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.
Civil Procedure Law Article 112
Meaning
Located within the general provisions on civil litigation conduct, statutory restraint targets parties who fabricate legal disputes or forge evidence to infringe upon the legitimate rights of others. Chinese judges apply Civil Procedure Law Article 112 to dismiss collusive lawsuits where suppliers and buyers stage fake contract defaults to shield factory assets from legitimate creditors. The court voids fraudulent claims while imposing fines or detention on participating corporate officers.
Legal proceedings under this article protect judicial integrity and third-party property rights.
Litigation Malpractice
Sham litigation occurs when colluding parties file pre-arranged lawsuits to obtain court-mediated settlement agreements or consent judgments. Offending enterprises use simulated equipment purchases or staged supply failures to create artificial liabilities. These artificial liabilities are then converted into enforceable court judgments that take priority over bona fide trade creditors during asset execution.
Factory assets or manufacturing equipment are transferred to friendly entities through court-sanctioned enforcement proceedings. Judicial scrutiny focuses on unusual concessions made during early mediation sessions, unexplained absences of arms-length contract negotiations and complete lack of pre-litigation commercial disputes between the opposing parties.
Judicial Sanction
Judicial panels impose monetary penalties up to one million yuan on corporate entities found violating statutory litigation standards. Individual representatives face administrative detention up to fifteen days alongside personal fines reaching one hundred thousand yuan. Where fraudulent filings involve substantial asset values, judges transfer case records to public security organs for criminal prosecution under penal provisions governing litigation fraud.
Dismissal of the fraudulent civil claim occurs immediately upon confirmation of collusive intent.
Administrative Intercept
Administrative findings of bad-faith litigation trigger notifications to market supervision authorities and credit reporting systems. Corporate credit profiles record statutory sanctions, restricting access to commercial banking facilities and land bidding procedures. Sanctioned corporate officers face restrictions on serving as legal representatives across other registered companies.