents
1. The main advantages of administrative protection of trade secrets
II. Basic Plans for the Administrative Protection of Trade Secrets
(1) Materials to be submitted by the right holder to claim administrative protection
(2) Evidence to be submitted by the right holder to claim administrative protection
(3) The administrative liability that the infringer needs to bear
III. Typical Cases of Administrative Protection of Trade Secrets
(1) Compulsory investigation and evidence collection by administrative protection can prevent the destruction of evidence
(2) The existence of commercial secrets shall be used as preliminary evidence in the filing of administrative protection cases
(3) Administrative punishments are an important basis for the settlement of disputes between the two parties
IV. Conclusion
Preface
In the practice of trade secret protection, when the right holder is infringed on its trade secrets, it can actively protect its rights through various ex-post remedies such as administrative, civil and criminal remedies. From the methodological point of view, we can clarify the protection path of trade secrets, analyze the overall situation, analyze the strategy, determine the personalized ideas and concrete paths for the protection of trade secrets, and do a good job in the protection of trade secrets. Compared with the two paths of civil protection and criminal protection, in practice, all parties pay less attention to the path of administrative protection of trade secrets. This paper analyzes the administrative path of trade secret protection to assist rights holders to understand this protection path from multiple perspectives and provide assistance for the protection of enterprise trade secrets.
1. The main advantages of administrative protection of trade secrets
The administrative protection of trade secrets refers to the way in which the right holder submits clues about the suspected infringement of trade secrets to the market regulation department through complaints, reports, etc., and is under the jurisdiction of the market regulation department at or above the county level where the illegal act occurred, and after investigation by the market regulation department and the administrative punishment is given, it has the characteristics of a relatively low threshold for filing a case, a short period of rights protection, and a fast investigation and punishment of evidence, which is very important for the right holder of trade secrets.
Due to the characteristics of trade secrets and trade secret infringement, rights holders often face several difficulties in protecting their rights in litigation: First, difficulties in obtaining evidence. Due to the intangible nature of trade secrets and the concealment of infringements, it is difficult to obtain evidence such as the extent to which trade secrets have been leaked and used, the infringement of trade secrets, and the profits from trade secret infringement. The lack of evidence not only affects the filing of the lawsuit, but also poses the risk of being destroyed by the infringer due to the filing of the lawsuit. The second is the problem of protection cycle. Because the litigation needs to go through at least the litigation process of the first and second instance, and inevitably involves procedures such as investigation and evidence collection, judicial appraisal, etc., to interrupt the trial period. Due to the cautious attitude of judicial practice towards the prohibition of acts, the right holder often needs to go through a relatively long litigation cycle to obtain a judgment result such as prohibiting the infringer from continuing to commit the infringing act. Combined with the above-mentioned difficulties, taking civil litigation as a single path will often face risks such as the failure to obtain or destroy evidence, and the inability to prohibit the infringer from continuing to commit infringement during the litigation process, which often leads to the loss of competitive advantage, the deviation of the protection effect from the expectation and even the failure of the protection purpose.
In contrast, administrative protection procedures can compensate for the above-mentioned shortcomings of civil litigation procedures to a certain extent.
First, the penalty period is shorter. According to Articles 18 and 64 of the Provisions on Administrative Punishment Procedures for Market Regulation (2022 Amendment), the administrative organ shall generally verify the report within 15 days of receiving the report materials, complete the process within 90 days, and extend it to 120 days under special circumstances. In practice, some regions have further refined the time limit for verification of administrative complaints about trade secrets. For example, Article 3.2.3 of the Guidelines for the Protection of Trade Secrets of Enterprises in Pudong New Area stipulates that the market regulation department shall verify the clues or receive the materials within 15 working days from the date of discovery of clues or receipt of materials, and decide whether to file a case. It can be extended by 15 working days in special circumstances. The time required for inspection, quarantine, appraisal, and identification or identification of the right holder shall not be included in the aforesaid time limit. If the rights holder conducts a relevant appraisal of the claimed confidential information after making a report, the time required for the appraisal shall not be included in the verification period.
