Anti-Unfair Competition Law
of the P.R. China Revised

　　On April 23, the Standing Committee of the National People’s Congress released the latest revision of the Anti-Unfair Competition Law (“AUCL”). With four articles being revised, the new AUCL should fortify the trade secret protection mechanism. The AUCL was previously revised in November 2017, less than two years ago. Some have interpreted this new AUCL as an immediate reaction responding the China-US trade conflicts which however seem to last without a foreseeable sign to cease. Several emphases of the new AUCL are elucidated as follows.

1. Intrusion by electronic means can be a kind of infringement. Of article 9 of the revised AUCL, it provides that “electronic intrusion” is reckoned as one of the exemplified means among theft, bribery, deception, and threat that improperly acquires trade secrets of others. Besides, a contributory behavior which induces or helps a person to misappropriate a trade secret is also defined as an act of infringement.
2. Not only a business operator, but any individual, legal entity, or organizational unit without personality maybe liable if accused of misappropriation for trade secret.
3. The new AUCL has introduced punitive damages. For a case of willfulness, the court may award one to five (1~5) fold of the damage amount calculated based on the loss of secrecy holder or gain by infringer, if not ascertainable. When neither a loss nor a gain can be ascertained, the court shall exercise discretionary award and its ceiling is now elevated from RMB$3,000,000 (USD$443,000) to RMB$5,000,000 (USD$738,000).  
4. In addition to a judiciary decision, an administrative agency in provincial level will also have enforcement authority to issue injunctions and confiscate the gains by infringers. Besides, an infringer can further be penalized by the agency for a fine from RMB$100,000 to RMB$1,000,000, or even another significant fine ranging from RMB$500,000 to RMB$5,000,000 according to severity of the willfulness.
5. The trade secret holder now bears a lighter burden of proof as the new AUCL introduces a burden shift. During a proceeding which is pending at the court, an assumption of infringement finding will be established when plaintiff presents preliminary evidence to adopt measures of secrecy protection and evidence of misappropriation. To rebut, the accused shall prove otherwise if the allegedly infringed secret of the plaintiff is not a protectable secret as defined in the newly added provision of Article 32 of AUCL.
6. On the other hand, when the plaintiff presents any kind of evidence as follows, the defendant  shall then bear the duty to prove the non-existence of misappropriation:

• Evidence that the accused defendant has an access to or an opportunity to access to the secret and information which is substantially identical to the secret;
• Evidence that the secret has already been published, used by the defendant, or risked for being published or used; or
• Evidence that the secret has been misappropriated by the defendant.

　In the real world of business competition, strategically the technology enterprises manipulate IP instruments such as patent and trade secret quite interchangeably. In many cases, the core technology of an enterprise is held as a secret rather than being disclosed to the public as a patent. By doing so, one can hold an absolute monopoly status. In previous practices, many enterprises had come across the problem that innovative results were unlawfully leaked out along with the mobility of technical specialists.

　　The new AUCL has significantly increased the cost of trade secret misappropriation as the upper limit of damages is elevated. Punitive damages have become possible, and any subject who violates the AUCL is held for infringement liability regardless of its form of organization. And the secret holder sits in a rather advantageous position to launch a lawsuit. The new AUCL substantively enhances the operability and practicability for the mechanism of trade secret protection. With such a strengthened protection for trade secret law, technological enterprises will, hopefully, be more encouraged to invest in research and development to enable China to prosper for innovative and technical advancement. 

for any questions relating to this topic, please contact us at cjchen@tsailee.com.tw