Supreme People’s Procuratorate and Ministry of Public Security – Decision on Amending the Criteria for Launching Formal Investigation into Criminal Cases of Infringement upon Trade Secrets

Published on September 17, 2020

For the purpose of punishing the crimes of infringing trade secrets in accordance of the law, strengthening the criminal judicial protection of intellectual property rights, and maintaining the order of socialist market economy, Article 73 of the Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on the Criteria for Public Security Organs to Launch Formal Investigation into Criminal Cases (II) is amended as follows: [Infringement of Trade Secrets (Article 219 of the Criminal Law)] Those who infringe on trade secrets and are suspected of one of the following circumstances shall be put on file for prosecution:

1. The amount of loss caused to the right holder of the trade secret is more than 300,000 yuan;
2. The amount of illegal gains owing to the infringement of trade secrets is more than 300,000 yuan;
3. Directly leading to the bankruptcy or closing of business of the right holder of the trade secret due to major business difficulties;
4. Other circumstances that cause heavy losses to the right holder of trade secret.

The amount of loss or the amount of illegal gains as prescribed in the preceding paragraph may be determined in the following ways:

1. Where the right holder’s trade secret is obtained by improper means and has not been disclosed, used, or allowed to be used by others, the amount of loss may be determined based on the reasonable licensing fee for the trade secret;
2. Where right holder’s trade secret is obtained by improper means and has been disclosed, used, or allowed to be used by others, the amount of loss may be determined based on the loss of the right holder’s sales profits caused by the infringement, or the reasonable licensing fee of the trade secret, whichever is higher;
3. Where a trade secret is disclosed, used, or allowed to be used by others, which is in violation of the agreement or of the right holder’s requirements for keeping the trade secret, the amount of loss may be determined based on the loss of the right holder’s sales profit caused by the infringement;
4. Where a trade secret is obtained, used or disclosed knowing that it is obtained by improper means or in violation of the agreement or of the right holder’s requirement on disclosing, using or permitting the use of the trade secret, the amount of loss may be determined based on the loss of right holder’s sales profit caused by the infringement;
5. Where a trade secret has become known to the public or has been lost due to an infringement of a trade secret, the amount of loss may be determined based on the commercial value of the trade secret. The commercial value of a trade secret can be comprehensively determined based on the research and development costs of the trade secret and the income from the implementation of the trade secret;
6. Property or other property interests obtained by disclosing or allowing others to use trade secrets shall be recognized as illegal gains.

The right holder’s loss of sales profit caused by infringement as prescribed in items 2, 3 and 4 of the preceding paragraph may be determined by multiplying the total amount of sales reduction caused by the infringement of the right holder by the reasonable profit of each product of the right holder; if the total amount of sales reduction cannot be determined, [the loss of sales profit] may be determined by multiplying the sales volume of the infringing product by the reasonable profit of each product of the right holder; where the right holder’s total sales volume reduction due to infringement and the reasonable profit of each product cannot be determined, [the loss of sales profit] may be determined by multiplying the sales volume of the infringing product by the reasonable profit of each infringing product. If the trade secret is used in other business activities such as services, the amount of the loss of sales profit may be determined based on the right holder’s reasonable profit reduced by the infringement.

The remedial expenses paid by the right holder of a trade secret for the purpose of reducing the loss of the business operation or business plans or restoring the security of the computer information system or other systems shall be included in the loss caused to the right holder of the trade secret.

Translation by East IP.

Original text in Chinese published at: https://www.spp.gov.cn/spp/xwfbh/wsfbt/202009/t20200918_480430.shtml#1