CHINA Law and Practice Contributed by: Chuanhong Long, Huiqing Wang, Yingying Shen and Fan Li, CCPIT Patent and Trademark Law Office
5.2 Reasonable Measures and Confidentiality The owner must take confidentiality measures that are reasonable under the circumstances. Chinese prac- tice does not require absolute secrecy, but it does require measures showing a genuine intention to keep the information confidential and restricting access in a meaningful way. Typical measures include confiden- tiality agreements, confidentiality clauses in employ- ment and commercial contracts, internal policies and training, confidentiality markings, access controls, password protection, document classification, visitor controls, limits on copying and downloading, and exit procedures for departing employees. Disclosure to employees does not automatically destroy trade secret status, provided access is limited on a need-to-know basis and the employer imposes confidentiality obligations through contract, policy, or other management measures. Likewise, disclosure to licensees, suppliers, joint venture partners, or other third parties does not necessarily defeat protection if the disclosure is controlled and subject to confiden- tiality restrictions. By contrast, public disclosure, or disclosure without meaningful confidentiality controls, may destroy secrecy and therefore protection. Accidental disclosure is not automatically fatal in every case, but the rights-holder should act quick- ly to contain the disclosure, demand confidentiality undertakings where possible, and prevent further dis- semination. The practical question is whether, after the disclosure event, the information still remains “not known to the public”. 5.3 Misappropriation of Trade Secrets Under Article 10 of the Anti-Unfair Competition Law, misappropriation includes acquiring a trade secret by theft, bribery, fraud, coercion, electronic intrusion, or other improper means; disclosing, using, or allowing others to use a trade secret obtained by such means; and disclosing, using, or allowing others to use a trade secret in breach of a confidentiality obligation or the rights-holder’s confidentiality requirements. The law also expressly covers inducing, encouraging, or help- ing another person to breach a confidentiality obliga- tion or the rights-holder’s confidentiality requirements.
Employee disputes are a common form of trade secret litigation in China. A departing employee who takes confidential files, customer data, technical docu- ments, source code, or manufacturing know-how to a new employer may face both contract-based claims and trade secret claims. The new employer may also be liable if it knew, or should have known, that the information came from improper acquisition or breach of confidence. The same legal framework generally applies to dis- putes involving competitors, distributors, suppliers, and joint venture or co-operation partners. The key issues are whether the information qualifies as a trade secret, whether reasonable confidentiality measures existed, how the defendant obtained the informa- tion, and whether the defendant’s use or disclosure was unauthorised. China also recognises defences such as independent development and reverse engi- neering, although reverse engineering will not help a defendant who first obtained access through improper means or breach of confidentiality. 5.4 Duration and Loss of Protection Trade secret protection in China has no fixed statutory term. It lasts as long as the information continues to satisfy the legal requirements for trade secret status, especially secrecy and commercial value, and as long as the owner continues to maintain reasonable confi- dentiality measures. Protection is lost when the information ceases to be secret, for example because it becomes publicly known through publication, unrestricted disclosure, market disclosure, or other public dissemination. Authorised disclosure under an NDA or other con- trolled confidentiality arrangement does not by itself terminate protection. The decisive issue is whether the information remains outside the public domain and Civil remedies are available. A trade secret owner may seek an injunction to stop disclosure, use, or further misappropriation, and may also seek damages. Dam- ages may be calculated based on the rights-holder’s actual loss, the infringer’s gain, or, where those are difficult to prove, statutory damages within the range under effective confidentiality control. 5.5 Enforcement and Remedies
41 CHAMBERS.COM
Powered by FlippingBook