In trade secret cases, “corresponding confidentiality measures” are a core statutory element for establishing the existence of a trade secret, and “manifesting the right holder’s clear intention to maintain confidentiality” is one of the key points in determining whether the confidentiality measures are effective. Confidentiality measures must clearly convey the right holder’s intent to maintain secrecy, enabling any party accessing the confidential information or its carriers to clearly perceive the existence of a confidentiality obligation. In practice, numerous disputes over trade secrets revolve around whether the measures taken by the right holder genuinely reflect their confidentiality intent—if the measures do not clearly indicate a confidentiality purpose or fail to convey such intent, even if they formally resemble confidentiality measures, they cannot be recognized as “corresponding confidentiality measures.” This article, drawing on typical cases from the Supreme People’s Court, will focus on dissecting the criteria for determining “confidentiality measures must reflect the right holder’s confidentiality intent” and common practical misconceptions, providing targeted guidance for right holders to standardize confidentiality practices and prevent related legal risks.

I. Case Information

Case Number: (2020) Supreme People’s Court IP Civil Final No. 538

Case Name: A Testing Technology Company v. A Electromechanical Technology Company (Dispute over Infringement of Technical Secrets)

II. Adjudication Summary

Where a technical secret is embodied in a product circulated in the market, the right holder’s act of affixing a label to the product, making a unilateral declaration regarding the technical secret, and prohibiting third parties not bound by a confidentiality agreement from disassembling the product does not constitute a confidentiality measure as defined by the Anti-Unfair Competition Law.

III. Case Brief

The plaintiff, A Testing Technology Company, alleged that its developed testing instrument contained technical secrets unknown to the public and that it had implemented a series of confidentiality measures that, under normal circumstances, were sufficient to prevent the disclosure of confidential information. The defendant, A Electromechanical Technology Company, maliciously initiated civil litigation and, through litigation preservation procedures, illegally obtained the above technical secrets and applied them in its own inspection instrument products. The plaintiff therefore requested a judgment: (1) ordering the defendant to cease infringing upon the plaintiff’s technical secrets and to destroy any illegally obtained photos, videos, and related materials involving the technical secrets; (2) ordering the defendant to eliminate the adverse effects and make a public apology in relevant newspapers; and (3) ordering the defendant to bear the litigation costs. The defendant argued that its disassembly and photography of the plaintiff’s testing instrument under court supervision were carried out for legitimate purposes in litigation, using lawful means, and did not constitute infringement of technical secrets.

The court found that the plaintiff claimed to have implemented reasonable confidentiality measures both “internally” and “externally” for the alleged technical secrets. To prove “internal confidentiality measures,” the plaintiff submitted its “Company Confidentiality Management System,” “Labor Contracts,” “Enterprise-Employee Confidentiality Agreements,” “Non-Compete Agreements,” and “Cooperation Confidentiality Agreements.” To prove “external confidentiality measures,” the plaintiff submitted an “Equipment Purchase and Sale Contract” with a third-party pharmaceutical company. The contract stated, “Unless otherwise agreed, the supplier’s provision of products under this contract shall not be deemed a transfer of any intellectual property rights owned or controlled by the supplier that are contained in such products,” and “From the date the buyer signs for the supplier’s goods (including but not limited to the trial period), the buyer is obligated to ensure the security of the technical confidential information of the supplier’s goods, and all technical confidential information shall not be provided to any third party (including but not limited to the supplier’s competitors). Any breach shall require the buyer to bear economic compensation of no less than 50% of the total contract price and joint and several legal liability. Technical confidential information includes product photos, component photos, component materials, component models, software photos, software test modes, software operations, liquid crystal displays, manuals, packing lists, and all other products and materials provided by the supplier.” Court personnel, along with staff from the plaintiff, went to the third-party pharmaceutical company to conduct evidence preservation of the plaintiff’s testing instrument. A label was affixed to the middle of the back cover of the testing instrument, stating: “Danger! Disassembly voids warranty!” Another label was affixed at the junction of the back cover and the bottom, stating: “XXX Quality Assurance. Tampering voids guarantee.” The Jinan Intermediate People’s Court of Shandong Province rendered a civil judgment on January 6, 2020: dismissing the plaintiff’s claims. After the judgment was pronounced, the plaintiff appealed, arguing that it had taken reasonable confidentiality measures. The Supreme People’s Court issued a civil judgment on December 14, 2020: dismissing the appeal and affirming the original judgment.

