Article 24

Penalty Framework

Financial consequences for the infringement of proprietary information are structured to provide both a deterrent effect and a means of restitution. When article 24 is applied, the regulator assesses the severity of the illegal act based on the duration of the infringement and the amount of profit gained by the violator. The law allows for fines between one hundred thousand and one million yuan in standard cases, but this can rise to five million yuan for particularly grave circumstances.

This sliding scale ensures that the punishment is proportional to the scale of the commercial harm. In addition to the administrative fine, the infringing party may be held liable for civil damages in a separate court proceeding. The total financial impact on a company can be substantial, affecting its capital reserves and future operational viability.

Regulators also have the power to confiscate the illegal gains derived from the use of the stolen secret. This comprehensive approach aims to remove the profit motive from intellectual property theft.

Administrative Discretion

Regulatory officials possess the authority to determine the specific level of punishment within the ranges established by the national law. In exercising this power under article 24, the market supervision bureau considers the cooperation of the infringing party and whether they have taken steps to mitigate the damage. A company that voluntarily discloses its infringement or provides evidence against other participants may receive a reduced penalty.

Conversely, attempts to conceal evidence or repeat violations lead to harsher sanctions at the top end of the legal scale. The exercise of this discretion must follow the principles of fairness and transparency, with the agency providing written reasons for its decision. Foreign enterprises must navigate these administrative processes carefully, often providing technical experts to explain the value of the secrets involved.

The decision of the regulator can be challenged through administrative appeals, but the findings of fact regarding the infringement are often given significant weight. This discretionary power allows the state to respond flexibly to different types of commercial misconduct.

Liability Boundary

Statutory limits on the application of penalties ensure that the enforcement of the law remains focused on intentional or negligent misconduct. Article 24 does not apply to situations where a company independently develops a similar technology or uses reverse engineering on a product lawfully obtained in the market. The liability is also confined to those parties who knew or should have known that the information was obtained through illegal means.

This knowledge requirement is a critical boundary that protects innocent third parties who may have unknowingly acquired a secret. When a consultant or an employee brings a secret to a new firm, the firm itself is only liable if it failed to conduct proper due diligence. The law also establishes a limitation period for the imposition of administrative penalties, typically two years from the discovery of the act.

These boundaries provide a degree of legal certainty for businesses as they hire staff and acquire technology. The judicial system serves as the final arbiter of whether an administrative penalty under this article has exceeded its lawful scope.