China’s Supreme People’s Court Rules Customer Lists are not Trade Secrets
In decision (2019）最高法民再268号 dated December 16, 2019 and just recently published, the Supreme People’s Court of China (SPC) held that customer lists are not trade secrets even with signed confidentiality agreements. One of the defendants, former employees of the plaintiff, Huayang Xinxing Technology (Tianjin) Group Co., Ltd. , left Huayang to start Mai Da Keer (Tianjin) Technology Co., Ltd. after almost 20 years at Huayang. With their departure, the defendants took a customer list containing 43 customers’ data including the customer names, number of sales orders, order dates, product name and specifications, unit price, contact person, telephone number, and address. The SPC reasoned that the customer list was not a trade secret because the names and contact information were easily discoverable with online searching and the other data do not reflect a customer’s purchasing habits nor intentions.
Huayang Company is an enterprise engaged in R&D, production and sales of industrial cleaning and maintenance products. The product range mainly includes cleaning chemicals, lubricants, sealants and other industrial chemicals. Defendant Wang Chenggang joined the Huayang Company in 1996. He served as director, deputy general manager, general manager, and vice president of Huayang Company. From 2012 to 2016, he served as the legal representative of Huayang Company. At the end of October 2015, he founded Mai Da Keer. Co-defendants Zhang Hongxing and Liu Fang were also employees at Huayang and joined Mai Da Keer afterwards.
Despite the SPC’s statement that “[t]his court believes that in the trial of trade secret cases, the people’s courts must strengthen the protection of trade secrets in accordance with the law, effectively stop the violation of trade secrets, create a safe and reliable legal environment for corporate innovation and investment, and properly handle the protection of business,” this case seems to weaken the minimal trade secret protection currently available in China. It would seem that past order information, such as price paid, would be extremely valuable to a competitor as the competitor would know the price needed to undercut competition. Further, past orders may indicate the timing of purchases and therefore customer intent.
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