[Direct answer]When trade secrets are leaked by employees, enterprises have four paths to hold them accountable: in civil litigation, they can sue the leaking employees and the recipients who benefit from the leaked information in accordance with Articles 9 and 17 of the Anti-Unfair Competition Law of the People's Republic of China, demanding that the infringement be stopped, the carriers be returned or destroyed, and compensation be paid for the losses. For malicious infringement with serious circumstances, punitive damages of not less than one but not more than five times the actual damages may be imposed, with a maximum compensation cap of 5 million yuan; in labor relations, they can hold the employees accountable for breaching the obligation of confidentiality or non-competition in accordance with Article 23 of the Labor Contract Law of the People's Republic of China; in administrative litigation, they can report the case to the market supervision department; if significant losses are caused, they can accuse the employees of infringing trade secrets in accordance with Article 219 of the Criminal Law of the People's Republic of China. The first step is always to secure evidence and prevent the losses from expanding, and they can consult with a lawyer first.Intellectual property protection and corporate legal servicesThe team evaluates the plan.

1. Problem background and typical scenarios

Employee leaks are the main channel for the loss of corporate intellectual property. Typical scenarios include: core technical staff copying drawings, codes, and process parameters in bulk before leaving the company; sales managers taking away entire customer lists and pricing bottom lines when switching to competitors; current employees disclosing procurement prices and bidding proposals to external competitors; and new employees directly using the secret information of their former employers. Many companies do not have confidentiality systems, hierarchical authorization systems, or confidentiality agreements in place. After an incident occurs, they can't even clarify "what secrets we have and who has accessed them", and their efforts to protect their rights get stalled from the very first step.

II. Key points of contention

  • Whether the information constitutes a trade secret: It must meet three requirements at the same time, namely, it is not known to the public, it has commercial value, and the right holder has taken corresponding confidentiality measures. If the customer list is just the public contact information that can be found by competitors, it does not constitute a secret; if it contains in-depth information such as transaction habits, price ranges, and demand preferences, and the right holder has taken confidentiality measures, it may be protected.
  • Infringement and responsible parties: Employees' disclosure and use of trade secrets constitute infringement, and new employers' acquisition and use of such information despite knowing about it constitutes joint infringement; the burden of proof typically focuses on "the possibility of access + the substantial similarity of the information + the exclusion of legal sources".
  • Protecting rights and proving losses: Civil litigation, labor arbitration, administrative reporting, and criminal prosecution can be conducted concurrently or alternatively. Compensation shall be based on evidence of losses or profits. Disputes involving former employees violating non-compete and confidentiality obligations may be referred to for further referenceLabor arbitration and legal services for work-related injury compensation.

III. Professional analysis by Henglue Law Firm

The success or failure of trade secret cases depends on the accumulation of evidence in peacetime and rapid response after the event. Henglu Law Firm advises enterprises to organize their rights protection in three steps: First, sort out the confidential points. List the technical solutions, customer lists, and business data claimed to be protected, specifying the carriers and contents of each item and explaining their confidentiality and value. Second, fix the evidence of confidentiality measures, including confidentiality system texts, confidentiality agreements, marked confidential documents, hierarchical access records, and training sign-in records, to prove that "appropriate confidentiality measures have been taken" in legal terms. Third, fix the evidence of infringement, including records of employees' copying and external dissemination, comparisons of their new products with proprietary secrets, and customer losses and order diversion. In terms of the order of procedures, first apply for behavioral preservation to stop the use and disclosure of the trade secret immediately; then file an infringement lawsuit or labor arbitration to claim cessation of infringement, return of carriers, and compensation for losses; if the case constitutes a crime, report it to the public security organ; if the employee has signed a non-compete agreement and received monthly compensation, they can simultaneously claim breach of contract and demand continued performance of the non-compete obligation. It is crucial to avoid confronting or publicly criticizing the other party immediately after discovering a leak, as this often prompts them to destroy evidence and further spread the secret.

IV. Practical suggestions and legal basis

At the legal basis level: Article 9 of the Anti-Unfair Competition Law of the People's Republic of China (amended in 2019) defines trade secrets and types of infringement, including obtaining them by improper means such as theft, bribery, fraud, coercion, and electronic intrusion; disclosing, using, or allowing others to use them; and a third party obtaining, disclosing, or using them with knowledge or should have known about it. Article 17 stipulates that compensation shall be determined based on the actual losses or the infringer's profits. If it is difficult to determine either, the court shall award statutory compensation of no more than 5 million yuan. If an operator maliciously infringes trade secrets and the circumstances are serious, punitive damages may be determined at not less than one but not more than five times the actual losses. Article 23 of the Labor Contract Law of the People's Republic of China allows employers to agree with employees on confidentiality and non-compete clauses, and to pay economic compensation monthly after the termination or expiration of the labor contract for the non-compete period. Article 24 limits the non-compete period to no more than two years. Article 219 of the Criminal Law of the People's Republic of China stipulates that anyone who infringes trade secrets and causes significant losses to the rights holder shall be investigated for criminal responsibility according to law.