Second, the threshold for filing a case is relatively low. According to Article 19 of the Provisions on Administrative Punishment Procedures for Market Supervision and Administration (2022 Amendment), if the right holder provides preliminary evidence of the possible existence of the infringement (generally confidential evidence is sufficient), the market regulation department at or above the county level will generally accept and file the case. The market regulation departments may, on the basis of their oversight and inspection powers, or through complaints, reports, transfers from other departments, or assignments from superiors, discover leads on illegal conduct suspected of infringing on trade secrets. In practice, the most common way is to report.
Third, the power of administrative compulsory investigation can effectively make up for the lack of private evidence collection by the right holder.
According to Article 13 of the Anti-Unfair Competition Law, the supervision and inspection department may take the following measures to investigate suspected acts of unfair competition:
(1) Entering a business premises suspected of acts of unfair competition to conduct inspections;
(2) Questioning the business operators, interested parties, and other relevant units and individuals under investigation, and requesting that they explain the relevant circumstances or provide other materials related to the conduct under investigation;
(3) Inquiring into or copying agreements, account books, bills, documents, records, business correspondence, and other materials related to suspected acts of unfair competition;
(4) Sealing or seizing assets related to suspected acts of unfair competition;
(5) Make inquiries into the bank accounts of business operators suspected of acts of unfair competition. In this way, it can effectively make up for the lack of private evidence collection by the right holder.
II. Basic Plans for the Administrative Protection of Trade Secrets
(1) Materials to be submitted by the right holder to claim administrative protection
In an administrative complaint of trade secret infringement, the requirements for materials that the right holder needs to submit to the market regulation department have been clarified by the market regulation authorities of some provinces and cities by issuing guidelines for the protection of trade secrets. For example, Article 13 of the Guidelines for the Protection of Trade Secrets in Zhuhai, Article 8 of the Administrative Guidelines for the Protection of Trade Secrets of the Qinghai Provincial Administration for Market Regulation, and Article 10 of the Guidelines for the Protection of Trade Secrets in Anhui Province (for Trial Implementation). Taking the Zhuhai Trade Secret Protection Guidelines as an example, the materials that rights holders need to submit when protecting trade secrets through administrative channels mainly include the following:
The first is the qualification of the subject of the trade secret rights to be protected. The requester shall be the right holder of the trade secret, or the licensee who has an exclusive license or exclusive use license relationship with the right holder. The licensee of the general use license contract must be authorized in writing by the right holder.
Second, the trade secret for which protection is requested shall meet the statutory requirements for the composition of the trade secret, including the process of generation, the carrier, the content of the specific secret point, the commercial value, the fact that it is not known to the public, and the specific confidentiality measures taken against it.
Third, the reported person has relevant supporting materials for contacting or committing acts of infringing on the trade secrets.
Fourth, the technical information and business information used by the reported person are consistent or identical with the technical information and business information requested by the complainant.
Fifth, other evidence showing that the trade secret has been infringed.
(2) Evidence to be submitted by the right holder to claim administrative protection
For example, paragraph 2 of Article 11 of the Guidelines for Strengthening the Protection of Trade Secrets by Business Operators in Shaanxi Province (2022) stipulates that before obtaining the help and guidance of the administrative department, the right holder shall promptly fix the following evidence in order to protect its rights:
1. Evidence that can prove that the infringed information is a trade secret claimed by the right holder, including the confidentiality measures taken by the operator, the commercial value of the information and its non-public knowledge.
2. Evidence of substantial overlap between the trade secret and the information held by the infringer.
3. Evidence that can prove that the infringer obtained the information through improper means, or a chain of indirect evidence that can prove that the other party had access to the trade secret on the basis of substantial similarity of the information.
4. Evidence of the loss of the trade secret after the infringement and the causal relationship between the trade secret and the infringement. In addition, for trade secrets independently developed by the operator or rights holder, lawfully transferred or licensed, cracked through reverse engineering, or obtained in good faith, relevant evidence should be retained to avoid the loss of malicious litigation. Among them, when it comes to the proof of non-public knowledge, identity, damages, etc., of trade secrets, third-party service agencies may be sought to provide professional services such as scientific and technological novelty search, appraisal and evaluation.
