In the past three years we handled several significant trade secret theft and disclosure cases for some industry leading clients in China. Customer list is one of the key kind of trade secrets for those clients in service and production industries. In China the customer list must meet certain criteria to be considered a trade secret thus entitled to protection under the PRC Anti – Unfair Competition Law (“AUCL”).
Companies invest significant time and resources toward creating and maintaining customer lists. Customer lists are often among the company’s most valuable assets and significant intellectual property, because it usually takes time and efforts to compile, organize, and analyze large amounts of customer data – including contact information, personal information, products, marketing materials, social media information, purchase history, buying preferences, and more. Such data can be crucial for maintaining current customer relationships and soliciting prospective business relationships.
Apart from the three aspect requirements secrecy, commercial value and confidentiality, how to decide and what kind of customer information could be categorized as trade secret in China?
Below are tips summarizing from precedent cases that elaborate what specific type of customer information meeting the criteria of trade secret under China practice.
The object of trade secret protection is information, and the customer list should also be defined as a kind of information being derived from the specific customer in the commodity or service area.
Sometimes when the customer list often represents business opportunity or trust relationship, the plaintiff often confuses it and requests the court to protect the business opportunity and the trust relationship as the trade secret. However, business opportunities and trust relationships are not objects of trade secret protection hence incapable of being protected under AUCL.
The information itself is intangible but is always fixed in the form of a certain carrier. In the trade secret infringement case, the plaintiff, in order to prove that the information he claims is trade secret, shall submit the information carrier as evidence to the court.
In practice, the carrier which can directly prove the content of the customer list should be submitted as evidence in proof; if the evidence of the customer relationship is reflected only by submitting the transaction voucher and the like, there will be a high likelihood of failure in the lawsuit.
The value of customer list is that it can bring competitive advantage to the right owner. Therefore, the information embodied in the customer list should not only be the usual name, contact information, but must include specific customer demands, trading habits, operation details, price affordability and other in-depth customer information. If the plaintiff only provides the customer name and contact information, there will be a high risk of losing the case.
The stronger the stability of the customer information, the more prominent its commercial value, the greater protection will be provided to the customer list. In judicial practice, the identification of customer list does not lie in its quantity, but in its quality. In some cases, although the right owner only provides one customer information in the customer list, it is also recognized by court as trade secret. On the contrary, if the customer information provided by the plaintiff is only reflected in short-term, one-off business transactions, it may easily lead to case defeat.