IV. Court’s Opinion

The “external confidentiality measures” claimed by the plaintiff either were only binding on the counterparty to the contract and not on unspecified third parties, or did not reflect the plaintiff’s confidentiality intent; therefore, they did not constitute “corresponding confidentiality measures” as defined by the Anti-Unfair Competition Law. On one hand, although the plaintiff stipulated in the equipment purchase contract with the third party that the transfer of the testing instrument did not entitle the customer to any intellectual property rights and that the customer was obligated to ensure the security of the technical confidential information and not provide it to any third party, this agreement only bound the customer and not unspecified third parties. Moreover, the contract did not restrict the customer from disposing of or transferring the purchased products, so unspecified third parties could acquire the product through market circulation and were not bound by the contract. On the other hand, although a label was affixed to a specific location on the testing instrument, the content—“Danger! Disassembly voids warranty!” and “XXX Quality Assurance. Tampering voids guarantee”—constituted safety warnings and product repair warranty notices, neither of which constituted confidentiality measures aimed at protecting secrecy. Therefore, the plaintiff’s claimed “external confidentiality measures” did not meet the requirements of “corresponding confidentiality measures” under the Anti-Unfair Competition Law.

V. Attorney Analysis

The adjudicative logic of this case indicates that the determination of confidentiality measures requires examining whether the measures reflect the right holder’s confidentiality intent. First, the core of confidentiality intent is “clarity”; it must convey a signal that “this information requires confidentiality” to the person accessing it through specific, identifiable measures. Formalistic actions or unilateral declarations alone cannot manifest such intent. According to the Anti-Unfair Competition Law and relevant judicial interpretations, the primary criterion for the effectiveness of confidentiality measures is whether the right holder has expressed a clear intention to maintain confidentiality through those measures and whether the person accessing the confidential information or its carrier can clearly perceive the confidentiality obligation. In this case, although the plaintiff claimed to have implemented both “internal” and “external” confidentiality measures, the actual measures failed to effectively reflect its confidentiality intent. Regarding external measures, the labels affixed to the testing instrument only stated “Danger! Disassembly voids warranty!” and “XXX Quality Assurance. Tampering voids guarantee.” These contents solely pertained to product safety warnings and quality guarantees, with the core purpose of restricting product repair and warranty-related conduct. They did not mention anything related to “technical secrets” or “confidentiality,” making it impossible for any person (including customers and potential third parties) accessing the product to realize that the product contained technical information requiring confidentiality, and thus could not convey the right holder’s confidentiality intent.

Second, even if a right holder makes a unilateral confidentiality declaration, without reasonably reinforcing the transmission of confidentiality intent, it cannot be deemed that effective confidentiality measures have been taken. In practice, some right holders mistakenly believe that a “unilateral confidentiality statement” fulfills their confidentiality obligations. However, as this case demonstrates, such a unilateral declaration, without clear indicative content and effective binding methods, cannot reflect genuine confidentiality intent. In this case, even though the plaintiff claimed a subjective confidentiality intention, it failed to translate that intention into identifiable measures. On one hand, while the equipment purchase contract with the third party contained provisions on intellectual property and technical information protection, those provisions primarily bound the counterparty’s use of intellectual property rights, did not explicitly mention “confidentiality” obligations, and did not clearly inform the counterparty that “the product contains technical secrets requiring confidentiality,” making it impossible for the counterparty to perceive its confidentiality responsibilities—thus failing to reflect the right holder’s confidentiality intent. On the other hand, for unspecified third parties who might access the product, the plaintiff did not adopt any clear confidentiality indication measures, neither marking confidentiality-related content on the product nor otherwise informing third parties that the product contained technical secrets, so that unspecified third parties could not know that the product they accessed required confidentiality, further demonstrating the failure to convey clear confidentiality intent.

