China Strengthens Trade Secret Protections: Key Developments and Landmark Cases in 2026

 

Key developments of the Provisions

• Expanded Scope and Modernized Definitions
  
  The former rules, promulgated over three decades ago did not expressly address whether data and algorithms qualified as protectable trade secret subject matter. Over time, however, courts gradually recognized that data, algorithms, and similar digital assets could fall within the scope of trade secret protection. Responding to this evolution in judicial practice, Article 5 of the new Provisions for the first time explicitly lists “data, algorithms, computer programs, and code” as protectable subject matter, providing a clear legal basis for safeguarding digital assets such as software source code and production data models.
  
  The Provisions also refine several concepts including “rights holder”, “not known to the public”, “commercial value” etc. For example, “commercial value” encompasses not only direct revenue gains but also cost reductions, shortened R&D cycles, increased transaction opportunities, and reputational advantages. Notably, interim research results and even failed experimental data are now expressly recognised as protectable, addressing a long-standing concern for R&D-intensive enterprises.
  
  
• Strengthened Confidentiality Measures and Employee Management
  
  The Provisions set out a detailed, non-exhaustive list of “reasonable confidentiality measures” that may support a finding that the rights holder has taken appropriate steps to protect the asserted trade secret:
  
  1. entering into confidentiality agreements or incorporating confidentiality obligations into contracts;
  2. imposing confidentiality requirements, through internal policies, training, or written notice, on employees, former employees, suppliers, customers, visitors, and others who may access trade secrets;
  3. prohibiting or restricting access to sensitive premises such as factories, workshops, laboratories, and offices, or implementing zoned management of such areas;
  4. adopting technical confidentiality measures for remote work and cross-border collaboration scenarios, including tiered access controls, data desensitisation, and operational log-keeping;
  5. classifying and managing trade secrets and their carriers through labelling, isolation, encryption, sealing, and restricting the personnel authorised to access them;
  6. prohibiting or restricting the use, access, storage, or copying of computer equipment, network devices, and storage devices that may contain trade secrets;
  7. requiring departing employees to register, return, delete, or destroy any trade secrets and carriers they have accessed, and to continue fulfilling their confidentiality obligations after separation; and
  8. adopting other reasonable confidentiality measures.
  
  The Provisions go beyond traditional measures such as confidentiality agreements, internal policies, staff training, and controlled access to sensitive premises by recognising measures tailored to today’s digital work environment, including tiered access controls, data desensitisation, and operational log-keeping for remote work and cross-border collaboration scenarios.
  
  In essence, not every listed measure is legally mandatory, but whether information qualifies as a trade secret turns on fact-specific and sufficiently concrete confidentiality measures, so employers would do well to draw on the measures above in practice, particularly because courts may reject claims where protections are overly generic or lack targeted controls, such as reliance on a broadly drafted confidentiality agreement alone.
  
  
• Lowered Evidentiary Thresholds and Heavier Penalties
  
  Under the former rules, proving that information was “not obtainable through public channels” imposed an extremely high evidentiary burden on rights holders, causing many cases to be dismissed before reaching substantive review. The Provisions now adopt a more practical standard: information qualifies as “not publicly known” if, at the time of the alleged infringement, it was not “generally known or readily accessible to relevant professionals in the field.” This shift from proving absolute impossibility to demonstrating that the information was not widely known among industry peers, substantially lowers the threshold for initiating enforcement actions.
  
  On the penalty side, the Provisions raise the minimum fine from RMB10,000 to RMB100,000, with a maximum of RMB5 million for serious violations, coupled with mandatory confiscation of illegal gains. This represents a significant escalation from the prior range of RMB10,000 to RMB200,000, aligning administrative penalties more closely with the actual commercial value of misappropriated trade secrets.

 

Punitive Damages Judicial Interpretation

On 17 April 2026, the Supreme People’s Court issued a revised judicial interpretation on punitive damages in IP infringement cases, effective 1 May 2026. The interpretation refines the criteria for establishing “intent” and “serious circumstances.” For example, repeat infringement after a prior settlement, or attempts to evade liability by establishing shell companies or altering corporate structures, now constitute recognised indicators of intent. The interpretation also clarifies that when an infringer’s “main business” consists of infringing activities, courts may use operating profits, rather than net profits, as the calculation base for damages, providing clearer guidance for high-value misappropriation claims.

 

Landmark Cases

Recent model cases published by the Supreme People’s Court and the Shanghai High People’s Court illustrate how courts are applying these strengthened protections in practice.

In one high-profile criminal case, a former department head at a semiconductor company recruited over a dozen colleagues to join a competitor he had newly established, systematically misappropriating proprietary RF chip technology valued at over RMB317 million in assessed licensing fees. The case was selected as one of the Supreme People’s Court’s Model IP Cases of 2025 and was featured among the trade secret protection model cases announced by the Shanghai High People’s Court. The court convicted all 14 defendants and imposed prison sentences of up to six years, with fines ranging from RMB200,000 to RMB3 million, underscoring the severity of coordinated insider theft in the high-tech sector.

In another civil case involving malicious poaching, two companies had previously resolved a trade secret dispute arising from employee recruitment by entering into a settlement agreement. That agreement provided that “neither party shall, directly or indirectly, hire the other party’s current employees, employees who have left within the preceding six months, or employees subject to non-compete obligations.” Despite this, one company systematically hired over 20 departing employees from the other, including department heads and senior technical staff, and actively helped them circumvent their non-compete obligations through tactics such as third-party labour contracts and proxy salary payments. The appellate court reversed the first-instance dismissal, finding unfair competition and awarding RMB1 million in damages.

 

Practical Takeaways for Employers

For multinational employers operating in China, these developments call for a comprehensive review of trade secret governance across the full employee lifecycle, from pre-hire due diligence to in-employment access controls and post-departure monitoring. Key steps include updating confidentiality policy and confidentiality and non-compete agreements to align with the new regulatory definitions, identifying and classifying the specific categories of confidential information that require protection, implementing layered technical and organisational safeguards proportionate to the sensitivity of the information, conducting regular compliance training, and establishing rapid-response protocols for suspected breaches. Employers should also note that enforcement options could extend beyond traditional labour law remedies to include administrative complaints, civil litigation with potential punitive damages, and criminal prosecution for serious cases, providing a multi-track approach to protection and deterrence.