Enforcing intellectual property rights often faces evidentiary hurdles, with trade secret protection being particularly challenging. Courts routinely dismiss trade secret claims due to inadequate proof, as plaintiffs often fail to convincingly demonstrate ownership of the disputed information, establish that it satisfies the legal definition of a trade secret, or provide compelling evidence of the defendant’s specific infringing acts.
To address these issues, rights holders must not only refine evidence gathering and litigation strategies but, more crucially, enhance their trade secret management frameworks to establish robust confidentiality safeguards.
Right ownership
Partner, Executive Director at National Intellectual Property Committee and
Director at Intellectual Property Department of the Beijing office
W&H Law Firm
Tel: +86 186 1403 8220
E-mail:
wangguixiang@weihenglaw.com
In trade secret cases, the plaintiff must demonstrate that they or their licensees hold legitimate rights to the protected information in question. After identifying the contested trade secrets and presenting supporting documentation, the plaintiff may face challenges regarding their legal standing to bring the action.
Where employees developed the disputed information, the plaintiff must produce corporate policies, employment contracts, job descriptions and project assignment documents to prove ownership by rules or contractual agreement. For externally developed, jointly created or acquired trade secrets, the plaintiff needs to provide corresponding agreements and documentation establishing contractual ownership. This evidentiary requirement becomes particularly crucial when the trade secret medium references third-party entities beyond the claimant or licensee.
Therefore, businesses must prioritise robust trade secret governance frameworks, ensuring proper contractual arrangements with both employees and external partners, coupled with rigorous document management systems. These measures prove indispensable when establishing standing in potential disputes.
Trade secret status
The plaintiff must also demonstrate that the contested information satisfies the statutory requirements for trade secret protection, namely, secrecy, confidentiality and commercial value. The confidentiality requirement proves particularly significant as it directly correlates with a company’s trade secret management practices.
Under legal provisions, courts must evaluate confidentiality measures by examining multiple factors, including the nature of both the trade secret and its medium, the information’s commercial worth, the recognisability of protective measures, the appropriateness of safeguards relative to the secret and the rights holder’s demonstrable intent to maintain confidentiality.
Jurisprudential trends reveal diverging standards among courts when assessing protective measures, with a noticeable shift towards increasingly stringent interpretations. Defence challenges regarding the effectiveness, recognisability and proportionality of confidentiality measures frequently influence final determinations. Notably, identical protective measures may yield varying judicial outcomes depending on the vigour and nature of the defendant’s contest.
Companies should uphold strict confidentiality standards to avoid legal exposure from reduced safeguards. They are advised to enhance daily management by not only refining policies and written agreements but also implementing tiered protection based on the significance of the trade secrets. A comprehensive protective strategy not only meets the confidentiality requirements in litigation but also mitigates leak risks at the source.
Even if, after considering efficiency, cost and confidentiality, a company opts against robust protection measures, it must confine potential leak paths to a minimal scope and ensure any incident is traceable, thereby achieving a controllable, traceable and preventable management framework.
Burden of proof
The plaintiff bears the burden of proving the defendant’s infringement of trade secrets. In practice, rights holders often find it difficult to trace evidence of infringement once a breach is discovered, making it challenging to track how trade secrets were accessed or disclosed.
Although article 32.2 of the Anti-Unfair Competition Law allows the plaintiff to shift the burden of proof after presenting preliminary evidence, strengthening internal trade secret management remains the most effective means of preventing infringement.
Only by establishing a rigorous management system can companies effectively trace two types of underlying infringements under the law: unauthorised acquisition of trade secrets by improper means; and breaches or unauthorised disclosures following proper acquisition.
Companies should strengthen trade secret management both internally and externally. Internally, access to trade secrets must be strictly limited, with access granted solely on a need-to-know basis. Key measures include: (1) establishing processes that encrypt information immediately upon creation; (2) restricting unnecessary circulation and refining approval and decryption protocols; and (3) regulating, restricting or tracking outbound transmission or copying by authorised employees.
These measures effectively limit the circulation of trade secrets and enable the swift identification of potential leakers and their methods, thereby enhancing confidentiality awareness among staff and serving as a strong deterrent to leakage, ultimately reducing the risk overall.
For external communications, it is recommended that all critical information be transmitted via end-to-end encryption. External suppliers and partners should also be urged to elevate their trade secret management standards to avoid creating vulnerabilities in the overall protection framework.
In summary, enhancing trade secret management not only facilitates rights enforcement but is also crucial for robust protection. Companies must develop a scientific and effective management system for trade secrets to pre-empt potential breaches.
Grace Wang is a partner at W&H Law Firm, executive director at its national intellectual property committee and director at the intellectual property department of the law firm’s Beijing office. She can be contacted by phone at +86 186 1403 8220 and by email at wangguixiang@weihenglaw.com
