*AI-generated translation, for reference only.

[Keywords]

Civil; infringement of trade secrets; infringement of technical secrets; improper acquisition; legitimate access

[Case Facts]

Beijing [REDACTED] Technology Co., Ltd. (hereinafter referred to as Beijing [REDACTED] Company) is the right holder in the game project code of the strategy game "World of Dragons" (English name: World of Dragons, abbreviated as WOD), and claims that the source code of the game software constitutes its trade secret. Cao [REDACTED] and Wang [REDACTED] are both former employees of Beijing [REDACTED] Company. Cao [REDACTED] previously served as the person responsible for operations and maintenance of a technology middle platform of a business line of the company (under KingsGroup), and Wang [REDACTED] previously served as the person in charge of KingsGroup of the company. Both individuals signed confidentiality, non-compete, and intellectual property protection agreements with the company during their employment at Beijing [REDACTED] Company. Wang [REDACTED] resigned from Beijing [REDACTED] Company on 31 December 2019 and on 1 June 2020 established [REDACTED] (Beijing) Technology Co., Ltd. (hereinafter referred to as [REDACTED] Technology Company), which is engaged in exactly the same business as Beijing [REDACTED] Company. Cao [REDACTED] submitted a resignation application to Beijing [REDACTED] Company on 30 June 2020.

On 2 July 2020, an affiliated company of Beijing [REDACTED] Company reported to the public security authorities that, approximately one week before Cao [REDACTED] submitted his resignation application to Beijing [REDACTED] Company, the affiliated company discovered during a routine internal network security inspection that, over a period of more than one month prior to Cao [REDACTED]'s resignation application, Cao [REDACTED] had, without the company's authorization, privately downloaded WOD source code and removed it from the company's business premises, storing it on an Apple computer that was not company-issued equipment. Further investigation revealed that Cao [REDACTED]'s acts of stealing Beijing [REDACTED] Company's trade secrets in breach of his confidentiality obligations were instigated, induced, and assisted by Wang [REDACTED]; that the funds Cao [REDACTED] used to purchase the computer for storing the trade secrets came from a WeChat transfer from Wang [REDACTED]; and that the purchase unit shown on the invoice for the Apple computer was [REDACTED] Technology Company. Beijing [REDACTED] Company considered that Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company jointly infringed the trade secrets at issue, and accordingly brought an action before the court, requesting the court to order the three accused infringers to immediately cease the acts infringing the trade secrets at issue, and to jointly and severally compensate for economic losses in the amount of RMB 4,283,000 (same currency hereinafter) and reasonable expenses incurred in enforcing rights in the amount of RMB 516,760.

The Beijing Intellectual Property Court held that the WOD game software source code constitutes a trade secret of Beijing [REDACTED] Company. As a technical employee of Beijing [REDACTED] Company, Cao [REDACTED] had the right to access and obtain the trade secrets at issue; the evidence on file could only prove that Cao [REDACTED] acquired the trade secrets at issue, but could not prove that Cao [REDACTED] disclosed, used, or permitted others to use the trade secrets so acquired. In the absence of any evidence showing that Cao [REDACTED] disclosed the trade secrets at issue to Wang [REDACTED] or [REDACTED] Technology Company, or that Wang [REDACTED] or [REDACTED] Technology Company used or permitted others to use the trade secrets at issue, the Beijing Intellectual Property Court rendered Civil Judgment (2020) Jing 73 Min Chu No. 1114 on 28 December 2022, dismissing all claims of Beijing [REDACTED] Company. Beijing [REDACTED] Company refused to accept the first-instance judgment and filed an appeal. The Supreme People's Court rendered Civil Judgment (2023) SPC IP Civil Final 539 on 11 September 2024, as follows: (1) the Civil Judgment (2020) Jing 73 Min Chu No. 1114 of the Beijing Intellectual Property Court is revoked; (2) Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company shall immediately cease infringing the trade secrets of Beijing [REDACTED] Company in the computer software source code of the strategy game "World of Dragons" (English name: World of Dragons), as of the date on which this judgment takes legal effect; (3) Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company shall jointly and severally compensate Beijing [REDACTED] Company for economic losses in the amount of RMB 500,000 within ten days of the date on which this judgment takes legal effect; (4) Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company shall jointly and severally compensate Beijing [REDACTED] Company for reasonable expenses in the amount of RMB 398,760 within ten days of the date on which this judgment takes legal effect; and (5) the remaining claims of Beijing [REDACTED] Company are dismissed.