This case fully illustrates that “reflecting the right holder’s confidentiality intent” is a core prerequisite for effective confidentiality measures. Measures lacking clear confidentiality intent, regardless of their formal completeness, may be deemed not to constitute “corresponding confidentiality measures” under the Anti-Unfair Competition Law. This also reminds right holders that when adopting confidentiality measures, they must transform their confidentiality intent into specific, identifiable actions: whether through product carrier markings, contractual provisions, or internal management, they must explicitly mention “confidentiality” related content, clearly inform the person accessing the information that it is a trade secret requiring confidentiality, and enable that person to clearly perceive the right holder’s confidentiality intent. Only then can it be determined that effective confidentiality measures have been taken, and legal protection of trade secrets can be achieved. Conversely, if only formalistic measures without clear confidentiality direction are adopted, even if the right holder has a subjective confidentiality intention, those measures cannot be recognized as effective confidentiality measures, ultimately failing to obtain legal protection for trade secrets.

VI. Extended Cases

1. Zhang Peiyao, Hui Deyue, Jiangsu Funing County Dust Removal Equipment Plant v. Suzhou Nanxin Cement Co., Ltd. (Dispute over Infringement of Trade Secrets and Compensation for Property Damage) [Supreme People’s Court (2000) IP Final No. 3]

If a right holder claims that technical information constitutes a trade secret, it must prove that it has taken reasonable confidentiality measures. If the right holder neither clearly indicates the existence of a technical secret in an agreement with the counterparty nor agrees on confidentiality obligations, and does not adopt other effective confidentiality measures, thereby failing to enable the counterparty to realize that the product it possesses or uses contains a technical secret, it cannot be deemed to have taken corresponding confidentiality measures, and the claimed technical information does not constitute a trade secret.

Case Brief: On December 4, 1996, Funing Dust Removal Plant and Suzhou Nanxin Cement Co., Ltd. entered into an agreement, under which Funing Dust Removal Plant was to provide one LZ-2 vertical kiln wet dust collector to Nanxin Cement Company at a cost of 290,000 yuan. If, after commissioning, the dust emission concentration did not fall below 150 mg/Nm³, Nanxin Cement Company would not pay and the equipment would still belong to Funing Dust Removal Plant. Upon removal of the equipment, Funing Dust Removal Plant was required to restore Nanxin Cement Company’s system to its original state. After installation, multiple tests showed that the equipment did not meet the agreed standard, so Nanxin Cement Company did not pay, and later the Suzhou Arbitration Commission ruled to terminate the agreement. Subsequently, Nanxin Cement Company, in order to install new dust removal equipment, repeatedly urged Funing Dust Removal Plant to determine a removal date, but without result, and eventually dismantled part of the dust collector equipment on its own. The technology related to the LZ-2 vertical kiln wet dust collector was transferred to Funing Dust Removal Plant by Zhang Peiyao, with the technical ownership belonging to Zhang Peiyao. In 1999, Zhang Peiyao, Hui Deyue, and Funing Dust Removal Plant sued Nanxin Cement Company for damages, alleging that the company’s self-dismantling of the equipment resulted in the disclosure and loss of the trade secret. The court dismissed their claims.

Court’s Opinion: The appellee obtained the dust collector through the December 4, 1996 agreement with Funing Dust Removal Plant, meaning it lawfully possessed and used the dust collector containing the technical information the appellants sought to protect. There was no contractual or other direct legal relationship between the appellants and the appellee. Therefore, whether the appellants took confidentiality measures for the relevant technical information should be assessed by examining whether Funing Dust Removal Plant included confidentiality obligations in its agreement with the appellee and whether other confidentiality measures were taken during the performance of the contract. The content of the agreement did not state that the dust collector contained technical secrets, nor did it contain any confidentiality clause. The agreement stipulated that the relevant process layout construction drawings, detailed equipment lists, and technical descriptions required the appellee’s approval before execution, but again with no confidentiality obligations. The appellants argued that the agreement’s reference to the dust collector as a “Chinese patent product” constituted a confidentiality measure, but this was clearly unfounded under the law. Since Funing Dust Removal Plant did not appropriately indicate whether the dust collector provided to the appellee contained technical secrets, the confidentiality measures claimed by the appellants could not lead an ordinary business operator to reasonably conclude that the product it possessed or used contained technical secrets. For the appellee, there were no reasonable confidentiality measures in place.

