Calculating Trade Secret Damages in Chinese Courts
Chinese courts calculate trade secret damages through actual losses, infringer profits, or license multiples, applying apportionment and punitive multipliers up to five times base losses.
Adverse Inference Rule
Meaning
Shift of factual presumption in Chinese civil litigation penalizes a party that refuses to produce court-ordered evidence within its exclusive control. Chinese courts execute the adverse inference rule under Supreme People’s Court judicial interpretations when a defendant withholding financial ledgers or technical schematics prevents accurate damages calculation. The judge accepts the moving party’s factual assertions regarding profits or technical specs as true.
Unreasonable non-compliance converts a claimant’s reasonable estimate into established facts.
Procedural Trigger
Issuance of a formal document production order precedes any application of judicial evidentiary sanctions. Litigants must first demonstrate that specific accounting books or manufacturing logs exist inside the opposing party’s facilities. Moving parties present purchase orders or customs clearance declarations to substantiate the existence of withheld materials.
Judges grant specific production deadlines before drawing negative conclusions. Failure to comply without legitimate justification allows courts to treat contested facts as proven.
Evidentiary Burden
Claimants retain the initial obligation to establish a preliminary showing of liability and economic scale before seeking evidentiary sanctions. Submitting preliminary proof of commercial distribution or factory output shifts the duty of production to the possessor of internal operational records. Factory managers cannot evade compliance by claiming internal business secrecy when protective confidentiality orders are available.
Judicial Presumption
Judicial discretion governs the scope of facts presumed true following an unexcused failure to produce court-ordered records. Courts limit adverse assumptions to facts directly related to the withheld documentation rather than issuing blanket judgments on all contested issues. Where a defendant refuses to disclose sales volumes, judges adopt the highest credible sales figure established by the plaintiff’s market evidence.
Administrative penalties imposed by market supervision bureaus for withholding records operate independently from civil evidentiary presumptions. Presumed profit margins remain subject to judicial adjustment when external industry data indicates physical impossibility.