The Supreme People's Court recently made a final ruling on a dispute over infringement of technical secrets, revoked the first-instance court's ruling to dismiss the prosecution on the grounds of repeated prosecution, and ordered the first-instance court to try the case. This case has certain reference significance for how to determine whether repeated prosecution occurs when the same right holder files a lawsuit over infringement of intellectual property rights and a lawsuit over infringement of technical secrets against the same infringer.

This case clarifies that Article 24 of the Judicial Interpretation of Supreme People's Court on Several Issues Concerning the Application of the Anti-Unfair Competition Law of the People's Republic of China mainly solves the problem of substantive determination to prevent infringers from bearing double civil liability in intellectual property infringement lawsuit and anti-unfair competition lawsuit, but is not the basis for a ruling to dismiss the lawsuit. Applying this article generally should result in a judgment to reject the plaintiff’s litigation claims.

A Zhejiang company complained to the court of first instance that its former employee Cao, who participated in the development of computer software for an intelligent speech recognition system (the "Infringed Software ") and had access to the source code of the software during his employment with the Zhejiang company, took a job at a Hangzhou company, and certain computer software ("the alleged Infringing Software") sold by this company was highly similar to the Infringed Software. The Zhejiang company believed that Cao and the Hangzhou company had jointly infringed on the technical secrets it owned. It filed a lawsuit requesting the court of first instance to order Cao and the Hangzhou company to immediately stop infringing on the technical secrets and bear joint liability for damages.

While the Zhejiang company sued Cao and the Hangzhou company for infringement of technical secrets, it also sued Cao and the Hangzhou company in the court of first instance for infringement of its rights to reproduce and modify the Infringed Software.

The court of first instance, upon trial, held that in the computer software copyright infringement lawsuit, it had been determined that some source code files of the alleged Infringing Software were similar to the source code files of the Infringed Software; since the relevant dispute in this case would be handled in the computer software copyright infringement lawsuit, a ruling was made to dismiss this trade secret infringement lawsuit of the Zhejiang company in accordance with the provisions of Article 24 of the Judicial Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Anti-Unfair Competition Law of China. The Zhejiang company was dissatisfied and appealed.

The Supreme People's Court held in the second instance that the focus of the dispute in this case was whether this case constituted repeated prosecution and whether the court of first instance should conduct a substantive trial of the case.
As for whether this case constitutes repeated prosecution, according to the provisions of Paragraph 1, Article 247,  of the Judicial Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, determination shall be made by comparing the parties, claims, and subject matters of the litigation in the previous and subsequent lawsuits and examining the impact of the res judicata of the previous lawsuit on the subsequent lawsuit, while the similarities and differences in the subject matter of the litigation shall be determined by analyzing the similarities and differences in the causes and facts, and the situation where the judgment result of the subsequent lawsuit negates the judgment result of the previous lawsuit shall be avoided.

First of all, although the dispute over infringement of technical secrets in this case and the dispute over infringement of computer software copyright in the other case involve the same parties, and the claims are basically the same, the causes and facts of the two cases, that is, the alleged infringement behaviors, are different. The alleged infringement in this case is that Cao violated his confidentiality obligation by disclosing, using and allowing the Hangzhou company to use the technical secrets of the Zhejiang company, and that the Hangzhou company knew that Cao violated his confidentiality obligations but still obtained and used the technical secrets of the Zhejiang company. In the other case, the alleged infringement is that Cao and the Hangzhou company reproduced and modified the copyrighted software without the authorization of the Zhejiang company. Therefore, the subject of litigation in this case is different from that in the other case.

Secondly, the two lawsuits filed by the Zhejiang company are based on different rights, so there is no possibility that the result of the subsequent lawsuit would negate the result of the previous lawsuit. In this case, the Zhejiang company claimed rights based on the technical secrets it owned, while in the other case, it claimed rights based on its ownership of the computer software copyright, and thus the corresponding rights and obligations of the parties are different. Therefore, no matter whether Cao and the Hangzhou company are determined to infringe the technical secrets, it will not conflict with the judgment result of the other case. That is to say, the substantive judgment of this case will not lead to the situation where "the judgement result of the subsequent lawsuit negates the judgement result of the previous lawsuit". In summary, this case does not constitute repeated prosecution.

Regarding whether the court of first instance should conduct a substantive trial of this case, Article 24 of the Judicial Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Anti-Unfair Competition Law of China stipulates that for the infringement committed by the same infringer against the same subject at the same time and within the same geographical scope, if the people's court has determined that the copyright, patent or exclusive right of a registered trademark has been infringed and ordered it to bear civil liability, and the party concerned requests the same infringer to bear civil liability against on the grounds that the act constitutes unfair competition, the people's court shall not support it. This provision mainly aims to clarify the relationship between specialize intellectual property laws and the anti-unfair competition law, and to solve the issue of determining duplicate civil liability. That is to say, where the court has determined infringement and ordered the infringer to bear civil liability in accordance with the relevant specialized intellectual property laws, if the party concerned requests the infringer to bear civil liability again on the grounds that the same infringement constitutes unfair competition, the court shall make a judgment to reject the party's litigation claims.

Whether Cao and the Hangzhou company are determined to be infringers in the computer software copyright infringement lawsuit does not affect the trial and determination of whether technical secrets have been infringed in this case. As for whether there is possibility that double civil liability is borne, it must be determined after a substantive trial. Therefore, the court of first instance should conduct a substantive trial on the litigation claims of the Zhejiang company.

 -- (2023) Zui Gao Fa Zhi Min Zhong No. 240

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