Trade secrets represent a vital form of intellectual property and serve as the cornerstone of a company's competitive edge. Strengthening their protection is a critical component of intensifying efforts against unfair competition, playing a significant role in stimulating corporate innovation, improving the business environment, and fostering high-quality economic development in China. Safeguarding trade secrets is fundamentally about protecting innovation itself.
To fully leverage the deterrent and educational impact of typical cases and guide business entities toward fair competition, the State Administration for Market Regulation (SAMR) has publicly released six cases involving the infringement of trade secrets. This column will present these six cases across two installments, with this edition covering the first three cases. Let's take a closer look at the details.
Case One: Shanghai Yangpu District Market Supervision Bureau Penalizes Xuejing Electronic Technology (Shanghai) Co., Ltd., Nanjing Jiulanwen Instrument Technology Co., Ltd., Xu, and Guan for Trade Secret Infringement
The case details reveal that Xu and Guan, former R&D personnel at An Technology (Shanghai) Co., Ltd. (the rights holder) who were privy to the technical secrets of the "Two-Dimensional Gas Chromatograph Solid-State Thermal Independent Modulator" (TIM) and had signed confidentiality agreements, left the company in 2015. They subsequently founded Xuejing Electronic Technology (Shanghai) Co., Ltd. (Xuejing) and Nanjing Jiulanwen Instrument Technology Co., Ltd. (Jiulanwen), continuing to engage in the R&D, production, and sale of solid-state thermal modulators. Between August 17, 2016, and March 26, 2024, the solid-state thermal modulators sold by both Xuejing and Jiulanwen incorporated technical secret information belonging to TIM. Furthermore, the parties involved disclosed TIM's technical secrets to the public by filing for invention patents.
Regarding legal application and penalties, Xuejing and Jiulanwen were found to have violated Article 9, Paragraph 3 of the Anti-Unfair Competition Law of the People's Republic of China (2019 Amendment), while Xu and Guan violated Article 9, Paragraph 1, Item (3) and Paragraph 2 of the same law. On September 15, 2025, after comprehensively considering factors such as the harmfulness of the infringement, its duration, and the extent of damage, the Shanghai Yangpu District Market Supervision Bureau, pursuant to Article 21 of the law, ordered the confiscation of illegal gains of RMB 77,800 and imposed a fine of RMB 730,000 on Xuejing. Jiulanwen faced confiscation of RMB 214,700 in illegal gains and a fine of RMB 770,000. Xu and Guan were each fined RMB 100,000.
In the case analysis, Xu and Guan's actions of leveraging technical secrets obtained before their departure to establish companies and produce infringing products exemplify a typical "individual leakage plus corporate profit" model of trade secret infringement. The enforcement authorities' full-chain accountability approach, targeting both Xuejing and Jiulanwen as well as Xu and Guan, not only penalized the organizers and implementers of the infringement but also severed the interest chains through which individuals or companies sought to evade legal responsibility, creating a powerful deterrent effect. Notably, the authorities did not confine themselves to a single administrative penalty but actively pursued a dual path of promoting settlement and administrative punishment. By establishing a communication platform and organizing ten rounds of negotiations between the parties, a settlement agreement covering compensation amounts and patent ownership was ultimately reached. This enforcement practice demonstrates that resolving disputes through reconciliation is also an effective means of optimizing the ecosystem for trade secret protection.
Case Two: Jiangsu Liyang Market Supervision Bureau Penalizes Xie and Chen for Infringing Trade Secrets in the Heavy Machinery Sector
In the heavy equipment manufacturing industry, core technical drawings are the essential assets for maintaining market competitiveness and constitute typical technical trade secrets. Liyang a Heavy Machinery Co., Ltd. (the rights holder) produces PGS roll crushers and B-series apron feeders, which enjoy high market recognition and strong competitiveness. Between 2019 and 2021, Xie established a company engaged in heavy equipment manufacturing. Lacking the corresponding technical R&D capabilities, he sought illicit gains by illegally obtaining the rights holder's technical secrets through multiple channels. First, he purchased equipment technical drawings from Wang, a former technician of the rights holder. Second, leveraging his external cooperation ties, he requested Chen, the production supervisor of the finishing workshop at a partner unit of the rights holder, to provide equipment technical drawings. Third, he recruited Du, a former assembler of the rights holder, to serve as his workshop director, obtaining relevant drawings through Du. However, the drawings provided by Du were only for equipment shells and did not involve core secret points. Using the illegally obtained core technical drawings, Xie produced and sold five units of similar mechanical equipment. After the case came to light, Xie compensated the rights holder RMB 3.8 million in economic losses, while Chen and Du also paid RMB 100,000 and RMB 50,000 respectively in compensation.