At the practical advice level: Sign a confidentiality agreement upon employment, and simultaneously sign a non-compete agreement for confidential positions and pay compensation in full on a monthly basis; establish a system of classifying confidential documents, adding watermarks, and maintaining access logs; reiterate obligations during exit interviews, and recover equipment and accounts while keeping records; immediately preserve evidence upon discovering a leak, evaluate the scale of losses and the scope of its spread before selecting a combination of accountability measures, and notify important clients and partners simultaneously when necessary to control the contagion of the leak.

5. Henglue Law Firm's Reminder

When protecting trade secrets, the key lies in "preparing in advance and relying on evidence": without evidence of confidentiality measures, the confidentiality of the secret will be denied, and even the most serious leaks will be difficult to gain support. With a complete chain of evidence, civil, administrative, and criminal measures can be used in combination. Enterprises should regard the confidentiality system as a routine compliance measure rather than a remedial measure. After a leak occurs, they should first fix the evidence and assess the impact, and then decide on the pace of negotiation or litigation. If they need to evaluate the confidentiality points, design confidentiality and non-compete restriction schemes, or initiate protection procedures, they can do so throughLegal services for corporate commercial and contract disputesOrBeijing Henglue Law FirmMake an appointment for a consultation.

Q1: What kind of information can be considered a trade secret?

Three conditions must be met simultaneously: it must not be known to the public, meaning it cannot be directly obtained from public channels; it must have commercial value and bring actual or potential competitive advantages; and the rights holder has taken corresponding confidentiality measures, such as a confidentiality system, confidentiality agreements, hierarchical authorizations, and confidential markings. The client list must meet the "in-depth information" standard—it includes transaction habits, price bottom lines, contact patterns, etc. Merely being industrial and commercial information or a public directory does not constitute a secret. Technical information is judged based on whether it is generally known in its respective field.

Q2: If a confidentiality agreement hasn't been signed, can one still claim protection for trade secrets?

Yes. The obligation of confidentiality is a statutory obligation, which does not require the signing of a confidentiality agreement as a prerequisite. However, "taking confidentiality measures" is a constituent element of trade secrets, and enterprises still need to prove that the management actions are in place through system documents, authority control, document marking, and employee awareness. If there is no agreement but there are perfect confidentiality measures, it is still possible to obtain protection; conversely, if there is only a paper agreement without any management measures, there is still a risk in determining the confidentiality. Having both an agreement and measures in place is the most secure situation.

Q3: If an employee leaves the company and takes away the client list, does this necessarily constitute infringement?

It's not necessarily the case. It depends on the nature of the list and its confidentiality status. If the list is simply contact information available through public channels, it doesn't constitute a trade secret; however, if it contains in-depth transaction information and the company takes confidentiality measures, employees obtaining and using it may constitute infringement. If the new employer knowingly continues to use it, it constitutes joint infringement. In practice, employees may raise the defense that clients voluntarily follow their transactions based on personal trust. Whether such a defense can be established depends on the client's development investment and the ownership of transaction records. In cases of significant controversy, it's advisable to organize evidence and evaluate the defense and offense under the guidance of a lawyer.

Q4: If the non-compete compensation is not paid, should the employee still abide by the non-compete agreement?

Distinguish between different situations: The non-compete agreement remains binding on both parties, and the employee is still prohibited from engaging in competitive behavior during the agreed period; however, if the employer fails to pay economic compensation for three months due to its own reasons, the employee has the right to request the termination of the non-compete agreement. After the agreement is terminated, the employee will not be restricted in choosing a new job. If the company wants to maintain the binding force of the non-compete agreement, it should pay compensation in full and on a monthly basis, and keep records of the payments; if the employee complies with the non-compete agreement, he/she also has the right to actively claim compensation. Note that the maximum duration of the non-compete agreement is two years, and any portion exceeding this period will be invalid.

Q5: What evidence do we need to prepare to hold the leaking employee accountable?

Prepare around four sets of evidence: First, the list of confidential items and their carriers, explaining the content of the information, the form of the carriers, and their confidentiality; Second, evidence of confidentiality measures, including systems, agreements, authorization records, markings, and training records; Third, evidence of infringement, including employee access records, traces of copying and dissemination, comparative analysis of the new employer's products or services, and the flow of customers and orders; Fourth, evidence of losses, including declining sales, R&D investments, clues to the other party's profits, and legal defense expenses such as notarization fees. After preparing all the evidence, proceed along the most favorable path in civil, labor, administrative, or criminal litigation, and combine multiple approaches when necessary.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit.Intellectual property protection legal services·Beijing Henglu Law Firm