Learn How to Protect Trade Secrets Correctly - Taking the Dispute Between Forest Cabin and CHANEL as an Example

Beijing YiJu Law Firm Ruoming Mei and Meihua ZHOU  On January 5, a topic # Forest Cabin founder accused Chanel of unfair competition # was trending on Weibo, with as high as 90 million views and more than 3,000 related posts. What triggered such a heated discussion among netizens was a post by Laichun Sun, founder of the domestic skin care brand "Forest Cabin".

On January 3rd, Laichun Sun posted that Chanel, a French perfume and make-up brand, entered in early 2022 the field of red camellia skin care products which Forest Cabin has been engaged for 12 years, and the main functions of the red camellia skin care products launched by Chanel are the same as those of Forest Cabin's products. Chanel also poached a number of first-line employees of Forest Cabin in 2021, and its entry into the field of red camellia products was premeditated! Laichun Sun also said in Weibo that red camellia is mainly distributed in Zhejiang, Jiangxi and other places in China. 90% of red camellia species originate from China, with the remaining 10% from Southeast Asia, Japan and South Korea. There is no such species in Europe and America, and Chanel does not have the genetic conditions to launch red camellia skin care products.

However, some of Laichun Sun's statements were objected to by netizens. Some netizens pointed out that Laichun Sun ought not to accuse Chanel of poaching employees, but to consider such problem from Forest Cabin's own perspective and retain employees by improving salary and otherwise. Some netizens refuted Laichun Sun's statement that Chanel did not have the genetic conditions to launch red camellia skin care products by exposing Chanel's publicity materials on camellia research in southwestern France. Some netizens directly claimed that Forest Cabin was finding fault with Chanel and thus attempted to improve the fame of Forest Cabin. Chanel has never responded to Laichun Sun's statement. From the morning of January 3 to 7, Chanel release seven posts in succession, all of which were just promoting its own red camellia series products.

Many netizens expressed their support for domestic products and chose to stand behind Forest Cabin. They stated that although Chanel is an international brand, as Laichun Sun, founder of Forest Cabin, said, Forest Cabin has been working in the field of red camellia products for 12 years, has dozens of invention patents, and its products have been very popular in China, so Chanel may not necessarily win over Forest Cabin. Moreover, Chanel's poaching of many first-line employees from Forest Cabin was an act of unfair competition, and may have infringed Forest Cabin's trade secrets.

According to China's Anti-Unfair Competition Law, unfair competition acts include fraudulent transactions, commercial bribery, false advertisements, infringement of trade secrets, deceptive sales with prizes, etc. Judging from Laichun Sun's accusation that Forest Cabin's employees were poached, and the fact that Chanel's products featured red camellia ingredients are the same as those of Forest Cabin's products, Laichun Sun's main claim is that competitor Chanel is suspected of infringing Forest Cabin's trade secrets. But up to now, the specific details of the whole incident have not been disclosed too much, and judicial or administrative procedures such as patent infringement litigation and patent invalidation have not taken place between the two parties, so it is impossible to determine whether Chanel has been actually involved in unfair competition for the time being.

However, from the perspective of this incident, both enterprises should know what to do to protect their trade secrets when other enterprises suddenly announce engagement in their own business field and poach their employees in quantity. Unfortunately, as an intellectual property attorney, the author found in the course of years of practices that for most enterprises, trade secrets are both familiar and unfamiliar, both revealable and mysterious, and many enterprises have subjective misunderstanding and objective management problems on trade secrets. To this end, the author summarizes the problems and response programs from the following four aspects for reference by enterprises, so that they can reasonably protect their trade secrets.

1. Enterprises look down on or are not aware of trade secrets. Among the enterprises that the author has dealt with, quite a few enterprises know nothing about the importance of trade secrets or even what trade secrets are. For these enterprises, there may be extremely serious problems in enterprise management. China's Civil Code marks trade secrets, patents and trademarks as important components of intellectual property rights of enterprises. The author thinks that trade secrets, as a type of intellectual property rights, are important intangible property of enterprises. Business owners and middle and senior managers should have a clear understanding of trade secrets, and should engage specialized lawyers to train enterprises on trade secrets.
2. Enterprises think that they have "no" trade secrets. The author finds that some enterprises think that they have no trade secrets nor are they not technology-oriented. In fact, trade secrets include technical secrets and business secrets. Non-technology-oriented enterprises may not have technical secrets, but any enterprise must have its own secrets on business management, such as client information, financial statements, resolutions of shareholders' meeting and even special management methods of enterprises. In this regard, enterprises should systematically check, classify and rate their trade secrets under the guidance of specialized lawyers.

III. Enterprises confuse patents with technical secrets. The author also finds that some technology-oriented enterprises often confuse technical secrets in patents and trade secrets, e.g., "There is no need to be afraid, because Forest Cabin has dozens of invention patents for protection" as stated by Laichun Sun, founder of Forest Cabin, in the long post. There are two ways for enterprises to protect their technological achievements: patents and trade secrets, but there are great differences between them. Patents have the characteristics of openness, strong exclusiveness and duration, while trade secrets have the characteristics of secrecy, weak exclusiveness and indefinite duration. The function of enterprises' patent rights is to prohibit others from implementing their own patented technologies without permission. However, when the technical secrets of enterprises are infringed, it is difficult to seek protection through patents. Therefore, the author believes enterprises should protect their trade secrets through a dedicated platform for right verification evidence preservation, so as to provide sufficient evidence to safeguard their own rights and interests through legal channels when their trade secrets are infringed.

1. Enterprises have difficulties in the management of trade secrets. The author also finds that although some enterprises have the knowledge of trade secrets, they are always troubled by the management of trade secrets. Confidentiality measures adopted by enterprises are the statutory constitutive requirements of trade secrets, which include various related management measures on documents, personnel and regions, etc. However, activities such as making external publicity, developing contracts staff dimission of enterprises are numerous and complicated, which would easily lead to loopholes in the management of trade secrets, therefore they should engage specialized lawyers to conduct examination of their trade secrets, and then systematically manage trade secrets under the guidance of lawyers in combination with their own characteristics.