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On 24 February, the State Administration for Market Regulation issued the Provisions on the Protection of Trade Secrets (Order No. 126), which will officially come into force on 1 June. The newly promulgated Provisions on the Protection of Trade Secrets (hereinafter the “New Provisions”) consist of 31 articles, covering the core aspects of trade secret protection, including the establishment of a trade secret protection system, the subject matter and constitutive elements of trade secrets, acts infringing trade secrets, administrative investigation and handling of suspected acts infringing trade secrets, and legal liabilities.
Compared with the draft for comments (42 articles) released in April 2024, the New Provisions streamline and consolidate certain provisions. For example, Articles 9 to 13 of Chapter III of the draft for comments, which concerned the establishment of a trade secret protection system, have been integrated into Article 4; certain provisions have been deleted, such as Article 5 of the draft for comments concerning circumstances that do not constitute customer information and circumstances based on personal trust in employees, which have not been incorporated into the New Provisions that will formally take effect. At the same time, the legal expressions in specific provisions are more systematic and aligned with the newly amended Anti-Unfair Competition Law and the wording in the already implemented judicial interpretations relating to trade secrets, thereby avoiding vague concepts or expressions prone to ambiguity.
Overall, the promulgation of the New Provisions constitutes a comprehensive and systematic upgrade of the rules on administrative protection of trade secrets. Following the issuance in April 2025 by the Supreme People’s Court and the Supreme People’s Procuratorate of the Interpretation on Several Issues Concerning the Application of Law in the Handling of Criminal Cases of Infringement of Intellectual Property Rights, which further strengthened the criminal protection of trade secrets, the New Provisions further improve the full-chain protection system of “criminal, civil and administrative” integration for trade secrets. In light of recent trends and latest practices in trade secret protection, the author provides a brief interpretation of the key provisions of the New Provisions, in the hope of eliciting further insights and facilitating joint study and discussion within the industry.
I. Technical trade secret cases, as distinguished from ordinary trade secret cases, fall under the jurisdiction of market regulation departments at or above the level of municipalities with districts (Article 3 of the New Provisions)
Article 3 of the New Provisions expressly stipulates the hierarchical jurisdiction over administrative cases involving trade secrets. Ordinary cases involving business secrets may fall under the jurisdiction of county-level market regulation departments. However, technical trade secret cases are subject to special rules on hierarchical jurisdiction and fall under the jurisdiction of market regulation departments at or above the level of municipalities with districts. According to China’s administrative division, apart from the four municipalities directly under the Central Government, there are 289 municipalities with districts, which basically correspond to prefecture-level cities, excluding only four prefecture-level cities without districts, namely Dongguan, Zhongshan, Danzhou and Jiayuguan. It is noteworthy that the draft for comments did not provide special rules on hierarchical jurisdiction for technical trade secret cases. The purpose of adding this provision in the New Provisions is undoubtedly to ensure the quality of adjudication of technical trade secret cases. Technical trade secret cases may involve appraisal and comparison of a large amount of technical information, and county-level market regulation departments may lack the corresponding capacity to handle such cases. This jurisdictional rule also draws on the rules on hierarchical jurisdiction over civil cases involving trade secrets. According to the Several Provisions of the Supreme People’s Court on the Jurisdiction over First-Instance Civil and Administrative Cases Involving Intellectual Property, first-instance civil cases involving technical trade secrets fall under the jurisdiction of intermediate people’s courts at the prefecture level, and primary people’s courts at the district/county level generally do not have jurisdiction over civil cases involving technical trade secrets. In addition, if acts infringing trade secrets involve multiple prefecture-level cities, the right holder may also request the provincial-level market regulation department to coordinate.
II. “Code” is expressly included as technical information within the scope of protected subject matter of trade secrets (Article 5 of the New Provisions)
Article 5 of the New Provisions sets out the constitutive elements of trade secrets and enumerates the types of subject matter of trade secrets that fall under technical information and business information. Among them, “code” is listed alongside data, algorithms and computer programs as an independent category of technical information within the scope of protected subject matter of trade secrets. This means that code is no longer protected merely as a component of algorithms or computer programs, but may be protected as an independent piece of technical information as a trade secret. In particular, for code that does not, as a whole, constitute a computer program or algorithm, but is capable of realizing specific technical functions or control, such as simple control scripts, hardware control code, etc., as long as it meets the constitutive elements of trade secrets, it falls within the scope of protected subject matter of trade secrets. This avoids disputes over the category under which code should be protected, broadens the types of subject matter of trade secrets, and is also consistent with the technological development trends in the digital era and the urgent need of right holders for protection.
