Trade Secret Litigation And Arriving At A Definition Of 'Commensurate' Security Measures

• Published date: 04 April 2024
• Subject Matter: Intellectual Property, Trade Secrets
• Law Firm: CCPIT Patent & Trademark Law Office
• Author: Mr Xiao Jin

It is well known that the basic elements of trade secrets include:

they must not be known to the public;
they must have commercial value; and
commensurate security measures must have been taken by the right holder.

The first two elements are relatively easy to understand and prove in trade secrets litigation, while the last element often becomes focus of the lawsuit on which each party spends lots of resources to compete. Some recent cases reveal that the right holders of trade secrets might not have sufficient understanding of the word of 'commensurate', which leads to unsatisfying outcomes in trade secrets litigation.

What kinds of security measures taken by the rights holders are accepted by courts as 'commensurate' in China? What are the underlying theories behind the word 'commensurate'? And what aspects should the rights holders pay attention to when adopting security measures? This article tries to provide answers to these questions based on some recent judgements of the Supreme People's Court (SPC) of China.

Legislative history of security measures

According to an earlier version of the Unfair Competition Law of China, the rights holders of trade secrets must take security measures to defend their trade secrets. However, at that time, there was no adjective preceding 'security measures'. This means that courts did not pay too much attention to the facts if the measure were reasonable and sufficient to protect the trade secrets. Few courts noticed this issue but did not elaborate on the relationship between the measures and the trade secrets in the practice.

After observing the legal practice for about 15 years, the SPC officially indicated in 2007 that the security measure must be "reasonable and commensurate with the trade secret". It is not hard to find out the reason why the SPC set up the new standard as, in practice, many measures taken by the rights holders were not reasonable and could not protect the trade secrets.

In 2020, the SPC again revised the wording from "reasonable and commensurate measures" to "reasonable measures before infringement" in its law interpretation to match the revised wording "commensurate measures" of the Unfair Competition Law. Therefore, the holders of trade secrets must prove that reasonable measures have been taken before the secret information is infringed so that the elements of trade secrets can be fulfilled. The court will review whether the plaintiff has taken "reasonable measures" in the trial.

The key factors of commensurate security measures

Five factors have been taken into consideration when determining whether the security measures are commensurate, including:

the nature of the trade secret and its carrier;
the commercial value of the trade secret;
the identifiability of the confidentiality measures;
whether the confidentiality measures are commensurate with the trade secret; and
the right holder's will to keep the secret.

Each of the factors will...