Overview of Trade Secret Protection in China

Author: Ma Ning (马宁) ; Source:chinalawinfo.com

　　Whether foreign company operates as wholly foreign-owned enterprises (WFOEs) or sets up joint ventures ("JV") with local partners in China, foreign companies should take a series of steps to protect their trade secrets in the workplace.

　　--Companies should timely identify their trade secrets and review who has or could have access to them;

　　--Companies should control access to trade secrets by implementing proper security measures and restricting access to relevant computers and equipment, documents and areas. Documents and materials that are trade secrets should be labeled so;

　　--Companies would do well to impose a strong and clear contractual obligation on employees at EACH level to protect the firm''s trade secrets. Upon hiring, companies should ask each employee to sign an agreement that confirms the employee''s obligation to protect the firm''s trade secrets. For certain level employees, non-competition clause with reasonable reimbursement may be included in the NDA or labor contract.

　　Many trade secret disputes occur after an employee "in the know" leaves the company, and increasing reports showed more employers are considering to seek criminal remedies against those employees in bad faith. Despite this, some judgements illustrate lots of employers misusing their bargaining power are not supported by the courts in terms of the enforcebility of non-competition clause.

　　Furthermore, when resolving a trade-secret-related infringement dispute, courts in China use a quasi-official body of experts to certify whether the information in dispute qualifies as a trade secret and whether the accused defendant or product has copied the secret. The opinion or conclusion of this panel of experts is officially nonbinding on the courts, but is highly persuasive, if not determinative. The reliability of such conclusion, however, is often undermined due to corruption.

　　Last but not the least, the injunctive relief is not applicable to trade secrets-related case in China.