On April 23rd, 2019, China’s Standing Committee on the National People’s Congress adopted amendments to the Anti-Unfair Competition Law, significantly strengthening China’s protection of trade secrets. The bolstering of intellectual property safeguards in China comes in advance of important trade negotiations between China and the international community, including the United States. The changes to the Anti-Unfair Competition Law include the following:
- “Commercial information.” Whereas previously the definition of trade secrets was limited to “technical or operational” information, the revised definition now includes “commercial information,” which significantly increases the scope of protectable trade secrets.
- Infringers. The amendment also broadened the definition of infringers to include not only “business operators” as before, but also “any other natural person, legal person or unincorporated organization.” The new definition clarifies the old law by expressly bringing within its ambit the individual hacker or bad actor.
- Infringing Acts. Under the new law, “hacking” explicitly constitutes a violation of trade secrets, as does instigating, inducing, or assisting others to breach obligations of secrecy.
- Burden of Proof. The revised rules make it easier for foreign trade secret holders to bring an action for trade secret misappropriation in China by creating a burden-shifting mechanism whereby a rights holder need only make a prima facie showing that (1) it took reasonable measures to protect confidentiality of its trade secrets, and (2) the trade secrets were misappropriated. If a rights holder can make this prima facie showing, the burden shifts to the accused infringer to prove that it acquired the trade secrets through lawful means. The presumption of infringement represents a strong shift in favor of rights holders.
- Damages. Punitive damages increase under the new law for repeat infringers, allowing for 1-5 times the ill-gotten profits (or the right holder’s actual loss) instead of 1-3 times the same. Statutory damages top out at RMB 5 million (roughly US $738,125) rather than RMB 3 million (roughly $442,875) for violations of the law.
These amendments took immediate effect upon their adoption on April 23rd, 2019.