5. In cooperative development, commissioned processing and other activities, business operators should retain relevant contracts and agreements, so as to provide necessary evidence to protect their own rights and interests when relevant parties infringe on third-party trade secrets.
For another example, Article 15 of the Zhuhai Municipal Guidelines for the Protection of Trade Secrets stipulates that in the course of investigating the reported person, the case-handling authority shall pay attention to extracting the following evidence:
(1) The specific circumstances of the relevant technical information and business information used by the reported person.
(2) Whether the reported person's technical information and business information are consistent or identical with the complainant's technical information and business information.
(3) The channels through which the reported person obtains its technical information and business information.
(4) The circumstances of the reported person's production or sale of relevant products.
(5) Whether the person being reported has subjective intent such as knowing or should have known.
(3) Administrative liability for infringement of trade secrets
(3) The administrative liability that the infringer needs to bear
Where the market regulation department determines that a party's conduct constitutes an infringement of trade secrets, the administrative liabilities that the infringer needs to bear include:
The first is to stop illegal acts. For example, Article 3.4.3.1 of the Guidelines for the Protection of Trade Secrets of Enterprises in Pudong New Area stipulates that, depending on the specific circumstances of the infringement of the parties, the market regulation authorities may order the parties to return or destroy the drawings, software or other relevant media containing trade secrets, and shall not continue to disclose, use or allow others to use the trade secrets. Where a party uses the right holder's trade secrets to produce a product that has not yet been sold, the party shall be supervised to destroy it, except where the right holder agrees to purchase it or agrees that the party will continue to sell it.
The second is the confiscation of illegal gains. According to Article 34 of the Provisions on the Protection of Trade Secrets (Draft for Comments), "unlawful gains" refer to all the income obtained by the infringer from the illegal production or sale of goods or the provision of services after deducting the appropriate and reasonable expenses directly used by the infringer for business activities. The departments for market regulation may comprehensively consider the trade secret infringer's accounting books, production records, sales records, transfer agreements, and other materials to calculate the amount of unlawful gains.
The third is to impose administrative fines. For example, Article 3.4.3.3 of the Guidelines for the Protection of Trade Secrets of Enterprises in Pudong New Area stipulates that a fine of not less than RMB 100,000 but not more than RMB 1,000,000 shall be imposed for infringement of trade secrets, and a fine of not less than RMB 500,000 but not more than RMB 5,000,000 shall be imposed if the circumstances are serious. At present, there is no legal provision or authority to interpret "serious circumstances", and in law enforcement practice, a fine range of between 100,000 and 1,000,000 RMB is generally applied.
Fourth, it is included in the list of the untrustworthy with serious violations. According to article 2 and paragraph 1 of article 9 of the Measures for the Administration of the List of the Untrustworthy with Serious Violations for Market Regulation, unfair competition conduct that seriously undermines the order of fair competition, such as infringement of trade secrets, shall be entered into the List of the Untrustworthy with Serious Violations after receiving heavier administrative penalties from the market regulation departments.
III. Typical Cases of Administrative Protection of Trade Secrets
(1) Compulsory investigation and evidence collection by administrative protection can prevent the destruction of evidence
For acts of infringing trade secrets, the protection of rights through litigation can easily lead to the destruction of evidence, and the administrative protection channel can improve the efficiency of evidence collection and prevent the loss of evidence. If the right holder obtains preliminary evidence, it can apply to the local market supervision and administration bureau to conduct an evidence investigation to obtain relevant evidence. The following three cases are good examples of the functions of administrative protection, compulsory investigation and evidence collection, and prevention of evidence loss.
1. Case 1: Administrative Penalty Decision [2018] No. 276 of the Cheng Industrial and Commercial Office
In this case, the right holder claimed that the accused infringer had obtained the trade secrets of the manufacture of cryogenic equipment through improper means, and was engaged in the production of liquid nitrogen ice cream machines and liquid nitrogen cans in a certain place. After the report, the market supervision bureau of a district in Chengdu did not take immediate action, but found the actual production address of the party through two days of observation (the party did not produce at the place of registration or at the address reported by the right holder). In this case, 72 drawings signed by the right holder were seized at the production site of the parties, and after appraisal by a judicial appraisal institute in Sichuan, it was concluded that the 72 drawings used for the production of liquid nitrogen cans and liquid nitrogen ice cream machines belonged to the technical secrets owned by the right holders. The parties concerned have no objection to this appraisal opinion and admit that these drawings were taken with them before they left their posts. At the time of the case, the parties were in the trial production stage, and no finished products were put on the market, which had not caused direct economic losses to the right holders.
