Navigating the Minefield of Trade Secrets Protection in China

Many Multinational Companies (MNCs) now consider trade secrets to be the most important intellectual property right in China, ahead of patents, trademarks, and copyrights. While trade secrets have become more valuable than ever as a business asset in China, many MNCs also find that the protection of trade secrets in China is full of pitfalls and traps. Unlike in the case of patents, trademarks, and copyrights, China has no unified law governing trade secrets, but has disjointed provisions scattered throughout various laws. The pitfalls are also created by a high evidentiary burden in proving a theft of a trade secret that many MNCs find difficult to meet. China places an emphasis on documentary proof of the theft of the trade secret, which can be difficult to obtain. A comparison of the enforcement of trademarks in China with the enforcement of trade secrets illustrates how much more difficult it is to enforce trade secrets. In addition, MNCs that attempt to enforce their trade secrets can find themselves caught in risky and dangerous entanglements with Chinese enforcement authorities. These enforcement authorities often demand illegal payments as a price of enforcement. While these enforcement problems admit of no easy solutions given the realities of China’s current trade secrets legal regime, many of these problems can be avoided altogether if MNCs implemented some simple advanced planning and preventative measures. MNCs should invest in these preventative measures that, if carefully implemented, can avoid the traps in China’s murky enforcement regime while at the same time protect valuable confidential and propriety information of the company.