It is also worth noting that the New Provisions delete “components”, “designs” and “propagating materials of new plant varieties” as technical information, and “bidding documents” as business information, which had been included in the draft for comments. These deleted categories should certainly not be understood as being excluded from the scope of subject matter of trade secrets; rather, from the perspective of legislative technique, they are removed to avoid misunderstanding and ambiguous expressions. For example, “propagating materials of new plant varieties” are generally primarily protected by new plant variety rights, and trade secrets mainly provide supplementary protection for propagating materials such as intermediate materials and inbred lines in the breeding process. The deletion of this expression in the New Provisions may be intended to avoid misunderstanding. Similarly, “bidding documents” are not only business information; they may also contain technical solutions and other technical information. To avoid misunderstanding, they are deleted from the category of business information.
III. Clarification of various circumstances in which information has commercial value, and inclusion of common confidentiality measures in remote working scenarios (Articles 6 to 9 of the New Provisions)
Articles 6 to 9 of the New Provisions provide specific explanations and clarifications on the “three characteristics” of trade secrets, namely not being known to the public (secrecy), having commercial value (value), and being subject to corresponding confidentiality measures (confidentiality). Among them, the provisions on secrecy in Article 6 basically follow the provisions in the judicial interpretation on civil cases involving trade secrets (Articles 3 and 4), and specifically list circumstances in which secrecy is not satisfied.
With respect to value (Article 7), the New Provisions do not adopt the same wording as in the judicial interpretation on civil cases involving trade secrets, and delete the expression “because it is not known to the public”, thereby affirming the status of value as an independent constitutive element, rather than deeming that information automatically has commercial value as long as the requirement of secrecy is satisfied. At the same time, “actual or potential commercial value” must be capable of bringing commercial benefits or competitive advantages to the right holder, and specific circumstances are enumerated, including increase in assets, growth in operating income or profits, increase in the number of users, reduction in costs and expenses, shortening of R&D time, increase in transaction opportunities, and enhancement of business reputation or product goodwill. This means that the right holder bears the burden of proof to demonstrate that the information for which protection is sought has commercial value, unlike in civil cases where commercial value may be presumed based on secrecy or established through reasoning. Article 18 of the New Provisions also expressly requires the right holder to submit preliminary evidence that the business information has commercial value. In addition, the New Provisions clarify that even failed experimental data and technical solutions have commercial value and are protected as trade secrets, as long as they can bring commercial benefits or competitive advantages to the right holder.
With respect to confidentiality (Article 9), the New Provisions do not require that confidentiality measures must be those “taken before the occurrence of the infringing act”. The timing requirement for taking confidentiality measures is no longer strictly “one-size-fits-all”, and the standard is appropriately relaxed, allowing the case-handling authority to make determinations based on the specific circumstances of the case. For example, where the right holder is unaware that trade secret information has been illegally transferred or appropriated, confidentiality measures taken after the occurrence of the infringing act may also satisfy the requirement of secrecy. However, this does not mean that the right holder may seek trade secret protection for information for which there was originally no intention to maintain confidentiality and no confidentiality measures were taken, by taking confidentiality measures ex post. This would clearly run counter to the legislative purpose of trade secret protection and degenerate into a weapon against departing employees. The New Provisions add confidentiality measures applicable to remote working and cross-border collaboration scenarios among the specific circumstances of taking corresponding confidentiality measures (item (4)), and clarify that technical confidentiality measures such as graded access control, data desensitization, and operation log retention applicable to such scenarios may satisfy the requirement of confidentiality for trade secrets. This undoubtedly accords with the reality of widespread internet use and more flexible working arrangements, and provides clearer guidance for right holders.
IV. Refinement of specific circumstances for different types of acts infringing trade secrets, and expansion of the bases giving rise to confidentiality obligations (Articles 10 to 12 of the New Provisions)
The New Provisions refine the different types of acts infringing trade secrets as set out in Article 10 of the Anti-Unfair Competition Law. Article 10 of the New Provisions enumerates in detail four circumstances of obtaining trade secrets by improper means, including: (1) unauthorized access to, possession of, or copying of carriers containing trade secrets; (2) bribing, coercing or deceiving others or entities to obtain trade secrets for oneself; (3) unauthorized access to digital systems or obtaining trade secrets through “hacking” techniques; and (4) unauthorized downloading or transmission of trade secrets to storage spaces or electronic devices not controlled by the right holder. The above four circumstances basically cover the common types of acts of illegally obtaining trade secrets in practice and can address scenarios in which trade secrets are prone to leakage, such as cloud-based working, online storage and electronic systems.
