A Voice from China: Unraveling the Different Standards for Civil and Criminal Misappropriation of Trade Secrets

In China, victims of trade secret misappropriation suffering losses over RMB 500,000 are entitled to file a civil action and may also report the case to public security authorities to initiate a criminal investigation. (For more of our coverage about trade secrets protection in China, click here). When both criminal and civil actions are pending, a Chinese criminal court tends to use the civil decision, if available, as the basis of proving the crime of trade secret misappropriation as long as the damages requirement is met. In Maige Kunci Co., Ltd. v. Suzhou Ruitai New Metal Co., Ltd. (regarded as one of the top 10 Chinese IP cases in 2014) however, the Jiangsu High People’s Court specifically ruled that the standard of proof in a civil action is high degree of probability, which is lower than the standard of proof in a criminal action–beyond all reasonable doubt. Thus, the civil wrongful act does not necessarily secure that the burden of proof for the criminal action will be met even if the damages threshold is satisfied.

In China v. Wang Zhijun, the court held that the standard of beyond all reasonable doubt was satisfied since the alleged software and customer lists marked with the victims’ names were found in the defendant’s company, which clearly showed that the information commercially used by the defendant did belong to the victim. If the case is in a civil court, however, under the lower standard of high degree of probability, the court may find the defendant misappropriating trade secrets as long as (1) the alleged software and customer lists, even without being marked with the plaintiff’s name, are identical with or similar to the plaintiff’s trade secrets; (2) the defendant has access to such trade secrets; and (3) the defendant fails to prove that the information used by the respondent was legally obtained.

In China, civil cases of trade secret misappropriation are usually under the jurisdiction of intermediate people’s courts while criminal actions of which are tried by the local people’s courts. Being at the lower courts, criminal judges often consult civil judges for the corresponding civil actions in the higher courts and follow their recommendations in order to make a consistent decision. In these circumstances, a criminal judge at a lower court has a tendency to use the civil decision as the basis of his or her criminal decision in the trial of a trade secret misappropriation criminal case.

This practical approach has long been criticized of ignoring the difference of the standards of proof existing between civil and criminal actions. With more scholars proposing to change the practice and more judges realizing the problem, this improper judicial practice may be about to change.