trade secrets in China

Had a telephone conversation with a client today (yes I am working today) regarding the steps it should be taking to protect its trade secrets in China.  Client is an American company that has been doing business in China for nearly a decade but is “for the first time being forced by its competition to bring over its good stuff to China.”

Strangely enough, this was the first time a client has asked me this question, at least in this form.  I am often asked to draft a contract that contains a trade secret provision and we are constantly drafting Non Disclosure Agreements designed to protect trade secrets.  But this question went beyond that.  The question was directed at all of the methods, both legal and non-legal, this client should employ to protect its trade secrets.

I thought for a while (and checked the notes from a speech I recently gave on protecting IP from China) and eventually spewed forth with the following five keys to China trade secret protection (or something fairly close):

1.  First thing you must do is figure out what you want to protect.

2.  Second thing you must do is figure out how your trade secrets can be taken and what you can do to protect them.  This involves answering a number of questions.  Does it make sense to have your suppliers/vendors sign a code of conduct or a contract making clear that they recognize and will protect your trade secrets?  What operational structures can you put in place (anywhere along the chain) to protect your trade secrets?

3.  Make sure your contracts provide trade secret protection.  In particular, look at your employment and sub-contracting agreements.  Make sure that these contracts safeguard your trade secrets both during the business relationship and after the relationship terminates — you would be surprised at how many contracts seem to end with the termination of the business relationship.

4.  Make sure that all of your people understand the importance of protecting your trade secrets. I don’t have any hard numbers on this, but if I had to guess, I would say that well over half of all trade secret thefts come from your own people and well over half of those come from sloppiness.  It is your job to make sure that you are employing the right personnel, and using the right physical and technical security measures to prevent leakage of trade secrets.  Do the same thing with your suppliers and anyone else that has access to your trade secrets.  Make sure to do whatever you can to ensure that your trade secrets remain a secret even after your business relationships end.  Go ahead and remind your former business partners and employees of the requirement to maintain your trade secrets.

5.  Don’t be afraid to sue to protect your trade secrets.

Did I miss anything?

What do you think?