[Judge's Opinion]

The focal point of dispute in this case is whether Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company committed acts infringing Beijing [REDACTED] Company's trade secrets at issue.

Article 9, Paragraph 1 of the Law of the People's Republic of China on Anti-Unfair Competition provides: "An operator may not adopt the following means to infringe business secrets: (1) obtaining business secrets from the owners of rights by stealing, promising of gain, resorting to coercion or other improper means; (2) disclosing, using, or allowing others to use business secrets of the owners of rights obtained by the means mentioned in the preceding item; (3) disclosing, using or allowing others to use business secrets that he has obtained by breaking an engagement or disregarding the requirement of the owners of the rights to maintain the business secrets in confidence." In determining whether the conduct of a party with legitimate access to trade secrets violates the provisions of Article 9, Paragraph 1 of the Law on Anti-Unfair Competition, it is not sufficient to consider in isolation whether the accused infringer previously had the right to access or obtain the trade secrets and whether the means by which the accused infringer obtained the trade secrets correspond to the types of means expressly enumerated in the law. Instead, a comprehensive examination shall be conducted of the accused infringer's intent in obtaining the trade secrets and of the conduct of the accused infringer following the acquisition of the trade secrets, in order to determine whether the accused infringing acts caused or may cause the right holder to lose effective control over the trade secrets. The fact that the accused infringer had the right to access the trade secrets at issue does not mean that the manner in which the accused infringer accessed and acquired the trade secrets, or the manner in which the accused infringer disposed of the trade secrets after acquiring them, was necessarily legitimate.

Cao [REDACTED] failed to provide any evidence showing that Beijing [REDACTED] Company had ever expressly permitted or tacitly allowed employees to remove from the company's premises office computers containing the source code of the trade secrets at issue and take them to their personal homes, nor was there any evidence showing that Beijing [REDACTED] Company had ever expressly permitted or tacitly allowed employees to download or copy the source code of the trade secrets at issue from the company's office computers or other hardware devices onto the employees' own mobile storage devices. Cao [REDACTED] knew or should have known that removing from the company's premises the office computer containing the source code of the trade secrets at issue and taking it to his personal home was in breach of his confidentiality obligations. Although Cao [REDACTED] emphasized throughout the first and second instance proceedings that his downloading, copying, and removal of the source code at issue from Beijing [REDACTED] Company was necessary to perform his job duties, he consistently avoided addressing why, after completing these acts, he went on to carry out such obviously abnormal acts as deleting relevant log operation records, tampering with jump server login records, and deleting relevant data. Based on the established facts, Cao [REDACTED] had in fact already, prior to 24 June 2020, been systematically and in a planned manner removing the code of the trade secrets at issue from Beijing [REDACTED] Company's premises in stages; and during the period from 24 June 2020 to 2 July 2020, a period exceeding one week, the transfer of the WOD game project code (which constitutes the trade secrets at issue) from Cao [REDACTED] to Wang [REDACTED] and [REDACTED] Technology Company was entirely feasible in terms of both time and conditions, given that the trade secrets were embodied in code and that electronic transmission technology is highly advanced today. The accused infringing acts committed by Cao [REDACTED] in this case both violated generally accepted business ethics and breached the confidentiality undertaking he made in the confidentiality agreement signed with Beijing [REDACTED] Company; the means by which he acquired the trade secrets at issue were manifestly improper; and his conduct has objectively caused the source code of the trade secrets at issue to escape the effective control of Beijing [REDACTED] Company and has created a significant commercial risk of disclosure and unauthorized use by others, such that the accused infringing acts are clearly attributable to him. Based on the foregoing analysis, the accused infringing acts of Cao [REDACTED] fall within the circumstances prescribed in Article 9, Paragraph 1, Item (1) of the Law on Anti-Unfair Competition—namely "obtaining business secrets from the owners of rights by stealing" — and in Item (3) of the same provision—namely "disclosing, using or allowing others to use business secrets that he has obtained by breaking an engagement or disregarding the requirement of the owners of the rights to maintain the business secrets in confidence."

