Decision of the Standing Committee of the National People’s Congress on Amending the “Anti-Unfair Competition Law” (Mainland China)

Di Wu

The Standing Committee of the National People’s Congress recently issued a decision on amending eight laws, including the Anti-Unfair Competition Law.  The amendments to the Anti-Unfair Competition Law are focused on trade secret protection, namely, the act, civil liabilities, sanctioning results and allocation of the burden of proof for trade secret infringement.  The amendments will go into effect on April 23, 2019 and are highlighted below.

1. Amendment concerning the act of trade secret infringement

The Anti-Unfair Competition Law as amended adds more detailed provisions on the act of trade secret infringement, including instigating, inducing or aiding others to breach confidentiality obligations, breaching the trade secret confidentiality requirements set out by a rights holder, or acquiring, disclosing, using or allowing others to use a rights holder’s trade secrets.  Meanwhile, the new law expands the scope of what is considered an infringing entity.  Any natural person, legal person or unincorporated organization that engages in any illegal act set forth above shall be deemed to have infringed on the trade secrets of another, and acts by a third party other than the operator may also constitute infringement of trade secrets.

The Anti-Unfair Competition Law as amended not only has more types of acts that are infringing but also expands the scope of entities of infringement.

2. Amendments concerning the assumption of liability and the penalties for trade secret infringement

The new Anti-Unfair Competition Law increases the liability of and penalties imposed on an infringing party.  In addition to retaining the previous provisions, the proportion of damages is also increased.  To wit, if a party maliciously engages in a serious infringement of the trade secrets of another, the amount of damages may be set at up to five times the actual losses of the damaged party or the amount of the infringer’s unjust gains (when the actual loss is difficult to calculate).  When the actual losses suffered by the rights holder and the gains of the infringer as a result are both difficult to determine, the upper limit of compensation awarded by a people’s court is increased to RMB five million.

3. The burden of proof between the parties

Article 32 is added to the new Anti-Unfair Competition Law to stipulate that in a civil proceeding for trade secret infringement, if the trade secret holder has provided prima facie evidence showing that it has taken protective measures for the subject trade secrets and has reasonably demonstrated that those secrets have been infringed, the alleged infringer is required to prove that the trade secrets alleged by the rights holder are not considered trade secrets under this law.

If a trade secret right holder has provided prima facie evidence to reasonably demonstrate that its trade secrets have been infringed and has also provided one of the following pieces of evidence, the alleged infringer must prove that there is no infringement: (1) the alleged infringer has channels or opportunities to obtain the trade secret, and that the information used is substantially the same as the trade secret; (2) the trade secret has been disclosed, used, or is under the risk of being disclosed or used by the alleged infringer; or (3) other evidence showing that the trade secret has been infringed by the alleged infringer.  The new law alleviates the burden of proof on the trade secret holders and clarifies the evidence that the right holders need to provide.

Based on the overall contents of the amendments there is a clear focus on the protection of trade secrets and strengthening them.  Both the increased penalties and the allocation of the burden of proof reflect this focus on protecting the trade secret rights holder.