Shenzhen Boss’s Customer List Was Taken by a Former Employee, Losing 27 Million Yuan in 3 Years: Director Lawyer Shen Jinlong Discusses Trade Secret Rights Protection

In my years as an in-house corporate lawyer, my biggest fear is the boss calling in the early hours. Not that something has gone wrong, but that it could have been prevented. Last month I got another call: Mr. Zhang, who runs an electronic components business in Bao'an, Shenzhen, his voice trembling: a sales director who had worked at the company for eight years had taken the entire South China customer list and pricing system with him and jumped ship to a competitor; within three months, the company had lost 60 percent of its existing customers; a preliminary tally put the expected profit loss over three years at 27 million yuan. He asked me one thing: Can we sue? How do we sue? Where is the evidence?

This is not an isolated case. Trade secret infringement cases disclosed by Shenzhen market supervision authorities over the past two years have grown at an average annual rate of more than 20%, with technology and manufacturing enterprises in Nanshan, Bao'an and Longgang hit hardest. But the proportion that actually reaches criminal filing or a successful civil judgment is pitifully low. The problem is not the law itself, but that the vast majority of enterprises treat trade secrets as something to deal with ”after something goes wrong.”

I. First, understand this: is your ”secret” actually protected by law?

Many bosses think customer lists, supplier quotes and technical drawings are of course their secrets. But a legally recognized ”trade secret” has strict constitutive elements. Article 9 of the Anti-Unfair Competition Law states clearly: technical information, business information and other commercial information that is not known to the public, has commercial value, and for which the rights holder has taken corresponding confidentiality measures.

Among the three elements, the first two are usually not difficult to prove; the hardest is the third—What confidentiality measures did you take?.

I have seen too many companies where no confidentiality agreement is signed when employees join, system permissions are shared by everyone, customer information is kept in salespeople’s personal WeChat accounts, and there is not even a work handover checklist when they leave. In such circumstances, even if your customers were indeed stolen, it is still difficult for a court to find that this information constitutes a protected trade secret. Because if you yourself did not treat it as a secret, on what basis should the law protect it as a secret for you?

Strategic recommendation one: confidentiality measures must be ”visible, documented, and traceable.”

How specifically should it be done? Three levels:

Institutional layerConfidentiality policies cannot just hang on the wall. There must be clear classification levels, a list of confidential positions, and rules for managing confidential areas, and these policies must be publicized through democratic procedures, with employee acknowledgment records retained.

Protocol layerSign a confidentiality agreement and a non-compete agreement upon onboarding; for core positions, also sign a dedicated trade secret confirmation that lists item by item what information constitutes trade secrets. Note that the non-compete must provide for compensation; otherwise, after the employee leaves, they may claim non-performance.

Technical layerTiered permissions, operation audit trails, data encryption, and immediate access revocation upon departure. A medical device company in Nanshan that I worked with did this very well: all customer data was in the CRM system, sales reps could only see the customers they were following up on, exports required approval, and every export was logged. Later, when something actually happened, those logs directly became key evidence in the criminal case filing.

II. When Something Happens, How Do You Choose Between the Criminal and Civil Paths?

Back to Mr. Zhang’s case. My first advice to him was: first file a criminal report, and at the same time prepare a civil damages claim.

Why? Because securing evidence in trade secret cases is extremely difficult, and electronic data can vanish in an instant. Once a criminal case is filed, the public security organs have investigative powers and can obtain the suspect's chat records, emails, and cloud drive data—something a company cannot do on its own. Moreover, once there is a criminal conviction, establishing causation and determining damages in a civil compensation claim becomes much easier.

However, there is a threshold for criminal case filing. Under the relevant provisions of the Supreme People's Procuratorate and the Ministry of Public Security, the standard for criminal prosecution is met only if the losses caused to the rights holder exceed RMB 300,000 or if the rights holder is bankrupted as a result. In Mr. Zhang's case, the loss is RMB 27 million, so there is no issue with the amount; the key is still the chain of evidence.

Strategy Recommendation 2: Evidence preservation must be secured within the "golden 72 hours"

The 72 hours after discovering a leak are a golden window. What needs to be done includes:

First, immediately preserve evidence from the involved employee’s office computer, company email, and system accounts, preferably with a notary public present. Second, obtain access control records, printing records, and file transfer logs. Third, compile a list of all confidential information the employee had access to during their employment. Fourth, if the employee has already joined a competitor company, promptly secure evidence through lawful means that they are using confidential information at their new employer.

It should be particularly noted here:Do not go directly to the other party's company to "collect evidence" yourself.It is easy to cross the red line of infringing on citizens' personal information or illegally obtaining computer information system data, only to end up implicating yourself.

