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China: Judicial Interpretation on Trade Secret Crimes Issued

(Nov. 12, 2020) On September 12, 2020, China’s highest court, the Supreme People’s Court (SPC), and the highest procuratorial organ, the Supreme People’s Procuratorate (SPP), jointly issued a judicial interpretation (JI) on handling criminal cases concerning intellectual property infringement, which covers trademark, copyright, and trade secret crimes. The interpretation took effect on September 14, 2020. (SPC & SPP, Interpretations III on Certain Issues Relating to the Specific Application of Law in Handling Criminal Cases Concerning Infringement of Intellectual Property Rights, Fa Shi [2020] No. 10 (2020 Interpretation).)

A highlight of the JI is that it reduces the threshold for the crime of trade secret infringement from 500,000 Chinese yuan to 300,000 Chinese yuan (about US$75,000 to $45,000). It also adds two circumstances that are identified as causing serious losses to the trade secret rights holder: (1) directly causing the bankruptcy or closure of business of the trade secret rights holder, or (2) causing other serious losses to the rights holder. (2020 Interpretation art. 4.)

Article 219 of China’s 1997 Criminal Law provides that obtaining trade secrets by stealing, luring, coercion, or other improper means, resulting in serious losses to the rights holder, is punishable by imprisonment for up to three years, criminal detention, and/or a fine. When the results are exceptionally serious, such an offense is punishable by imprisonment for three to seven years and a fine.

The SPC and SPP had previously issued a JI in 2004 setting forth the specific thresholds for determining whether losses are “serious” or “exceptionally serious” for the purpose of article 219. According to the 2004 interpretation, losses of over 500,000 Chinese yuan are serious losses, while losses of over 2.5 million yuan (about US$374,000) are exceptionally serious. (SPC & SPP, Interpretation on Certain Issues Relating to the Specific Application of Law in the Handling of Criminal Cases Concerning Infringement of Intellectual Property Rights art. 7.)

The new interpretation reduces the threshold for “serious” losses, but that of “exceptionally serious” results remains 2.5 million yuan. (2020 Interpretation art. 4.) The new interpretation further defines “stealing” for the purpose of article 219 of the Criminal Law to include “acquiring trade secrets through illegally reproducing or using a computer information system without or beyond authorization.” Acquiring trade secrets through bribery, fraud, or electronic intrusion is defined to be “other improper means” under article 219. (2020 Interpretation art. 3.)

The interpretation specifies a series of methods to determine the amount of losses or illegal gains. For example, if the trade secret that has been unlawfully acquired has not yet been disclosed or used, the amount of loss may be determined on the basis of the reasonable licensing fee of the trade secret. If it has been disclosed or used, the amount of loss may be determined on the basis of the sales profit loss caused to the rights holder due to infringement; but if it is lower than the reasonable licensing fee of the trade secret, the amount of loss is to be determined on the basis of the reasonable licensing fee. (Art. 5.)

On September 18, 2020, the SPP and the Ministry of Public Security jointly released a decision to amend the prosecution standards for criminal cases of trade secret infringement. The decision brings the prosecution standards in line with the JI and reduces the threshold for prosecuting trade secret crimes to 300,000 Chinese yuan.

The SPC had previously issued another JI on civil enforcement of trade secrets on September 10, 2020, which took effect on September 12, 2020. (SPC, Provisions on Several Issues Concerning the Application of Law in Handling Civil Cases of Trade Secret Infringement, Fa Shi [2020] No. 7.)