Article 11 of the New Provisions concerns acts of disclosing, using or allowing others to use trade secrets, and provides clear explanations and definitions of disclosure and use. The definition of disclosure does not adopt the relatively broad expression in the draft for comments, which covered “acts of making others aware of trade secrets in any manner that may cause damage to the competitive advantage or economic interests of the right holder”, but instead adopts two more specific circumstances, namely disclosure to a third party or making the trade secrets available to the public. This renders the meaning of disclosure clear and specific, reduces grey areas, and facilitates the application of the provisions by law enforcement authorities in handling specific cases. With respect to acts of using trade secrets, the New Provisions cover not only direct use, but also “improvement-type” use and “passive” use, which is consistent with current judicial practice.
Article 12 of the New Provisions concerns acts of infringing trade secrets by breaching confidentiality obligations or confidentiality requirements, and refines and expands the specific circumstances in which confidentiality obligations or confidentiality requirements exist. In addition to the common confidentiality obligations arising from confidentiality agreements, employment contracts and confidentiality clauses, confidentiality obligations may also arise based on industry practice and business ethics under the principle of good faith. Even in the absence of contractual stipulations, the right holder may impose explicit confidentiality requirements on relevant subjects through rules and regulations, confidentiality measures, oral notifications and other means. Disclosure or use of trade secret information in violation of such confidentiality requirements likewise constitutes an act of infringing trade secrets.
V. Enumeration of common types of indirect acts infringing trade secrets, and delineation of the boundaries of non-infringing acts (Articles 13 and 15 of the New Provisions)
With respect to indirect acts infringing trade secrets, such as instigating, inducing or assisting others to commit acts infringing trade secrets, Article 13 of the New Provisions enumerates three common types of acts: (1) inciting or instigating others (instigation); (2) enticing others with benefits (inducement); and (3) providing facilitating conditions (assistance). There are already cases in judicial practice involving the above types of acts. For example, in the case concerning infringement of technical trade secrets relating to “carbomer” [1], the defendant Hua, taking advantage of his position as project leader, instructed the workshop director to violate confidentiality rules and provide him with drawings and other materials relating to the technical trade secrets; in the case concerning technical trade secrets relating to “carbon-6 and carbon-N” production facilities [2], the infringer promised that designers who possessed technical trade secrets would join the infringer’s design team, thereby inducing them to disclose technical trade secret information to the infringer; in the “WOD game code” case [3], the infringer funded the purchase of computers for employees of the right holder who were still in service, for the purpose of transmitting and storing the misappropriated game source code, thus providing facilitating conditions for the infringement.
Article 15 of the New Provisions delineates the scope of acts that do not constitute infringement of trade secrets. In addition to independent development and reverse engineering, which have already been clearly provided for, the New Provisions expressly exclude from acts infringing trade secrets the use of employees’ “tacit knowledge” and acts of disclosure to state organs and their staff for the purpose of exposing illegal or criminal acts and safeguarding national and public interests. Employees’ “tacit knowledge” forms part of their personality, constitutes the basis of their ability to survive and to work, and they enjoy the right to freely use such knowledge, which should not be restricted. However, in practice, corporate trade secrets and employees’ “tacit knowledge” are often not clearly demarcated and must be distinguished with caution. “Tacit knowledge” generally consists of industry-wide experience or knowledge and does not include technical or business information unique to an enterprise. Information unique to an enterprise that is independently developed or formed by the enterprise in the course of its operations, even if it incorporates the experience and contributions of employees, is valuable information formed through the enterprise’s investment of costs and resources and, where the constitutive elements are satisfied, should be regarded as trade secrets rather than employees’ “tacit knowledge”. As regards acts of disclosing trade secrets to state organs, such acts are strictly confined to the purposes of exposing illegal or criminal acts and safeguarding national and public interests, and must not be abused; otherwise, this could easily result in state organs arbitrarily appropriating or expropriating trade secrets of private enterprises or individuals.
VI. Clarification of the requirements for preliminary evidence in reports by right holders and the standards for case filing, and reasonable allocation of the burden of proof (Articles 17 to 20 of the New Provisions)
Articles 17 and 18 of the New Provisions set out the requirements for preliminary evidence when reporting acts infringing trade secrets. The right holder must submit preliminary evidence that the business information constitutes a trade secret, as well as clues indicating that the trade secret is suspected of having been infringed. Preliminary evidence that business information constitutes a trade secret mainly consists of evidence proving the process and time of formation of the trade secret and that it possesses the “three characteristics”. It is noteworthy that the New Provisions only require the right holder to submit clues indicating that the trade secret is suspected of having been infringed, and do not adopt the expression “preliminary evidence” used in the draft for comments, which appears to further lower the evidentiary burden on the right holder, in that it suffices to provide specific clues without the need to reach the level of reasonably indicating that the trade secret has been infringed. However, the standard for formal case filing requires evidence that preliminarily proves the existence of acts infringing trade secrets and that such acts should be subject to penalties (Articles 19 to 20 of the New Provisions). In other words, upon receiving the preliminary evidence and reporting clues provided by the right holder, the market regulation department is entitled to conduct verification and, after verification, decide whether to formally file a case based on whether the standard for case filing is met. This in effect grants administrative law enforcement authorities more flexible handling methods and discretionary power. Where the right holder can only provide clues and has no means or channels to obtain preliminary evidence, the administrative law enforcement authority may first take the initiative to conduct verification and, after obtaining preliminary evidence through its evidentiary powers, formally file a case. By giving full play to the initiative of administrative law enforcement authorities, this can indeed, to a certain extent, alleviate the evidentiary burden on right holders. In addition, right holders need to pay attention to the statutory time limit for administrative penalties. According to Article 36 of the Administrative Penalty Law, the reported illegal act must have occurred within two years, calculated from the date on which the illegal act was committed; where the illegal act is continuous or ongoing, the period is calculated from the date on which the act is terminated.
