Recently, the Beijing Intellectual Property Court issued a final second-instance judgment on a dispute over infringement of business secrets filed by a thermal energy technology company against a Beijing machinery equipment company, Zhang and four other defendants. The court dismissed all the appellant’s appeal requests and affirmed the original first-instance judgment.
Lawyer Zhongsheng(Jason) Zhou from Shengzhi acted as the authorized litigation representative for four of the defendants, including the Beijing machinery equipment company and Zhang, in the second instance. Building on the first-instance victory, the team accurately grasped the adjudication standards for trade secret cases and constructed a tiered defense system targeting the grounds of appeal. The core defense opinions were ultimately adopted by the appellate court, completely eliminating the risk of over RMB 8 million in claims for the clients.
I. Case Background: Appellant Filed Appeal After First-Instance Loss with Three Claims to Overturn the Verdict
In the first instance of this case, the People’s Court of Xicheng District, Beijing rejected all the plaintiff’s claims on the ground that “the plaintiff failed to take reasonable confidentiality measures for the business information involved, and the information does not constitute a trade secret protected by the Anti-Unfair Competition Law”.
Dissatisfied with the first-instance judgment, the plaintiff appealed to the Beijing Intellectual Property Court, with the following core claims:
- The company had formulated a confidentiality management system and assigned dedicated personnel to manage corporate emails, which constituted de facto confidentiality measures;
- Employees bear statutory loyalty and confidentiality obligations based on the employment relationship, and the absence of a written confidentiality agreement does not exempt them from confidentiality liability;
- The transaction information of domestic suppliers and foreign customers involved constitutes in-depth business information with secrecy and commercial value, thus qualifying as business secrets. Our clients constituted joint infringement and shall be subject to punitive damages.
II. Core Second-Instance Defense: Directly Addressing the Appellant’s Logic and Clarifying Legal Boundaries
In response to the appellant’s three claims, Shengzhi’s legal team closely followed the statutory “three constituent elements” of trade secrets and formulated a precise defense strategy based on the facts supplemented and verified in the second instance:
(1) Deconstructing “confidentiality measures”: distinguishing routine management from specialized confidentiality measures
We clearly pointed out that confidentiality measures for trade secrets must meet the requirements of “reasonableness, identifiability and correspondence”, and ordinary office management cannot be equated with confidentiality measures:
- There is no evidence proving that the company management system submitted by the plaintiff was publicized, delivered or signed by the involved employees before the alleged infringing act occurred. Testimony from internal employees alone is insufficient to prove that the system was actually communicated to staff;
- Assigning corporate email management to a single employee is a routine work authority configuration for the position. Without specialized measures such as confidential information isolation and hierarchical permission control, it does not constitute a confidentiality act targeting trade secrets;
- The plaintiff itself had disclosed supplier transaction information in work groups, which sufficiently confirms that it did not strictly manage the involved information as trade secrets.
(2) Clarifying legal boundaries: labor loyalty obligation ≠ trade secret confidentiality obligation
In response to the appellant’s core logic that “statutory confidentiality obligation exempts the burden of proof”, we focused on distinguishing the adjudication standards of the two types of legal relationships:
- In labor dispute cases, a finding that an employee violates professional ethics and bears compensation liability is evaluated based on the ancillary loyalty obligation under the employment relationship. In trade secret infringement cases, however, the right holder must prove that it has proactively taken confidentiality measures, and this statutory obligation cannot be replaced by the employee’s implied obligation.
- An employee’s confidentiality obligation is premised on “knowing that the information constitutes a trade secret”. In this case, the plaintiff neither defined the scope of confidential information nor communicated confidentiality requirements, so it cannot be presumed that the employee bears a statutory confidentiality obligation at the trade secret level.
(3) Responding to the secrecy claim: information depth is insufficient to fall outside the public domain
Based on evidence such as product models and quotation information published on suppliers’ official websites and e-commerce platforms, we further explained that the “in-depth transaction information” claimed by the plaintiff did not form unique transaction rules and exclusive content different from public information. A long-term transaction relationship alone is insufficient to establish the secrecy of the information, which fails to meet the statutory constituent elements of a trade secret.
III. Key Points of the Final Judgment: Clarifying Adjudication Rules and Affirming the First-Instance Verdict
After trial and supplementary verification of facts including the content of the labor contract and the management method of confidential carriers, the Beijing Intellectual Property Court made the following final findings:
- Determination of confidentiality measures: The evidence on record cannot prove that the plaintiff had effectively communicated the confidentiality system to the involved employees before the infringing act occurred, nor is there evidence that the two parties reached a confidentiality agreement on the business information involved. Its management methods for emails and contracts are insufficient to constitute reasonable confidentiality measures commensurate with the value of the business secrets involved.
- Boundary of legal application: The previous labor dispute judgment was an evaluation of professional ethics based on labor law rules, which differs from the determination standards for business secret infringement disputes in this case. The finding of compensation liability in the previous case does not necessarily lead to a finding of trade secret infringement in this case.
- Final ruling: All the appellant’s appeal requests are untenable. The court dismissed the appeal and affirmed the original judgment, with the second-instance court fees fully borne by the appellant.
This judgment is final and binding, and the dispute has been conclusively settled.
IV. Typical Significance of the Case
As a final effective second-instance judgment, this case further clarifies two important practical rules for trade secret disputes in Beijing:
- First, the implementability of confidentiality measures is the core: merely formulating internal confidentiality systems is insufficient for an enterprise to fulfill its burden of proof for confidentiality. Enterprises must retain records of system delivery, employee acknowledgment and specialized training, and support them with matching measures such as permission control and physical isolation commensurate with the value of the information. Otherwise, it will be difficult for the court to recognize them as “reasonable confidentiality measures”.
- Second, there is a clear legal boundary between labor disputes and trade secret disputes: employees’ professional ethics obligations and ancillary obligations under labor relations cannot replace the right holder’s proactive confidentiality obligation under trade secret law. The right holder still bears an independent burden of proof for the adoption of confidentiality measures.
The final victory in this case not only completely ends the litigation risk for the parties, but also provides practical reference ideas for the defense of similar commercial infringement cases.
Shengzhi has profound experience in commercial intellectual property, unfair competition, labor disputes and other fields, and boasts rich experience in full-process first-instance and second-instance representation in trade secret dispute cases. Moving forward, the firm will continue to focus on cutting-edge adjudication rules in the field of commercial intellectual property and safeguard the rights and interests of clients with professional capabilities.
