How to Identify Customer Listas Business Secret?

The former employer’s customers are solicited by the employee by utilizing its Customer List ( “CL”) after he/she has made a job-hopping, which is a common occurrence. Some of those former employers have tried to sue the employees for Infringement of Business Secret by the evidence of CL, but the courts seldom support their claims.

Article 10 of “Anti-Unfair Competition Law of PRC” (“AC LAW”) has stipulated that the business secret (“BS”) includes technical information and business information (“BI”). In accordance withArticle 2 of “Several Provisions on Prohibiting Infringements upon Business Secrets”, BI mainly includes, management secrets, CL, information about resources, production and sales strategies, bottom price of a bid, contents of a bidding document, and etc.,” which means CL belongs to BI as specified in AC LAW. However,if CL can be identified as BS, it shall fulfill the requirementsspecified in Article 10 of AC LAW. The requirements are, a) secrecy, which means it shall be unknown by the public; b) utilization, which means it can create business interests or profit for the obligee; c) confidentiality, which means it shall be maintainedsecrecy by the obligee.

For secrecy,because the information stated in CL, including name, address, telephone No. etc. can be obtained through public channel, such as internet, the specific case shall be analyzed based on the contents of CL and other details. Article 13 of “Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition” (“Interpretation” )stipulates the basic principle to identify CL, “CL among BS generally refers to the customer’s special information that is different from related public information, including the name, address, contact information, business habits, intentions, and contents of the customers and comprise the name roll of customers that collects lots of customers as well as the specific customers that have kept a long-term and stable transactionrelationship.” In view of this, if the employerwants to identify C L as BS, CL shall include the special BI, such as the concrete needs of customers, the price strategy, and etc., (Quoted from Civil Judgment“(2006)HuErZhongMingWu(IP)ChuZiNo.310” ) .

For utilization, it means that the informationof CL shall have practical or potential commercialvalue, and can be used for enhancing the competitive advantage for the obligee. Therefore, if the obligee has changed its business items and the customers base, or terminated the business relationship with the customerstated in CL, before CL be disclosed, these informationwill not be identified as BS.

For confidentiality, CL is the working object for the employees working in marketing, sale or customers service Dept., how to take appropriate protecting measures is a difficulty in the identificationof BS. The company can take measures from the following two aspects: a) setting up and improving the management system on BS during the daily management; b) making the reasonable agreement or contract with employees,such as non-solicitationagreement.

Nevertheless, as an exception, Item 2, Article 13 of “Interpretation” stipulates, “In case a client develops market transactions with the entity due to relying on an employee thereof, after this employee leaves his post, if it can be proved that this client voluntarily chooses to perform market transactions with the said employee or the new entity he works for, it shall be ascertained that no unfair methods has been adopted, unless otherwise stipulated between this employee and the former entity.” If the former employer has not made a specific agreement with the employee, this action shall not be deemed as the infringement of BS when the customer develops market transactions with the employee or his/her new employerdue to relyingon this employee.