If the alleged infringer provides technical secret information or its carrier to specific or non-specific entities, causing the technical secret to escape the control of the rights holder and become known to others, the People's Court may determine such conduct as constituting disclosure of the technical secret.
In early 2000, U.S.-based Company A developed the "Digital Analogue Knowledge System" (DAKS System). Beijing A1 Company, an affiliate of Company A, was authorized by Company A to use the DAKS System and to pursue legal actions when the DAKS System-related intellectual properties are infringed. In this case, Company A and Beijing A1 Company claimed the technical parameters and engineering data within the DAKS System software (i.e., the technical information at issue) as the trade secret. Wherein, Secret Point 1 was "474 technical parameters (database fields) used to define oil and gas reservoir attribute information in the DAKS System database containing 1,339 oil and gas reservoir data," and Secret Point 2 was "474 technical parameters (database fields) used to define the attribute information of each oil and gas reservoir and their corresponding engineering data in the DAKS knowledge system database containing 1,339 oil and gas reservoir data." From 2009 to 2012, Natural person X was employed by Beijing A1 Company. After leaving Beijing A1 Company, X developed the IRBS System software, which was alleged to contain technical information substantially identical to the technical information at issue in this case. In August 2017, X transferred the IRBS System software to Daqing B Company for a fee of CNY 3.5072 million. Daqing B Company then deployed and operated the system on the website of its wholly-owned subsidiary, Beijing B1 Company. Given these actions, X, Daqing B Company, and Beijing B1 Company were found to have jointly infringed upon the trade secrets at issue. Consequently, Company A and Beijing A1 Company filed a lawsuit, seeking a court order X, Daqing B Company, and Beijing B1 Company to cease the infringement and bear corresponding liability for damages.
On December 27, 2021, the first-instance court rendered its civil ruling, ordering: 1) Beijing B1 Company, Daqing B Company, and X to immediately cease using or permitting any third party to use the technical information at issue owned by Company A and Beijing A1 Company from the effective date of the judgment; 2) Beijing B1 Company and Daqing B Company to jointly compensate Company A and Beijing A1 Company for economic losses totaling CNY 2 million plus reasonable expenses of CNY 600,000 within ten days of the judgment's effective date; and X to be held jointly and severally liable for CNY 1 million of this total amount; and 3) to dismiss all remaining claims by Company A and Beijing A1 Company . Dissatisfied with this ruling, X, Daqing B Company, and Beijing B1 Company filed an appeal. The Supreme People's Court issued its final judgment on December 4, 2023, dismissing the appeal and upholding the first-instance judgment.
The court's effective ruling holds that X had engaged in acts of obtaining, using, and permitting others to use the trade secrets at issue. As for whether Daqing B Company and Beijing B1 Company had committed acts of infringing the trade secrets, the analysis is as follows:
First, Daqing B Company failed to exercise sufficient due diligence during the negotiation and signing of the share purchase agreement for the transfer of the IRBS System software copyright with X. The DAKS database involves a large database composed of technical parameters and engineering data from numerous oil and gas reservoirs worldwide, yet the creator of this database was merely an individual, X. As a professional enterprise specializing in oilfield exploration and development data processing, Daqing B Company should have reasonably doubted X's technical capabilities and the legality of the source of the parameter data in the IRBS System. Had Daqing B Company conducted necessary investigations, it would not have been difficult to discover the close connection between X's former employer "CCAP" and the "C&C" in ’the English abbreviation of Company A. Furthermore, given the high similarity in function, effect, and purpose between the IRBS System software and the DAKS System software, Daqing B Company should have been further alerted to the legality of the source of the relevant parameter data in the IRBS System software. However, Daqing B Company did not conduct further investigations, particularly neglecting to pay attention to the details disclosed in X's resume, and proceeded with the significant transaction of acquiring assets through stock purchase. From the perspective of a reasonable person, it cannot be concluded that Daqing B Company had exercised sufficient due diligence regarding the compliance of this transaction.
Second, after X joined Daqing B Company, Daqing B Company still did not fulfill its obligation to verify the relevant details in X's resume. In the two annual reports released by Daqing B Company in 2016 and 2017, the records of "X's work experience from 2006 to 2016" were clearly inconsistent. Given this anomaly, Daqing B Company, as a listed company, should have questioned whether X had made honest statements, but it failed to conduct further extended investigations into X's personal history. Due to Daqing B Company's failure to conduct necessary extended investigations into X's work experience during this period, it was unable to reasonably suspect whether there was any inherent connection between the IRBS System software and Beijing A1 Company's DAKS System software or whether the allegedly infringing information in the IRBS System software might have been obtained by X through improper means from Beijing A1 Company. Therefore, Daqing B Company's claim that it was defrauded by X and was unaware of the source of the IRBS System software held by X was rejected.
Finally, X contributed the copyright of the IRBS System software to Daqing B Company as a technology investment. Daqing B Company acquired the copyright of the IRBS System software on July 5, 2017, and signed a "Software Product License Agreement" with an oilfield research institute for the IRBS System software on April 24, 2018. Beijing B1 Company is a wholly-owned subsidiary of Daqing B Company. Although the arbitration award submitted by Daqing B Company and Beijing B1 Company during the second instance determined that X had not delivered the complete source code of the IRBS System software to the two companies, this determination was insufficient to prove that Daqing B Company and Beijing B1 Company had not actually used the allegedly infringing information in the IRBS System software. When Daqing B Company should have known that X had infringed the trade secrets of US-based Company A and Beijing A1 Company, it still acquired the copyright of the IRBS System software from X, signed the "Software Product License Agreement" in the name of Daqing B Company, and added IRBS System-related web plugins and login page links to the product introduction page on Beijing B1 Company's website. These business operation activities objectively created a risk of disclosure, whereby the allegedly infringing information in the IRBS System software (which was actually the trade secrets involved in the case) could be accessed or obtained by specific or non-specific members of the public.
Based on the above analysis, it should be determined that Daqing B Company and Beijing B1 Company jointly engaged in acts of disclosing, using, and permitting others to use the trade secrets involved in the case.
(2022) Zui Gao Fa Zhi Min Zhong No. 901
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