Article 20 of the New Provisions expressly provides that suspected infringers and related parties have the obligation to submit evidence to administrative law enforcement authorities, and sets out an evidentiary rule similar to “reversal of the burden of proof”. Where there is evidence proving that the information used by the suspected infringer is substantially identical to the trade secret and that the suspected infringer had the conditions to obtain the trade secret, the market regulation department may directly determine that there exists an act infringing trade secrets, unless the suspected infringer has evidence proving that the information it used is lawful. This further alleviates the evidentiary burden on the right holder and places on the infringer the burden of proving that its acts do not constitute infringement of trade secrets. A reasonable allocation of the burden of proof is more conducive to the orderly progress of cases and effectively safeguards the lawful rights and interests of right holders.
VII. The importance of unilateral appraisal (Article 22 of the New Provisions)
Article 22 of the New Provisions provides that both the right holder and the suspected infringer may submit appraisal opinions commissioned unilaterally or expert opinions issued by persons with specialized knowledge. In technical trade secret cases, which are relatively difficult to assess, it is highly necessary to conduct appraisal or obtain expert opinions on specialized issues such as “whether the information is known to the public” and “substantial identity”. Even appraisal reports or expert opinions commissioned unilaterally still play a key role in the success or failure of a case. In practice, where market regulation departments lack the capacity to assess specialized issues, they will also require right holders to submit appraisal reports or expert opinions as evidence.
VIII. Refinement of the forms of assuming legal liability (Articles 23 to 26 of the New Provisions)
Articles 23 and 24 of the New Provisions provide for the investigative measures available to administrative law enforcement authorities and the legal liabilities for acts infringing trade secrets, which are consistent with the provisions of the Anti-Unfair Competition Law. Article 25 refines the measure of ordering cessation of illegal acts, providing that the period for ordering cessation of illegal acts shall generally continue until the relevant business information no longer constitutes a trade secret, and that the methods of cessation include cessation of use, return or destruction of carriers, destruction of infringing products or intermediates, and elimination of trade secret information. Article 26 refines the definition of “serious circumstances”. It is noteworthy that the New Provisions do not adopt the expression “RMB 300,000 or more” in relation to “serious circumstances” used in the draft for comments, thereby retaining some room for discretion, and include repeated commission of infringing acts as a serious circumstance. In addition, the New Provisions delete the authority of market regulation departments to mediate the amount of compensation, and right holders will no longer be able to claim compensation amounts in administrative proceedings. This is likely related to the absence of explicit authorization in the Anti-Unfair Competition Law.
IX. Acts infringing trade secrets committed outside China may be handled upon request within China (Article 29 of the New Provisions)
Where acts infringing trade secrets are committed outside China but the trade secrets are used within China or the infringing results occur within China, the market regulation department may likewise be requested to handle the case, which is consistent with the provisions in the judicial interpretation on civil cases. This provision grants foreign-related right holders a channel for safeguarding their rights against cross-border misappropriation of trade secrets. There is already a typical case in judicial practice. In the case concerning trade secrets relating to “natural proteinase 3 (PR3)” [4], the Supreme People’s Court upheld the right of a foreign-related right holder to seek relief in China against acts infringing trade secrets committed outside China. The inclusion of this provision in the New Provisions undoubtedly increases the avenues for extra-territorial right holders to seek relief in China and enhances their confidence in obtaining equal protection.
In general, as an important departmental regulation on the administrative protection of trade secrets, the New Provisions further enhance the operability and standardization of administrative investigation and handling, address the pain points of trade secret protection in the digital era, alleviate the evidentiary burden on right holders, and afford equal protection to the rights and interests of the parties involved. The administrative protection route for trade secrets may become an effective lever and diversion mechanism for addressing acts infringing trade secrets.