2. Chemical Industry Ministry Nantong Synthetic Material Plant, Nantong Zhonglan Engineering Plastics Co., Ltd., et al. v. Nantong Wangmao Industrial Co., Ltd., Chen Jianxin, et al. (Dispute over Infringement of Technical Secrets) [Supreme People’s Court (2014) Civil Third Instance (IP) Final No. 3]

If the confidentiality measures claimed by a right holder are routine management measures in production and operation, and there is no evidence that the purpose of implementing those measures is related to confidentiality, so that they cannot reflect the right holder’s confidentiality intent, they cannot be recognized as “corresponding confidentiality measures” under the Anti-Unfair Competition Law.

Case Brief: Synthetic Material Plant, Star Company, and Zhonglan Company sued Wangmao Company and five natural persons (including Chen Jianxin) for infringement of technical secrets, claiming that 155 formulations for modified PBT, related processes, and 53 customer lists were trade secrets. They requested an injunction and damages of 45 million yuan. The five defendants had previously worked for the three appellants and after resigning joined Wangmao Company to produce similar products. The court of first instance found that the claimed information did not constitute trade secrets and dismissed the complaint. The Supreme People’s Court held that the three appellants had not taken reasonable confidentiality measures for the claimed information and dismissed the appeal, affirming the original judgment.

Court’s Opinion: The three appellants argued that recording technical information such as formulations on “mixing sheets” and “batching sheets,” conducting batching and mixing in separate areas, and using letters and numbers to refer to formulations all constituted confidentiality measures. The court held that mixing and batching are two distinct processes, and the measures claimed by the appellants were routine measures that might be adopted in production activities. These measures could be for the purpose of facilitating production and management, or they could be based on confidentiality or other purposes. Since the appellants did not provide evidence that the purpose of adopting these measures was related to confidentiality, the mere existence of these measures alone made it difficult to conclude that Zhonglan Company had taken reasonable confidentiality measures for the claimed information.

VII. Legal Documents

1. Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Involving Infringement of Trade Secrets [Fa Shi [2020] No. 7]

Article 5 Reasonable confidentiality measures taken by a right holder before the occurrence of the alleged infringing act to prevent the disclosure of a trade secret shall be recognized by the people’s court as the corresponding confidentiality measures referred to in Article 9, Paragraph 4 of the Anti-Unfair Competition Law.

The people’s court shall determine whether the right holder has taken corresponding confidentiality measures based on factors such as the nature of the trade secret and its carrier, the commercial value of the trade secret, the identifiability of the confidentiality measures, the degree of correspondence between the confidentiality measures and the trade secret, and the right holder’s confidentiality intent.

Article 6 Under any of the following circumstances, where under normal circumstances it is sufficient to prevent the disclosure of a trade secret, the people’s court shall find that the right holder has taken corresponding confidentiality measures:

(1) Entering into a confidentiality agreement or agreeing on confidentiality obligations in a contract;

(2) Proposing confidentiality requirements to employees, former employees, suppliers, customers, visitors, etc., who can access or obtain the trade secret through articles of association, training, rules and regulations, written notices, etc.;

(3) Restricting visitors or separately managing confidential factory buildings, workshops, and other production and operation premises;

(4) Distinguishing and managing the trade secret and its carriers by means of marking, classification, isolation, encryption, sealing, limiting the scope of persons who can access or obtain them, etc.;

(5) Adopting measures such as prohibiting or restricting the use, access, storage, or copying of computer equipment, electronic equipment, network equipment, storage equipment, software, etc., that can access or obtain the trade secret;

(6) Requiring departing employees to register, return, clear, or destroy the trade secrets and their carriers they have accessed or obtained, and to continue to assume confidentiality obligations;

(7) Adopting other reasonable confidentiality measures.

