The use of interim injunctions in protecting trade secrets

New products, new processes and business information are the foundation on which an enterprise continues to grow, and enterprises generally invest a great deal of manpower and resources in protecting trade secrets so as to keep their competitive edge. Coca-Cola, for instance, has held an important market position for a very long time, very largely because its unique formula is kept in the closest secrecy. Protection of trade secrets is therefore steadily strengthening throughout the world, and the interim protective measure long used in trade secret litigation is the interim injunction.

1. The interim injunction in the protection of trade secrets: an outline

A trade secret bears the characteristic of being lost for ever once it is lost. The rights holder generally seeks damages, but damages are a remedy after the event, and by that time the trade secret has in a sense already leaked to a greater or lesser degree. For an important trade secret, therefore, keeping it from leaking and from being unlawfully used by others should come first. The remedy of an injunction for trade secrets arose accordingly.

The remedy of injunction for trade secrets originated in England at the beginning of the nineteenth century and was subsequently applied more widely in the United States. Chinese scholars take a trade secret interim injunction to mean that where the rights holder or an interested party has evidence that another is committing or is about to commit an act infringing its trade secret, and that failure to stop it promptly would cause losses to its lawful rights and interests that would be difficult to make good, it may, before bringing proceedings, apply to the People's Court for an order to stop the infringing act and for property preservation.1 Other scholars hold that an interim injunction means a compulsory measure applied for by the rights holder to the court before proceedings are brought or before judgment, ordering the respondent not to commit or to cease committing the relevant infringing act, so as to prevent loss that would be difficult to make good or to preserve the substantive rights and obligations between the parties as they stand.2

The interim injunction is widely used abroad chiefly because it can fill the gap in the protection of rights.

A trade secret dispute is generally brought when the right is faced with, may be, or has been infringed, and because such disputes are highly specialist and complex they often run through a long litigation cycle. Without a timely interim injunction, the rights holder cannot promptly stop the disclosure of the trade secret. An interim injunction can also require the infringing act to stop earlier, so that it is checked in time and the loss of the injured party is reduced as far as possible.

2. The use of the interim injunction in China

1. Interim injunctions in the General Principles of Civil Law

Under article 162 of the notice of the Supreme People's Court on issuing the Opinions on Several Issues concerning the Implementation of the General Principles of Civil Law of the People's Republic of China (for trial implementation), where in the course of proceedings there is a need to stop an infringement, remove an obstruction or eliminate a danger, the People's Court may, on the application of a party or ex officio, make a ruling in advance.

2. Interim injunctions in the field of intellectual property law

After China joined the WTO, and to meet the requirements of the TRIPS Agreement, China successively provided in article 66 of the Patent Law,3 article 65 of the Trademark Law4 and article 50 of the Copyright Law5 that the rights holder may, before bringing proceedings, apply to the People's Court for an order to stop the relevant act, so establishing in outline the system of pre-litigation injunctions in the intellectual property field. On 7 June 2001 the Supreme People's Court issued the Provisions on Several Issues concerning the Application of Law to Pre-litigation Orders to Stop Infringement of Patent Rights, which laid down rules on pre-litigation orders to stop patent infringement.

3. Interim injunctions in trade secret disputes

The Anti-Unfair Competition Law as newly revised, in force from 1 January 2018, contains no provision on interim injunctions. Whether an interim injunction applies to trade secrets in China, and the specific standard for applying the rules on it, have yet to be unified in judicial practice.

The author considers that an interim injunction can effectively prevent the rights and interests of the rights holder or an interested party from being further infringed, and that the institution has been applied to a considerable extent in the United States, the United Kingdom, Japan, Germany and other countries. Where a trade secret is infringed, therefore, the rights holder or an interested party may apply to the court for an interim injunction to prevent further infringement. Under the legal norms at present in force in China, the legal basis for seeking an interim injunction in a trade secret dispute is article 162 of the Supreme People's Court's Opinions on Several Issues concerning the Implementation of the General Principles of Civil Law (for trial implementation). On 12 June 2001 Cao Jianming, then Vice-President of the Supreme People's Court, said at the national conference on intellectual property adjudication: "Where a party applies, when bringing proceedings and during the proceedings thereafter, for an order to stop infringement of a patent right, the relevant provisions of the Supreme People's Court's Provisions on Several Issues concerning the Application of Law to Pre-litigation Orders to Stop Infringement of Patent Rights may be applied; where the application is to stop other acts infringing intellectual property, a ruling to stop the infringement, remove the obstruction or eliminate the danger may, under article 162 of the Opinions on Several Issues concerning the Implementation of the General Principles of Civil Law (for trial implementation), be made in advance on the party's application and enforced, so as to protect the lawful rights and interests of the intellectual property owner in accordance with law." The author accordingly considers that there is a legal basis for applying an interim injunction in trade secret disputes in China.

By reference to the Patent Law, the Trademark Law and the Copyright Law and to the Provisions on Several Issues concerning the Application of Law to Pre-litigation Orders to Stop Infringement of Patent Rights, an application to the court for an interim injunction should satisfy the following conditions:

(1) The applicant

The applicant for an interim injunction over a trade secret should be the rights holder or an interested party.

(2) Urgency

The rights holder or interested party has evidence that another is committing or is about to commit an act infringing its right.

(3) The possibility of loss

Whether the rights holder or interested party faces irreparable loss is crucial to whether the court will issue a pre-litigation injunction, and the principle rests on the same legal foundation as domestic property preservation. Because a pre-litigation interim injunction is a temporary remedy designed to strengthen the protection of the rights holder, it inevitably comes into some conflict with the principle of due process; only where the applicant can prove that the loss is irreparable may the judge, in weighing the advantages and disadvantages, sacrifice the procedural protection of the respondent, for otherwise the institution of the interim injunction would be devoid of fairness.6

(4) The application must be made to a court with jurisdiction

In sum, a trade secret plays a key, even decisive, part in the sustained development and operation of an enterprise, and the sensible use of the interim injunction can effectively prevent an enterprise's trade secrets from being further infringed.

[1] Hu Zhenyuan, "The standard for applying interim injunctions in intellectual property cases". [1] Hei Xiaobing, "Interim injunction relief for trade secrets" [J], Intellectual Property Law Studies, 2004, (12).

[2] Long Zhuhua, "On the application of interim injunctions in protecting trade secrets in service outsourcing" [J], International Economics and Trade Research, 2013, (10).

[3] Article 66 of the Patent Law: where the patentee or an interested party has evidence that another is committing or is about to commit an act infringing the patent right, and that failure to stop it promptly would cause losses to its lawful rights and interests that would be difficult to make good, it may, before bringing proceedings, apply to the People's Court for a measure ordering the cessation of the relevant act. The applicant shall provide security when applying; where no security is provided, the application shall be dismissed.

[4] Article 65 of the Trademark Law: where the registered proprietor of a trademark or an interested party has evidence that another is committing or is about to commit an act infringing its exclusive right to use the registered trademark, and that failure to stop it promptly would cause losses to its lawful rights and interests that would be difficult to make good, it may, in accordance with law, before bringing proceedings, apply to the People's Court for measures ordering the cessation of the relevant act and for property preservation.

[5] Article 50 of the Copyright Law: where the copyright owner or a rights holder related to copyright has evidence that another is committing or is about to commit an act infringing its right, and that failure to stop it promptly would cause losses to its lawful rights and interests that would be difficult to make good, it may, before bringing proceedings, apply to the People's Court for measures ordering the cessation of the relevant act and for property preservation.

[6] Hu Zhenyuan, "The standard for applying interim injunctions in intellectual property cases".