The other day, I and another China lawyer from my law firm were talking with a very sophisticated client about protecting his company’s intellectual property in China. We went through the usual litany of options, starting with trademarks, copyrights, and patents, and then we started discussing the importance of not neglecting “less sexy” protections, such as non disclosure agreements (NDAs) and trade secret contracts.
We then talked about how we typically recommend that NDAs (we call them NNN Agreements because in addition to non-disclosure provisions we view it as critical to include non-compete and non-circumvent provisions as well) and trade secret agreements be in Chinese, call for application of Chinese law, and provide for jurisdiction in China courts, particularly for actions requiring injunctive relief. We also noted how we usually want to add a provision stating how protection of the confidential information requires more than just damages, so as to make it easier to seek injunctive relief. By way of a very brief explanation, injunctive relief is when a court orders a party to do something other than pay damages. For example, if you have an ex-employee who has taken your customer list upon termination from your company, you might seek injunctive relief to require this employee to return the list to you and destroy any copies. Our view is that if someone is stealing your IP in China, you do not have time to sue in the United States or in Europe and then take that judgment/award back to China for enforcement (assuming that would even be possible).
The client then commented how this was all well and good, but “everyone knows” the Chinese courts never grant injunctive relief. I told him I knew that not to be true because I personally was aware of cases where such relief had been granted and it was “my sense” that Chinese courts were becoming more comfortable with this sort of remedy. I then talked about how even if the chances of injunctive relief were low, the cost-benefit analysis of putting in such provisions mandated we do so. He agreed with this.
Rouse’s most recent China Intellectual Property Express newsletter (h/t to Duncan Bucknell’s absolutely excellent IP Think Tank Blog which I pretty much read cover to cover this morning because I just could not stop) has a short piece entitled, “Use of injunctions on the increase in Chinese Courts” [link no longer exists] noting the following:
According to statistics from the Supreme People’s Court, 430 applications for preliminarily injunctions were accepted by Chinese Courts between 2002 and 2006. Of these, 83% resulted in the grant of a preliminarily injunction or similar remedy. During the same period, 642 applications for evidence preservation were accepted, with 607 of those being approved. Most cases were determined within 48 hours, thereby ensuring the effectiveness of provisional measures. These statistics show that Chinese Courts are now willing to make use of provisional measures in the protection of intellectual property.
Not huge numbers, but getting there.
This same issue of the Newsletter also has a short article on a recent trade secret case where the Xi’an Intermediate People’s Court awarded General Electric approximately $120,000 in damages in a trade secret/unfair competition lawsuit against an ex-employee.