Wang [REDACTED] was a former employee of Beijing [REDACTED] Company and, during his employment, served as the person in charge of KingsGroup and signed confidentiality, non-compete, and intellectual property protection agreements with Beijing [REDACTED] Company. The company established by Wang [REDACTED] after his resignation from Beijing [REDACTED] Company, [REDACTED] Technology Company, is also primarily engaged in game development and operation; Wang [REDACTED] therefore clearly understood the value and significance of a game project's source code for a company's business operations and competitive advantage. Wang [REDACTED] was aware that Cao [REDACTED] was employed at Beijing [REDACTED] Company and that Cao [REDACTED] had signed relevant confidentiality and non-compete agreements with Beijing [REDACTED] Company. He proactively inquired of Cao [REDACTED] whether he was interested in joining [REDACTED] Technology Company, and in particular proactively asked Cao [REDACTED] whether he knew about or had access to Beijing [REDACTED] Company's game code. Upon receiving Cao [REDACTED]'s affirmative reply and his indication that he had no storage device, Wang [REDACTED] promptly provided Cao [REDACTED] with funds via WeChat transfer to purchase an Apple computer, after which Cao [REDACTED] used the funds transferred by Wang [REDACTED] to purchase an Apple computer and successfully carried out the infringing acts of taking Beijing [REDACTED] Company's source code home and transferring it to the said Apple computer. The accused infringing acts committed by Wang [REDACTED] were, on the one hand, acts carried out based on his individual free will and, on the other hand, acts carried out on behalf of and in the interests of [REDACTED] Technology Company. Based on the foregoing analysis, the accused infringing acts of Wang [REDACTED] fall within the circumstances prescribed in Article 9, Paragraph 1, Item (4) of the Law on Anti-Unfair Competition, namely "obtaining, disclosing, using or allowing any other to use an obligee's commercial secrets by instigating, temping or helping any other to violate the confidentiality obligations or the obligee's requirements on keeping such commercial secrets confidential", and in Paragraph 3 of the same article, namely "Where a third party knows or should know of the fact that an employee conducts any of the illegal acts specified in the first paragraph of this article, but still accepts, publishes, uses or allows any other to use such secrets, such practice shall be deemed as infringement of commercial secrets."

Furthermore, based on the established facts concerning the contacts, communications, and mutual interactions among the three parties (Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company), the infringing acts committed by these three parties were clearly not independent, isolated acts of infringement, but rather acts of joint infringement based on close subjective concert of action, close objective division of labor and cooperation, all directed at the same trade secret. Accordingly, Cao [REDACTED], Wang [REDACTED], and [REDACTED] Technology Company shall bear liability for infringement according to law.

[Judgment Digest]

In cases involving disputes over infringement of trade secrets, the fact that the accused infringer had the right to access the trade secrets at issue does not mean that the acts of acquiring and disposing of such trade secrets were necessarily legitimate. Instead, the determination shall be made with care and in accordance with law, taking into account such factors as the accused infringer's intent in acquiring the trade secrets, the means of acquisition, and whether the post-acquisition disposal conduct caused or may cause the right holder to lose effective control over the trade secrets.

[Related Index]

Article 9 of the Law of the People's Republic of China on Anti-Unfair Competition

Articles 1(1), 8, and 10(1) of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Infringement of Trade Secrets (Fa Shi [2020] No. 7)

First Instance: Civil Judgment (2020) Jing 73 Min Chu No. 1114 of the Beijing Intellectual Property Court (28 December 2022)

Second Instance: Civil Judgment (2023) SPC IP Civil Final 539 of the Supreme People's Court (11 September 2024)