2. Case 2: Shanghai Jian Song Office [2020] No. 272020000100 Administrative Penalty Decision
In this case, the accused infringer, Mr. Li, served as a "mechanical engineering designer" in the rights holder company and signed a confidentiality agreement and an IT security management system. During his tenure, Mr. Li participated in the design and development of wood edge banding machine products. On August 1, 2016, Sun Moumou, the legal representative of the party, signed the "Agreement" with Li, and the two parties agreed that Sun Moumou would invest 2 million yuan, and Li would provide linear automatic wood edge banding machine technology and cooperate to start a company. On November 10, 2016, Sun and Song registered and established Shanghai FH Intelligent Equipment Co., Ltd. (party), with Li as the general manager, fully responsible for the production and sales of wood edge banding machines. In this case, the 24 pieces of technical drawings (3D models) kept in the mobile storage disks seized by the administrative authorities from the parties were identified and found to contain substantially the same technical information as those contained in the technical drawings (3D models) of the wooden edge banding machine of the right holder. It is worth noting that in the course of the investigation of this case, the parties closed the company, dismissed employees, obstructed the investigation by various means, and argued that the relevant product technology was developed through reverse engineering. However, in this case, the administrative authority first used direct evidence to overturn the party's defense of reverse engineering research and development, and then applied the principle of presumption, holding that Li Moumou had the conditions to contact the technical secrets of the right holder, and the technical information of the two was substantially the same, and the legal source could not be proved, so it was determined that the infringement was established and an administrative penalty was issued.
3. Case 3: Haikou Intermediate People's Court of Hainan Province (2012) Haizhong Fa Min San Chu Zi No. 20
In this case, the plaintiff filed a complaint with the administrative department for industry and commerce in July 2010, requesting that the defendant's unfair competition acts of counterfeiting the unique packaging and decoration of the restaurant and infringing on trade secrets be investigated and punished. After investigation and verification, the Sanya Administration for Industry and Commerce issued the Administrative Penalty Decision on December 15, 2010, "San Shang Shang Chu Zi [2010] No. 234", finding that the advertising, decoration and utensils of the Taste Hall operated by the defendant were similar to the plaintiff's series of chain stores in terms of overall design, decoration style and color tone, and constituted unfair competition, and imposed an administrative penalty on him. Defendant Mao Zhijun was dissatisfied with the penalty decision and filed an administrative lawsuit, which was heard by the suburban court and the Sanya Intermediate People's Court, and both ruled to uphold the administrative penalty decision of the Sanya Industrial and Commercial Bureau. It is worth noting that after the administrative evidence was collected, Mao Zhijun carried out rectification, and there was no longer the use of black and yellow design style. If a civil lawsuit is directly adopted in this case, there will be a possibility that the key evidence will be lost due to the failure to preserve the evidence in a timely manner.
(2) The existence of commercial secrets shall be used as preliminary evidence in the filing of administrative protection cases
Although the protection of trade secrets through the administrative protection path has the advantage of a low threshold for filing a case, the right holder still needs to submit materials to prove the existence of trade secrets. If it cannot be proved that the information claimed to protect satisfies the constitutive elements of a trade secret, it will be difficult to successfully file a case. For example, in the (2016) Hu Xing Zhong No. 738 case, the Jing'an District Market Supervision Bureau received a report letter from a certain company, reporting that the company had maliciously hired employees of a certain company with high salaries, obtained its software source code and other trade secrets, and also carried out false publicity on the website, so it requested that it be investigated and punished. After receiving the report, the Jing'an District Market Supervision Bureau reported the jurisdiction of the case to the Municipal Administration for Industry and Commerce. On March 20 of the same year, the Municipal Administration for Industry and Commerce approved the suspected infringement and handed it over to the Jing'an District Market Supervision Bureau for investigation. The Jing'an District Market Supervision Bureau went to the location of a company, fixed and fully mirrored the data in the computers in its office premises, including laptops, took screenshots and printed relevant pages of the company's website, and conducted other investigations, and the Jing'an District Market Supervision Bureau then filed a case, and then the Jing'an District Market Supervision Bureau made an administrative penalty decision involved in the case, finding that the plaintiff company had false publicity and infringing on trade secrets, ordered to stop the illegal acts, and fined 10,000 yuan and 20,000 yuan respectively, and decided to impose a combined penalty of 30,000 yuan.