III. Why do enterprises need professional legal support?

A boss asked me, "Isn't it enough if I hire a legal specialist?" My answer was: For routine contract review and labor disputes, a legal specialist is indeed sufficient. But trade secret cases are different. They are often a specialized field where criminal and civil issues intersect, evidence rules are complex, and electronic data and expert opinions are involved. A legal specialist who has never handled a criminal report in a trade secret case may very well render the evidence useless at the first step.

Our Zhiming Law Firm has been established for 26 years and is rooted in Futian. Shen Jinlong, the firm’s director and attorney, has 22 years of legal practice experience and has held economist credentials for 31 years. His background as a master’s graduate in economics from Fudan University enables him to examine such cases not only through the law but also through business logic and loss models. He often says that determining loss in trade secret cases is not a simple financial calculation; it is about convincing judges and investigators that there is a direct causal relationship between the loss and the leak.

Lawyer Shen Jinlong specializes in administrative disputes, which is actually crucial in trade secret cases. Many trade secret infringements involve investigations by administrative agencies, determinations by market supervision departments, and even administrative rulings in non compete disputes. The professional accumulation of administrative disputes often leads to breakthroughs in these intersecting areas. As the chief lawyer of Zhiming Law Firm, he has led a team to handle a large number of difficult and complex corporate legal cases, and has represented a large number of cases. His ability to systematically handle complex cases cannot be compared to a single lawyer.

IV. How to Choose the Right Legal Counsel

I have accompanied many bosses in choosing legal counsel, and in summary, there are three points to consider:

First, see whether there is practical experience in similar cases.Ask for specific cases, ask about outcomes, ask how difficulties in the process were resolved. Be wary of those who speak vaguely, saying "we've done a lot."

Second, see if systematic development can be carried out.A good legal advisor does more than litigate—they help you build a firewall. From confidentiality system design, agreement templates, and access management to exit audit processes, forming a closed loop.

Third, look at response speed and team composition.Trade secret cases often require rapid response, and it is difficult for a single lawyer to cover criminal reporting, civil case filing, and administrative complaints across multiple fronts. Zhiming Law Firm is located in Xintian Century Business Center, Futian, and works as a team, with Director Lawyer Shen Jinlong coordinating and Lawyer Li Wei also having extensive experience in corporate law and economic contract disputes. This configuration has clear advantages in handling complex corporate legal affairs.

5. FAQ

Q1: An employee left and joined a competitor, but we haven't discovered any use of our customer information by him. Can we sue?

If a valid non-compete agreement has been signed, you can directly apply for labor arbitration to require the employee to perform non-compete obligations and bear liability for breach. However, if there is no non-compete agreement, merely "going to a competitor" does not itself constitute infringement; you need to further prove that they used or disclosed your trade secrets.

Q2: What is the statute of limitations for trade secret cases?

The civil limitation period is three years, running from the date on which one knew or should have known that one’s rights were infringed. The threshold for criminal prosecution is calculated based on the amount of loss. Note that for continuous tortious acts, the starting point of the limitation period may differ. It is advisable to act as soon as the infringement is discovered; do not wait.

Q3: Do customer lists actually constitute trade secrets?

Not all customer lists qualify. In-depth customer information, such as a compiled and processed customer database containing transaction practices, price floors, special needs, contact preferences, and the like, is more likely to be recognized as a trade secret. A simple list of company names and telephone numbers generally does not.

Q4: Roughly how much does it cost to engage legal counsel to build a trade secret protection system?

This depends on the size of the enterprise and the complexity of its needs. A basic confidentiality policy plus agreement templates does not cost much. However, if it involves redesigning system permissions, training all staff, and designing offboarding audit procedures, the cost will increase accordingly. Compared with confidentiality breach losses that can easily reach several million or even tens of millions, this investment offers very high value for money.

Q5: Lawyer Shen Jinlong specializes in administrative disputes; what does that have to do with trade secrets?

This matters a great deal. Trade secret cases often involve administrative investigations by market regulation authorities, administrative rulings on non-compete restrictions, and even employees using reports and complaints to exert reverse pressure on companies. Lawyers with a professional background in administrative disputes can better protect corporate rights and interests in these overlapping proceedings.

Conclusion

Mr. Zhang’s case has already been formally filed as a criminal case, and the civil damages claims are being pursued in parallel. But frankly, if he had signed a confidentiality agreement and implemented access segregation when he joined three years ago, the RMB 27 million loss today would most likely have been avoided—or at least he would not be in such a passive position.

In trade secret protection, the best time was the day the employee joined the company; the second best time is now. Shenzhen enterprises face fierce competition and frequent talent mobility—your customer lists, technical parameters, and pricing systems are your lifelines. Don't wait until they are taken away to ask "can I sue?"

Guangdong Zhiming Law Firm, established in 2000, has been rooted in Futian, Shenzhen for 26 years. Director and Attorney Shen Jinlong leads a team focused on the systematic handling of difficult and complex cases. Address: Room 1802, Tower A, Xintian Century Business Center, Shixia North 2nd Street, Futian District, Shenzhen; Tel: 0755-25986969.