Constitutive Requirements of the Offense of Infringement of Business Secrets and Its Judicial Definition

On 9 May, 2008, a symposium on “the Constitutive Requirements of the Offense of Infringement of Business Secrets and Its Judicial Definition” was held by the Institute of the Law Firm of East China University of Political Science and Law. The experts in Criminal Law, Procedure Law, Civil Law, Administrative Law and Intellectual Property Law share their personal opinions about the topic. My former studies on the business secrets are basically based on the studies of Anti Unfair Competition Law. Through the communication with the experts, I have acquired further and more comprehensive knowledge of the legal practice of the laws about business secrets. In my opinion, when dealing with a criminal case of the offense of infringing upon business secrets involving know-how, the lawyer should particularly pay attention to the relevant problems as follows in the conclusion of authentication:

1. The conclusion of authentication about the Novelty Search

In practice, in a case involving certification of business secrets, firstly, the party will consign the case to the authentication institution to obtain an authentication report on whether the disputing business secret in the case is unknown by the public (the Novelty Search). It’s the most important conclusion in a case of business secrets. Only when the business secret in the case is recognized as “unknown by the public”, the case can be continued. For this kind of cases involving specialized technical knowledge, the lawyers and judicial organs usually neglect to study on the reliability and probative force of the conclusion of authentication. For example,

(1) Dose the induction of the know-how points measure up to the industry standard?
(2) Is the selection of the keywords of retrieval correct?
(3) Is the determination of the way and scope of retrieval objective and fair?

According to my former experience, the above 3 aspects affect the conclusion of authentication a lot. The induction of the know-how points involving in the case will directly affect the determination of the keywords of retrieval. Even if the keywords are correctly chosen, that the scope is too narrow or the way of retrieval (mainly the problem of the apportionment of the manual retrieval and the computer retrieval) is improper will affect the probative force of the conclusion of authentication.

2. The conclusion of authentication about “intercomparison”

If the involved know-how is recognized as business secret, the authentication institution should also authenticate whether the infringer has used that know-how. We call it “causality recognition” in law (intercomparison authentication). In the cross-examination about this kind of authentication conclusion, usually, experts of this industry should intervene. In a civil case, we can apply to the people’s court for having the experts appear in court to do cross-examination. According to Article 61 of Some Provisions of the Supreme People's Court on Evidence in Civil Procedures,
“The parties concerned may apply to the people's court to have one or two persons with professional knowledge to appear in court to make accounts of the specialized questions relating to the case. If the people's court approves such applications, the relevant expenses shall be borne by the party that makes the application.
The judges and parties concerned may interrogate the persons with professional knowledge that appear in court.
The persons with professional knowledge may interrogate the authenticators.”

However, in a criminal case, our Criminal Law does not seem to give the similar rights to the defendant. If there are no incidental civil actions in a criminal case, the defender has no legal basis to apply to the people’s court for having experts cross-examine the conclusion of authentication. Therefore, usually, the lawyer of a criminal case can only make a non-essential cross-examination of the conclusion of authentication without experts’ support. Nevertheless, according to Article 138 and Article 140 of Some Provisions of the Supreme People's Court on Criminal Procedure Law, the prosecutor and the defendant should summon expert witness to appear in court under the permission of the people’s court; for that both the prosecutor and the defendant can read the conclusion of authentication without the expert witness’s attendance, it makes the conclusion of authentication become the basis of conviction without cross-examination. Moreover, such defects of Procedure Law can easily hurt the defendant's rights.

3. The conclusion of authentication about the “damage result”

The damage result of business secret cases can be determined through the damage to the right or the properties obtained from the infringement. In practice, there are situations as follows:

(1) Evaluate the damage through the assessment value of the obligee’s business secret itself (for example, the research and development expenses of know-how, license fee of technique and so on);
(2) Evaluate the damage through the decrease of the obligee’s market share;
(3) Evaluate the damage through the interests that the infringer obtained from the business secret.

Due to the fact that there’s no definite and unified regulation in the judicial interpretation about the identification criteria of the damage result of business secret cases at present, we can receive different conclusions of authentication according to different calculation method. It brings great uncertain factors to the determination of damage result of business secret cases.

In a word, in the criminal cases of business secret involving infringement of know-how, it not only requires the lawyer to have sturdy foundation of law and rich practice experience, but also requires the lawyer to understand quickly the basic characteristics of the know-how in the case in a short time. Only by these means can a lawyer protect the client’s legal rights and interests.

Authored by: Zhong Yi, Attorney at Law - Shanghai Runhe Law Firm