Mou's company filed an administrative lawsuit with the court, claiming that the Jing'an District Market Supervision Bureau's administrative punishment of Mou's company was illegal, had no jurisdiction, and violated legal procedures such as investigating first and then filing a case, illegally postponing, illegally hearing, and illegally appraisal. The Shanghai Municipal People's Court and the High People's Court pointed out in the second instance that if a trade secret is used as a means to seek legal relief, four statutory requirements must be met at the same time, all of which are indispensable, otherwise it will not be able to obtain the protection of the Anti-Unfair Competition Law. "Not known to the public", as the primary element for determining a trade secret, cannot be inferred from the fact that the holder has taken confidentiality measures. It is also lacking in factual basis to conclude that the source code and related documents are necessarily trade secrets based on the general importance and value of the software enterprise.
It can be seen that if the confidentiality, confidentiality and value elements of the trade secret cannot be fully proved when filing an administrative complaint, then there is still a risk of revocation in subsequent administrative litigation. In the case filing procedure for initiating administrative protection, the existence of trade secrets should still be a prerequisite. In administrative litigation, the administrative organ shall bear the burden of proof, and bear the burden of proof that the commercial secrets identified in the administrative punishment meet the three sexual requirements.
(3) Administrative punishments are an important basis for the settlement of disputes between the two parties
Due to its efficiency and enforceability, administrative penalties can facilitate the rapid resolution of disputes, help to form conclusive evidence and clear facts in a short period of time, and help both parties to clarify the offensive and defensive posture as soon as possible and reach a settlement agreement.
For example, in the case of Ning Shi Jian Office [2019] No. 373, Yu, the former legal representative of a company in Ningbo, joined the whistleblower company on May 17, 2008, and worked in the design department from May 2008 to May 2012, mainly engaged in the design and development of automobile door panels and instrument panels, and worked in the marketing department from May 2012 to February 2017, and served as the domestic sales supervisor of the marketing department, mainly engaged in customer development, quotation, data analysis, At the end of March 2018, Mr. Yu resigned from the whistleblower company and began to formally participate in the operation of the party Ningbo company in April 2018.
In 2019, the Ningbo Municipal Market Supervision Bureau took advance registration and preservation of the DELL laptop used by Yu, took compulsory measures to seize the laptop, and mirrored the relevant hard disk, and retained relevant evidence. After the investigation and handling of the case, the parties actively rectified, and under the supervision of the Market Supervision and Administration Bureau, the trade secret information involving Founder Mold Company has been deleted, and a settlement has now been reached with the whistleblower company, and at the same time, Yu handled the equity change of a company in Ningbo, transferred the equity, and no longer served as the legal representative of the company, and withdrew from the operation of a company in Ningbo.
IV. Conclusion
The administrative remedy procedure for trade secrets is an important weapon for enterprises to protect trade secrets, especially when only a few or some infringers are known and only the clues of infringement are preliminarily grasped, giving priority to the administrative protection path can reduce obstacles for subsequent trade secret rights protection actions. Of course, administrative remedies still require evidence from the right holder, so enterprises should pay attention to the formation and protection of trade secrets, the removal and retention of trade secrets and secret-related carriers during the turnover of employees, and communicate with the legal counsel or trade secret lawyer in a timely manner when there are signs of infringement, so as to effectively use different protection paths to effectively remedy trade secret rights.
Author: Zhang Zewu Huang Yuanhui
编辑:lancelot