December 2023
Karl Zhang and Teresa Huang
The protection of customer information-based trade secrets is important in business operations. For enterprises, customer information is one of their core assets, which, once leaked or acquired by competitors, will cause serious damages to their business interests and competitive position. Therefore, trade secret protection of customer information is a necessary means for enterprises to maintain their own interests and competitive advantage.
In terms of relevant laws and regulations, China’s Anti-Unfair Competition Law has made clear provisions on the definition and protection of trade secrets. Trade secret refers to the technical information, business information and other commercial information that is not known to the public with commercial value and has been taken by the right holder of corresponding confidentiality measures. As such, trade secrets should be secret, valuable and confidential. For an overview, please refer to our article: Enterprise Trade Secrets Protection Series (1) ─ Legal Determination of Trade Secrets (Mainland China). This article will delve into the judicial practice of adjudication cases on the confidentiality of business information, with a view to providing some references for enterprises that need to protect the trade secrets of customer information.
With regard to the provisions on confidentiality, the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Civil Cases of Infringement of Trade Secrets further clarifies that customer information can be recognized as constituting business information and sets out the criteria for judging its confidentiality. The People’s Court may recognize information such as creativity, management, sales, finance, plans, samples, bidding materials, customer information and data related to business activities as constituting business information specified in Article 9(4) of the Anti-Unfair Competition Law. The customer information referred to in the preceding paragraph includes the customer’s name, address, contact information, as well as information on trading habits, intentions and content. If the information for which the right holder requests protection is not generally known and readily available to relevant persons in the field to which it belongs at the time of the alleged infringement, the People’s Court shall recognize that it is not known to the public as referred to in Article 9(4) of the Anti-Unfair Competition Law.
After retrieval, this paper is going to cite the following two cases to illustrate the judicial practice for the judgment standard of the confidentiality of customer information.
Practice Case 1: Customer information, if only a simple list of name, address, contact information and other basic information, is usually difficult to meet the elements of trade secrets:
In the case of [(2019)ZGFMZ268], the Supreme People’s Court holds that in the current online environment, relevant demand-side information is easily accessible and easily known by practitioners in the relevant industry based on their labor skills. Information about the date of the order, the order number, the name of the product, the specifications of the goods, the quantity of the sales order, the unit price, the untaxed local currency and other information is a general listing without reflecting a customer’s trading habits, intentions and other content that distinguishes it from a general transaction record. In the absence of in-depth information covering the specific trading habits and intentions of relevant customers, it is difficult to recognize that the demand-side information is a trade secret protected by the Anti-Unfair Competition Law.
Practice Case 2: Customer information is more likely to be found to meet the confidentiality requirement of a trade secret if it is in-depth information that is not available to the public:
In the case of [(2020)ZGFMS4074], Baiyue’s customer list includes not only simple information such as the customers’ name, address and email, but also in-depth information involving trading habits, intentions, and contents such as development methods, names of products purchased by the customers, packaging, transaction amounts and transaction frequencies, and such information is obtained by Baiyue from its customers through long-term and stable transactions and is the business secret that can not be easily obtained directly from public channels. The trial judgment accordingly finds that Baiyue’s customer information constitutes a trade secret, with factual and legal basis.
It can be seen from the above cases that the trade secret protection of customer information needs to fulfill certain conditions. If the customer information is just a simple listing of basic information such as name, address and contact information, it is usually difficult to satisfy the elements of trade secrets. On the contrary, if customer information contains in-depth information that can not be readily made known to the public, such as information about the habits, intentions, and content of transactions, it is more likely to be recognized and protected as a trade secret. Therefore, enterprises should focus on collecting and protecting such in-depth information to better safeguard their interests and competitive advantages when protecting customer information as trade secrets.
Related Articles
- Enterprise Trade Secrets Protection Series (1) ─ Legal Determination of Trade Secrets (Mainland China)
- Enterprise Trade Secrets Protection Series (2) ─ Legal Liabilities for Infringement of Trade Secrets (Mainland China)
The contents of all newsletters of Shanghai Lee, Tsai & Partners (Content) available on the webpage belong to and remain with Shanghai Lee, Tsai & Partners. All rights are reserved by Shanghai Lee, Tsai & Partners, and the Content may not be reproduced, downloaded, disseminated, published, or transferred in any form or by any means, except with the prior permission of Shanghai Lee, Tsai & Partners.
The Content is for informational purposes only and is not offered as legal or professional advice on any particular issue or case. The Content may not reflect the most current legal and regulatory developments. Shanghai Lee, Tsai & Partners and the editors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The contributing authors’ opinions do not represent the position of Shanghai Lee, Tsai & Partners. If the reader has any suggestions or questions, please do not hesitate to contact Shanghai Lee, Tsai & Partners.