*AI-generated translation, for reference only.

[Keywords]

Civil, infringement of trade secret, technical secret, form of liability, elimination of adverse effects

[Case Facts]

Xu [REDACTED] Co., Ltd. (hereinafter referred to as Xu [REDACTED] Company) alleged that it was the exclusive licensee of the "trioxane synthesis and distillation" production process (hereinafter referred to as the technical secret in question) within China. Its employee, Chen [REDACTED], in collusion with Xi'an Shang [REDACTED] Technology Development Co., Ltd. (hereinafter referred to as Xi'an Shang [REDACTED] Technology Company) and Jiangsu Yong [REDACTED] Chemical Equipment Co., Ltd. (hereinafter referred to as Jiangsu Yong [REDACTED] Chemical Equipment Company), disclosed the technical secret in question by successively applying for four patents (Patents A, B, C, D). Therefore, it requested the court to order: 1. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to cease all acts infringing the technical secret in question, including ceasing the disclosure, use, or authorization for others to use the technical secret in question that they had obtained. Specifically, this included: immediately ceasing the filing of patent applications, refraining from implementing or licensing others to implement the technical solutions involving the technical secret in question within the four patents, refraining from assigning the patent rights or patent application rights in question, and refraining from using the technical information of Xu [REDACTED] Company's technical secret in question to file new patent applications; 2. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to compensate Xu [REDACTED] Company for economic losses and reasonable expenses incurred in stopping the infringing acts of Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company, totaling RMB 10,841,417.55 (currency unit same below), including economic losses of RMB 10,000,000 and reasonable expenses of RMB 841,417.55; 3. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to publish statements in Wen Wei Po and Xinmin Evening News regarding their infringing acts to eliminate adverse effects.

The court ascertained through trial: Chen [REDACTED] was formerly an employee of Xu [REDACTED] Company, had knowledge of the technical secret in question, and had signed a confidentiality agreement with Xu [REDACTED] Company. During his employment with Xu [REDACTED] Company, Chen [REDACTED] established Xi'an Shang [REDACTED] Technology Company as one of its shareholders and actively participated in the operation of that company. On June 30, 2014, Xi'an Shang [REDACTED] Technology Company filed a patent application for Patent A with the State Intellectual Property Office as the applicant and was granted the patent. On September 16, 2016, and December 7, 2016, Xi'an Shang [REDACTED] Technology Company and Jiangsu Yong [REDACTED] Chemical Equipment Company jointly filed patent applications for Patents B and C with the State Intellectual Property Office as applicants; these two patent applications were rejected. On April 27, 2020, Chen [REDACTED] filed a patent application for Patent D with the State Intellectual Property Office as the applicant and was granted the patent. Chen [REDACTED] was one of the inventors of the aforementioned four patents (or patent applications). Each of the aforementioned four patents (or patent applications) disclosed part of the technical secret in question.

The Suzhou Intermediate People's Court of Jiangsu Province rendered the (2020) Su 05 Min Chu No. 1172 civil judgment on January 7, 2022, ordering: 1. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to immediately to desist from further infringement of Xu [REDACTED] Company's technical secret, i.e., to cease using the technical information related to the technical secret in question contained in the patents and patent applications in question, with the cessation period lasting until the expiration  of the patent rights in question; 2. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to publish statements in nationally distributed media to eliminate adverse effects; 3. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to jointly and severally compensate Xu [REDACTED] Company for economic losses of RMB 5,000,000 and reasonable expenses for rights protection of RMB 841,417.55, totaling RMB 5,841,417.55, within ten days from the effective date of the judgment; 4. Rejection of Xu [REDACTED] Company's other claims.

Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company refused to accept the judgment and filed appeals. The Supreme People's Court rendered the (2022) SPC IP Civil Final 1232 civil judgment on June 28, 2024, ordering: 1. Affirmation of the third item of the (2020) Su 05 Min Chu No. 1172 civil judgment of the Suzhou Intermediate People's Court of Jiangsu Province; 2. Revocation of the first, second, and fourth items of the (2020) Su 05 Min Chu No. 1172 civil judgment of the Suzhou Intermediate People's Court of Jiangsu Province; 3. Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company shall, from the effective date of this judgment, immediately cease the acts infringing Xu [REDACTED] Company's technical secret in question, including but not limited to: 1. From the date of service of this judgment, unless with the consent of the holder of the technical secret in question, they shall not use or exploit the technical secret in question disclosed in the four invention patents (or patent applications) in any form, nor shall they continue to use the technical secret in question for filing new patent applications. The period for ceasing the infringement shall be 20 years from the filing date of the patent(s) (or patent applications) in question; 2. From the date of service of this judgment, unless with the consent of the holder of the technical secret in question, they shall not exploit, license others to exploit, transfer, pledge, or otherwise exploit the two granted invention patents, including not maliciously abandoning the patent rights by failing to pay the annual patent fees in full on time or failing to actively respond to requests for patent invalidation; 4. Rejection of the appeals of Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company; 5. Rejection of Xu [REDACTED] Company's other claims.

[Reasons for Judgment]

One of the points of contention in this case was whether Xu [REDACTED] Company's claim requesting Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to publish statements in Wen Wei Po and Xinmin Evening News regarding their infringing acts to eliminate adverse effects could be upheld.

Article 15 of the Tort Liability Law of the People's Republic of China stipulates: "The main methods of bearing tort liability shall include: (1) cessation of infringement; (2) removal of obstacles; (3) elimination of dangers; (4) return of property; (5) restoration to original condition; (6) compensation for losses; (7) apology; (8) elimination of adverse effects and restoration of reputation. The aforesaid methods of bearing tort liability may be applied individually or jointly." (This provision has been absorbed into Article 179 of the Civil Code of the People's Republic of China.) Accordingly, elimination of adverse effects and restoration of reputation are closely related, referring to the elimination of adverse effects on the victim's reputation through appropriate means to restore the victim's reputation. Therefore, this remedy is primarily applicable in cases of infringement of the right to reputation. The prerequisite for an infringer to bear liability for elimination of adverse effects and restoration of reputation is that the infringing act has caused damage to the reputation of the infringed party. A technical secret is primarily a form of property right. The right holder chooses to keep specific technical information "confidential" and protect it as a technical secret. An infringer's act of infringing a technical secret generally does not cause damage to the right holder's reputation. Therefore, unless the right holder has evidence proving that the act of infringing the technical secret has also caused damage to its reputation, the form of liability of "elimination of adverse effects" is generally not applicable.

In this case, there was no evidence proving that the disclosure of the technical secret in question by Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company through the filing of patent applications caused adverse effects resulting in damage to Xu [REDACTED] Company's reputation. Therefore, Xu [REDACTED] Company's claim requesting Chen [REDACTED], Xi'an Shang [REDACTED] Technology Company, and Jiangsu Yong [REDACTED] Chemical Equipment Company to publish statements in Wen Wei Po and Xinmin Evening News regarding their infringing acts to eliminate adverse effects lacked factual and legal basis. The corresponding item of the first-instance judgment was inappropriate, and the court of second instance corrected it.

[Judgment Digest]

Elimination of adverse effects and restoration of reputation are closely related. An infringer's act of infringing a technical secret generally does not cause damage to the reputation of the holder of the technical secret. Therefore, unless the holder of the technical secret has evidence proving that the act of infringing the technical secret has also caused damage to its reputation, the form of liability of "elimination of adverse effects" is generally not applicable.

[Corresponding Index]

Article 179 of the Civil Code of the People's Republic of China (the applicable version in this case is Article 15 of the Tort Liability Law of the People's Republic of China effective July 1, 2010)

First Instance: Suzhou Intermediate People's Court of Jiangsu Province (2020) Su 05 Min Chu No. 1172 Civil Judgment (January 7, 2022)

Second Instance: Supreme People's Court (2022) SPC IP Civil Final 1232 Civil Judgment (June 28, 2024)