Concerning legal application and penalties, Xie's actions of obtaining and using the rights holder's trade secrets through improper means violated Article 9, Paragraph 1, Item (2) of the Anti-Unfair Competition Law (2019 Amendment). After comprehensively weighing the case circumstances and compensation situation, on January 6, 2025, the Liyang Market Supervision Bureau, pursuant to Article 21 of the law, ordered Xie to cease the infringing activities and imposed a fine of RMB 100,000. Chen's act of disclosing the rights holder's trade secrets to others in violation of confidentiality obligations violated Article 9, Paragraph 1, Item (3) and Paragraph 2 of the law. On the same date, the Bureau ordered Chen to cease the infringing activities and fined him RMB 50,000. Following investigation and appraisal, since the drawings provided by Du fell outside the secret points identified in the rights holder's appraisal application, no administrative penalty was imposed on Du. Wang had already been subject to criminal punishment.
The case analysis highlights that this is a typical multi-party composite trade secret infringement case, breaking away from the conventional single-infringer enforcement model. The authorities clarified the responsibility boundaries across the multi-link leakage chain involving "external operator solicitation - external partner disclosure - departed employee transfer," precisely distinguishing core secret points from non-core information, and imposing differentiated penalties on different parties based on their infringement circumstances. This achieves proportionality between the offense and the penalty, providing enforcement reference for handling similar multi-party trade secret cases. The case also offers guidance for manufacturing enterprises on trade secret compliance management. Companies must establish a comprehensive trade secret protection system, clearly defining the scope of confidentiality and control measures. This involves not only signing confidentiality agreements with internal core-position employees and conducting regular confidentiality training but also incorporating external cooperation units and departed employees into the confidentiality management framework. Improving the full-process control mechanism for confidential materials, building protective barriers from the source, will contribute to the standardized and orderly innovative development of the equipment manufacturing industry.
Case Three: Hangzhou Market Supervision Bureau in Zhejiang Penalizes Sun for Infringing Trade Secrets in the AI Large Model Sector
With the rapid advancement of AI large models and evolving technologies, companies are increasingly inclined to protect new types of technical information, such as prompt engineering and Agent skill packages, through trade secrets. In July 2011, Sun joined a Hangzhou-based AI company (the rights holder) as a senior algorithm expert and remained there until leaving in July 2025. During this period, Sun took full responsibility for leading the R&D of a vertical-domain AI intelligent review model, possessing access to the model's core confidential materials. In December 2023, while still employed, Sun used a spouse's identity to register and effectively control Fayuan (Hangzhou) Technology Co., Ltd. (Fayuan). In June 2024, Sun sent Fayuan's R&D personnel materials including the rights holder's proprietary AI model prompt templates, review rules, and annotation standards for use in developing a similar AI model. Following special deliberation by industry experts, the integrated scenario-based intelligent review solution formed by these materials was determined to possess the characteristics of non-public knowledge, commercial value, and enterprise confidentiality controls, qualifying as a new type of integrated technical trade secret in the AI vertical domain.
Regarding legal application and penalties, Sun, as a core algorithm employee with access to confidential information, had signed a special confidentiality agreement upon joining in July 2011, incurring confidentiality obligations both during and after employment. The act of privately disclosing the rights holder's core confidential materials violated Article 9, Paragraph 1, Item (3) and Paragraph 2 of the Anti-Unfair Competition Law (2019 Amendment). On May 28, 2026, after comprehensive consideration, the Hangzhou Market Supervision Bureau, pursuant to Article 21 of the law, ordered Sun to cease the disclosure and authorized use activities and imposed a fine of RMB 350,000. The trade secret infringement case involving Fayuan was handled separately.
In the case analysis, this represents the nation's first trade secret case involving a vertical AI large model, breaking through traditional enforcement limitations in the AI industry. Past IP rights protection in AI was largely confined to source code confirmation. This case dismantles the industry's "code complex," adapting enforcement perspectives to better suit AI industry characteristics and clearly establishing that natural language-based integrated solutions and non-standard operational rules can independently constitute trade secrets. The handling of this case explores the path for identifying trade secrets in AI non-standard integrated technologies, filling a gap in trade secret enforcement within China's AI industry. It draws compliance red lines for algorithm talent mobility, peer AI R&D, and confidential data management in tech enterprises, thereby supporting the standardized and innovative development of the AI industry.