The rise of trade secret litigation in China

Our research over recent years reveals a steady rise in trade secret litigation in firms’ submissions. The practice has matured to the point where certain lawyers have earned strong reputations, with peers readily citing them as “trade secret experts” during our calls. Some attorneys are keen to enter this space; as one patent lawyer observed, “many want to brand and label themselves as trade secret specialists.”

This shift is not merely about self-promotion — it reflects an evolving legal landscape. “Trade secret litigation is booming,” one source confirmed, adding: “Rights holders are finding that suing infringers isn’t as difficult as it once was. Article 32 is now applied with far greater flexibility.”

The “Article 32” aforementioned refers to the 2019 amendment of the PRC Anti-Unfair Competition Law. When the interviewee noted that litigation is “not as hard as” before and the law is applied “with more flexibility”, they were primarily referring to how this key change shifts the burden of proof away from right holders. Under this amendment, alleged infringers are now required to provide evidence of non-infringement, a development that clearly encourages right holders to take action. Another incentive lies with the scale of damages. In the landmark case Geely v WM Motor, Supreme People’s Court ruled in 2024 to award Geely CNY640 million. Such unprecedented awards, echoed in other trade secret cases, send a clear signal to market players: trade secret litigation is an increasingly powerful tool for protecting intellectual property rights.

Beyond the EV disputes mentioned earlier, there has been a surge of cases in fast-evolving sectors where innovation is crucial for a company’s survival.

Recent examples include the high-profile lawsuit in which Elon Musk accused OpenAI of misappropriating trade secrets, and the China-US case where Beijing E-Town sued Applied Materials over core semiconductor processes. Similarly, in the life sciences sector, a New Zealand-based company pursued legal action against a former employee who went on to establish a business in Wuhan, China.

In sectors such as AI, semiconductor and life sciences, new and cutting-edge technology is a company’s most important and valuable asset. Trade secrets offer a unique and distinct advantage in intense competition because they can be protected indefinitely — so long as they remain confidential. This absence of a time limit enables a company to maintain their market edge for years.

One market source noted: “The economy is gloom and global competition is fierce, thus companies need to use IP rights as a tool to defeat their competitors.” Echoing this observation, our guide has seen tremendous growth on the contentious side of intellectual property practice. Compared to our first independent Greater China Region Guide 2022, the submission number of IP has increased by 125% and ranked law firms and lawyers on the litigation side alone have increased by 60% and 229% respectively.

Shifting from the macro-economic environment level to local level, competition is intensifying. Companies are battling to attract talents in the race for technological supremacy. Historically, disputes arising from talent-related issues were primarily treated as employment matters. Organisations would accuse rivals of poaching key personnel and employers might sue departing employees if confidential information and trade secrets were misappropriated. These dispute points are increasingly falling under the trade secret category. Whether it is a code of an AI model, a drug formula, a mechanical design or a specific dataset for a digital application, such technical assets are the life-or-death factors to a company’s survival. In this climate, trade secret litigation has become one of the vital tools for businesses to safeguard their innovation and prevent their competitive edge from walking out the door with departing employees.

Another lawyer on the call stated: “Not only in civil law but in criminal law, trade secret protection is being stressed.” Several factors allow criminal proceedings to be effective in technology protection, such as heavier penalties, wider circumstances to trigger prosecution and the fast-reacted police department, suggesting criminal proceedings are an effective technology protection mechanism. This primarily influences employee behaviour. For instance, an employee contemplating copying documents to a portable device before their employers must think twice. Likewise, defence lawyers now face higher stakes as clients risk imprisonment. In one case, lawyers representing a start-up founder who had stored technology drawings from a former company expressed concerns in a call with us over the severity of such matters, nothing that “they involved criminal charges.”

The rapid growth of trade secret litigation is only a glimpse into China’s fast evolving legal environment. China’s commitment to technology protection continues to strengthen. A leading lawyer in this practice said: “The legislation is more friendly to right holders and the market is improving.” This reassures technology developers that they are well-prepared to safeguard their valuable assets.