On April 23, 2019, the Standing Committee of the National People’s Congress (NPCSC) passed the amendments to the PRC Anti-Unfair Competition Law, the second amendments since the implementation of the PRC Anti-Unfair Competition Law in 1993 and the first amendments in 2017. The revised PRC Anti-Unfair Competition Law became effective on April 23, 2019.
The new PRC Anti-Unfair Competition Law featured trade secret protection and raised fines and damages for unfair competition acts. These new revisions address international concerns, enhance trade secret protection and show that China is giving priority to building an environment conducive to trade and investment.
The revisions are summarized in the underlined texts in the charts as follows:
The revisions in Article 9 are all about trade secret protection, including the definition of trade secrets and acts of trade secret infringement. The newly added Article 32 allocates the burden of proof in trade secret civil lawsuits.
The revisions in Article 17 introduce the one to five times punitive damages for malicious infringement of trade secrets and increases the maximum statutory damages from the previous 3 million yuan (around 444,985 USD) to 5 million yuan (around 741,641 USD).
The revisions in Article 21 have prescribed confiscation of illegal gains and higher fines for infringement upon trade secrets than before. In severe trade secret cases, the maximum fines have been increased to five million yuan (around 741,641 USD) from the previous fines at the amount of three million yuan (around 444,985 USD).
Trade secret is important asset and critical infrastructure of incredible value to IP right holders and in some cases, is vital to business survival and sustained success in the cold-blooded cut-throat market competition. “That's why the formula for Coca-Cola was never patented. They kept it as a trade secret, and they've outlasted patent laws by 80 years or more.” as it is explained by Mr. Craig Venter, American biotechnologist, biochemist, geneticist, and businessman. The statistics in the annual White Paper on IP Protection released by the PRC People’s Supreme Court shows the steady growth of unfair competition lawsuits in China and a drastic surge at 63.04% in 2018 compared to those in 2018. The revisions to the PRC Anti-Unfair Competition Law focus primarily on trade secret protection with more heavy-handed penalties for the violators and increased damages for the IP right holders.
Sources: The Annual White Paper on IP Protection in China Released by the PRC People’s Supreme Court
While protecting trade secret with special procedures for handling it, technological and legal security measures and legal protections including non-disclosure agreements (NDAs), and work-for-hire and non-compete clauses etc. to ensure that “The only secrets are the secrets that keep themselves”, the IP right holders may re-evaluate strategy to make the maximum benefits from the improved trade secret protection under the revised PRC Anti-Unfair Competition Law.