The Provisions on the Protection of Trade Secrets came into effect on June 1, with data, algorithms, and other important items being included in the scope of trade secret protection, according to a statement on the website of the State Administration for Market Regulation (SAMR). The provisions also list specific technical confidentiality measures for remote work and cross-border collaboration, and clearly specify digital means as improper trade secret infringement. The new rules are suited to the digital era, the SAMR said. It noted that “with the deepening development of the digital economy, digital assets including data, algorithms, computer programs, and codes have become key commercial secrets for businesses. At the same time, emerging infringements such as electronic intrusion and remote data scraping are occurring more frequently.”
Observers noted that amid the rapidly growing digital economy and token economy, under which data and algorithms such as artificial intelligence (AI) model training data, recommendation algorithms, and risk control models, have emerged as the most important competitive advantages for companies, the inclusion of those items within the scope of trade secrets is a necessary and a timely move. Pan Helin, Member of the Information and Communication Economy Expert Committee of the Ministry of Industry and Information Technology (MIIT), told the Global Times that, at present, incorporating algorithms into trade secret protection is difficult because many algorithms operate as black boxes. Taking AI domains as an example, the majority consist of machine-learning algorithms, whose specific details are often hard to articulate. Pan noted that considering all the factors, what is more likely to receive protection under the new provisions is the underlying basic code that constitutes these algorithms, which belongs to the category of intellectual property. “However, the overall move will enable Chinese large-language AI model companies to actively innovate and develop original algorithms, free from the need to rely on following others or using knowledge distillation to build their models,” Pan said.
As a manifestation of enterprises' innovation and competitiveness, trade secrets play a critical role in maintaining the security of industrial and supply chains and fostering new quality productive forces in China. They have become a prominent issue in international economic and trade practices. The rules also introduce new provisions on instigation, inducement, and assistance in infringement, thereby improving third-party liability and achieving full-chain accountability for market violations. In line with the Anti-Unfair Competition Law, the new regulation adds extraterritorial applicability, stipulating that where overseas infringing acts disrupt the domestic market order, Chinese regulators may pursue legal liability in accordance with the law, the SAMR said, as reported by the Global Times.
