China’s Threshold for Criminal Trade Secret Misappropriation to Drop to 300,000 RMB

Share Post:

On September 13, 2020, China’s Supreme People’s Court and Supreme People’s Procuratorate released the Interpretation on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Infringement of Intellectual Property Rights (3) (关于办理侵犯知识产权刑事案件具体应用法律若干问题的解释(三)) effective September 14, 2020.  One of the key highlights in this Judicial Interpretation is the reduction in the threshold for criminal misappropriation of trade secrets.  Previously, the threshold was 500,000 RMB (~$73 thousand USD) and will now be 300,000 RMB.

Some of the other highlights include:

Article 1 clarifies that “the same trademark as the registered trademark” as stipulated in Article 213 of the Criminal Law includes:

(1) Changing the font, letter case, or the horizontal and vertical arrangement of the registered trademark is basically indistinguishable from the registered trademark;
(2) Changing the spacing between the words, letters, numbers, etc. of the registered trademark so that there is basically no difference between it and the registered trademark;
(3) Changing the color of the registered trademark does not affect the distinctive features of the registered trademark;
(4) Only adding the generic name and model of the product to the registered trademark;
(5) There is basically no difference from the three-dimensional mark and flat elements of the three-dimensional registered trademark;
(6) Other trademarks that are basically indistinguishable from registered trademarks and are sufficiently misleading to the public.
Article 3 clarifies that “other improper means” as stipulated in the first paragraph of Article 219 of the Criminal Law includes bribery, fraud, electronic intrusion, etc., to obtain trade secrets.
Article 4, besides lowering the criminal threshold for trade secret theft also specifies other potential thresholds including:

(2) Directly causing the owner of the trade secret to go bankrupt or go bankrupt due to major business difficulties;
(3) Causes other major losses to the owner of the trade secret.
Further, where the amount of loss caused to the owner of a trade secret or the amount of illegal gains due to infringement of the trade secret is more than 2.5 million yuan, it shall be deemed as “causing particularly serious consequences” as stipulated in Article 219 of the Criminal Law.
Article 5 specifies that the amount of loss or the amount of illegal gains caused by trade secret theft can be determined based on a reasonable licensing fee for the stolen trade secret, profit loss due to the theft, or the commercial value of a trade secret, which can be determined based on the research and development costs of the trade secret and the benefits of implementing the trade secret.
Article 7 specified that equipment used in the manufacture of counterfeit products should be destroyed. Destruction can be delayed until after civil or administrative trials if needed as evidence therein.
Articles 8 and 9 specify when harsher and more lenient penalties should be imposed. Harsher penalties should be imposed when:
(1) The defendant is mainly engaged in infringement of intellectual property rights;
(2)Defendants were already administratively punished for infringement of intellectual property rights;
(3) During the period of major natural disasters, accidents, disasters, and public health events, the defendant counterfeited the registered trademarks of commodities such as rescue and disaster relief, epidemic prevention materials, etc.;
(4) Refusing to hand over the illegal gains.
Leniency should be provided when:
(1) The defendant pleads guilty;
(2) Obtaining the understanding of the right holder;
(3) Those showing repentance;
(4) The trade secrets of the right holder have not been disclosed, used or allowed to be used by others after obtaining the right holder’s trade secrets by improper means.
Article 10 specifies that fines (in addition to prison)  are generally determined at more than one time and less than five times the amount of illegal gains with a maximum of 5 million RMB (~$731 thousand USD).
The full text is available here (Chinese only).

Author: Aaron Wininger

Aaron Wininger is a Senior Attorney and Director of China Intellectual Property at Schwegman Lundberg & Woessner.

One thought on “China’s Threshold for Criminal Trade Secret Misappropriation to Drop to 300,000 RMB”

Leave a Reply

Author: Aaron Wininger

Aaron Wininger is a Senior Attorney and Director of China Intellectual Property at Schwegman Lundberg & Woessner.