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Trade Secrets Protection in China

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What are trade secrets in China?

According to Chinese law, trade secrets, also called commercial secrets, refer to any technical or operational information which is unknown to the public, has commercial value, and for which the owner has adopted confidentiality measures. To be afforded trade secrets protection, your information must meet all three conditions. In practice, the most common type of trade secrets for Canadian companies are production processes and other forms of technical know-how, but these can also include product pricing information and client lists.

How do I protect my trade secrets?

Trade secrets are valuable insofar as they are kept confidential. Once disclosed to the public, their value cannot be recovered. Trade secrets, in contrast to other forms of intellectual property, cannot be registered or filed with government authorities. Preventing disclosure is therefore the key to protecting trade secrets.

A well drafted non-disclosure agreement (NDA) should be signed before sharing any confidential information with potential partners, including distributors, and suppliers. Due to differences between the Canadian and Chinese legal systems, the standard NDA used in North America may not offer optimal protection in China. Legal counsel with practical experience in Chinese law should be consulted to draft an effective and enforceable NDA in China. 

The majority of trade secrets infringement cases in China involve former or current employees of a company. It is therefore important to consider including non-disclosure and non-competition clauses in employment contracts or signing a separate confidentiality agreement. In addition to contractual protection, companies can establish internal information management procedures to restrict access to confidential information on a need-to-know basis.

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