2. Guidelines of the Jiangsu Provincial High People’s Court, Jiangsu Provincial People’s Procuratorate, and Jiangsu Provincial Public Security Department for Handling Criminal Cases Involving Infringement of Trade Secrets

(V) Determination of “Corresponding Confidentiality Measures”

1. General Approach. The determination of whether a right holder has taken corresponding confidentiality measures shall be made in light of factors such as the nature of the trade secret and its carrier, the commercial value of the trade secret, the identifiability of the confidentiality measures, the degree of correspondence between the confidentiality measures and the trade secret, and the right holder’s confidentiality intent. Confidentiality measures generally should be capable of preventing the trade secret from being obtained by others, but perfection is not required; the measures should enable the person assuming confidentiality obligations to be aware that the relevant information requires confidentiality.

Where a right holder adopts confidentiality measures only after a period of time following the formation of the information, a strict review shall be conducted based on the specific circumstances of the case. In the absence of evidence to the contrary that the information has already been disclosed, the confidentiality measures may be deemed to have been established.

3. Determination of General Confidentiality Clauses. The content of the trade secret required to be kept confidential should generally be specific and clear. However, confidentiality measures that only impose general confidentiality requirements through confidentiality agreements, confidentiality clauses, labor contracts, rules and regulations, etc., without specifying the specific information to be kept confidential, should not be categorically denied. The determination must be made in conjunction with factors such as whether the suspect or defendant actually knew that the information they accessed or obtained was a trade secret, whether they used improper means, and the likelihood of actual disclosure of the relevant information.

Under any of the following circumstances, a general confidentiality clause may be deemed as an effective and reasonable confidentiality measure:

(1) The right holder later explicitly informed the suspect or defendant during the course of work that the relevant information was a trade secret;

(2) Based on the principle of good faith, the nature and purpose of the contract, the contracting process, trade practices, etc., the suspect or defendant knew or should have known that the information they accessed or obtained was a trade secret;

(3) The suspect or defendant intentionally used improper means to obtain the information claimed for protection by the right holder, or disclosed, used, or allowed others to use the information obtained by improper means, and there is no evidence that the information had been publicly disclosed before.

3. Trial Guidelines of the Jiangsu Provincial High People’s Court for Civil Disputes Involving Infringement of Trade Secrets

2.6 Principles for Determining Confidentiality Measures

Reasonable confidentiality measures taken by a plaintiff before the occurrence of the alleged infringing act to prevent the disclosure of a trade secret shall be recognized as the corresponding confidentiality measures referred to in Article 9, Paragraph 4 of the Anti-Unfair Competition Law.

The court shall determine whether the plaintiff has taken corresponding confidentiality measures based on factors such as the nature of the trade secret and its carrier, the form of existence, the commercial value of the trade secret, the identifiability of the confidentiality measures, the degree of correspondence between the confidentiality measures and the trade secret, and the plaintiff’s confidentiality intent.

The following factors may be considered in reviewing the reasonableness of confidentiality measures:

(1) Effectiveness: The confidentiality measures adopted by the plaintiff must be commensurate with the subject matter to be protected, with the standard being that without improper means or breach of agreement, others would find it difficult to obtain the information.

(2) Identifiability: The confidentiality measures adopted by the plaintiff, under normal circumstances, should be sufficient to make the counterparty realize that the information requires confidentiality.

(3) Appropriateness: The confidentiality measures should be commensurate with the level of protection that the information itself requires to achieve confidentiality. This must be determined on a case-by-case basis. Generally, the principle of appropriateness does not require that confidentiality measures be foolproof.

Where a plaintiff adopts confidentiality measures only after a period of time following the formation of the information, a strict review shall be conducted based on the specific circumstances of the case. In the absence of evidence to the contrary that the information has already been disclosed, the confidentiality measures may be deemed to have been established.