Trade Secret Protection in China

Trade secrets are valuable business assets that require active protection. China has strengthened trade secret laws, but companies must take proper measures to qualify for protection.

What Qualifies as a Trade Secret?

Under Chinese law, trade secrets must have:

• Secrecy: Not publicly known
• Commercial value: Provides competitive advantage
• Confidentiality measures: Owner took steps to protect it

Types of Trade Secrets

• Technical information (formulas, processes)
• Business information (customer lists, pricing)
• Management information (strategies, plans)
• Financial information

Required Protection Measures

Physical Security

• Restricted access areas
• Locked storage for documents
• Visitor controls
• Security cameras

Digital Security

• Password protection
• Access controls
• Encryption
• Audit trails

Contractual Measures

• NDAs with employees
• Confidentiality clauses in contracts
• Non-compete agreements
• Exit procedures

Administrative Measures

• Confidentiality policies
• Employee training
• Document classification
• Need-to-know access

Misappropriation Claims

Types of Violations

• Theft or bribery to obtain secrets
• Breach of confidentiality obligations
• Inducing others to breach
• Using or disclosing stolen secrets

Enforcement Options

• Civil litigation for damages
• Administrative complaints
• Criminal prosecution for serious cases

Proving Your Case

You must show:

• Information qualifies as trade secret
• You took confidentiality measures
• Defendant had access
• Defendant used or disclosed the secret

Damages Available

• Actual losses
• Defendant's profits
• Reasonable royalty
• Statutory damages up to ¥5 million
• Punitive damages (up to 5x) for willful violations

Prevention Best Practices

• Identify and classify trade secrets
• Implement comprehensive protection program
• Regular employee training
• Exit interviews and procedures
• Monitor for potential leaks