Trade secret protection in China

Trade secrets that provide a competitive edge are increasingly vulnerable in a fast-moving, digital-first economy. As China continues to position itself as a global innovation hub and the protection of trade secrets in China is of critical concern. 

Under Chinese laws and regulations, trade secrets, also called commercial secrets, include any technical or operational information that:

• is unknown to the public
• has commercial value
• has confidentiality measures adopted by the owner

All 3 conditions must be met for information to qualify as a trade secret in China. 

Trade secret protection in China is primarily governed by the Anti-Unfair Competition Law, the Civil Code, the Criminal Law, and various administrative regulations and judicial interpretations issued by government bodies and the Supreme Court.

Although China has made strides in strengthening its legal framework for the protection of trade secrets, foreign companies still face significant challenges, including:

• employee mobility and poaching
• strict burden of proof requirements that make it difficult for companies to detect and prove trade secrets theft
• potentially lengthy and costly litigation that discourages many companies from enforcing their rights

Preventing disclosure is the key to protecting trade secrets. Companies should:

• strengthen internal controls
• implement robust confidentiality agreements
• restrict access to sensitive information
• conduct regular employee training

A non-disclosure agreement (NDA) specific to the China market should be signed before sharing any confidential information with potential partners, including distributors and suppliers. 

Engaging legal counsel or other service providers with experience with trade secrets in China is critical. 

China’s State Administration for Market Regulation (SAMR) and other government bodies offer a faster and lower-cost administrative enforcement channel. This is an alternative to pursuing trade secret misappropriation criminally - a strategy can be leveraged when appropriate.