China IP’s Challenge

• Since joining the World Trade Organization (2001), China has strengthened its legal framework and amended its IPR laws and regulations to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Differences

• Legal differences• Cultural differences• Political differences

Prevention — Best Protection

• Registerable/Non-registerable IPs– Patent: the State Intellectual Property Office (SIPO, the Patent

Office)– Trademark: the Trademark Office of the State Administration for

Industry and Commerce – Copyright: China’s National Copyright Administration (NCA) – Unfair Competition: the Fair Trade Bureau under the State

Administration for Industry and Commerce (SAIC) – Trade Secrets (know-how): protected under Anti-unfair

Competition Law

Trade Secrets

• Definition– The Anti-Unfair Competition Law (effective September 2, 1993),

Article 10– It refers to “the utilized technical information and business

information which is unknown by the public, which may create business interests or profit for its legal owners, and which is maintained secrecy by its legal owners.”

• Misappropriation– Article 10, illegal means to acquire and breach of agreement

Trade Secrets

• Contract Law (1999)– Article 43: neither party may disclose or inappropriately exploit the trade secret obtained

in negotiating a contract, whether or not the contract is executed

• Company Law (2006)– Article 149: directors or managers of a company shall not illegally disclose the company’s

trade secrets

• Labor Law (1995)– Article 22: an employer and employee can enter into a confidentiality agreement

regarding the employer’s trade secrets in a labor contract

• Labor Contract Law (2008)– Article 23: an employer may impose confidentiality obligations on the employees in a

labor contract regarding the employer’s trade secrets

Trade Secrets

• Burden of Proof– P: (1) existence of trade secrets [including the carriers, specific

contents, commercial values of the trade secrets as well as the specific confidentiality measures taken to protect the trade secrets]; (2) the ownership; (3) proper measures to maintain; (4) the same information used by D; (5) access to the secrets; and (6) injury

– D: (1) public availability of the secrets; (3) improper measures to maintain; (3) different information being used; and (4) legal means to obtain

Trade Secrets

• Judicial Interpretations on Civil Cases Involving Unfair Competition

– Sufficient actions to keep confidential: 1. Limit the range where the confidential information can be known. The content of the

information shall be only open to relevant people who must know it;

2. Take such preventive measures as locking the carriers of the confidential information;

3. Label confidentiality indications on the carriers of the confidential information;

4. Use passwords or codes for the carriers of the confidential information;

5. Sign confidentiality agreements;

6. Limit visitors to or propose confidentiality requirements as for the machines, workshops, and others locations related to the confidential information;

7. Other reasonable measures to maintain confidential information

Trade Secrets

• Contractual Protection of Trade Secrets– Agreements on ownership rights– Confidentiality Agreement– Non-compete Agreement, limited to senior managers, senior technical personnel, or others

with confidential obligations– License Agreement: clauses relating to definition of confidentiality information, obligations of

the licensee, time period, termination of contract, right to audit for compliance, etc [additional CDA with licensee’s employees, request licensee to set up policies]

• Others– Company policies—information control– Staff education/management

Thank you!

Qinghong Xu, Ph.D., J.D.

Lung Tin International Intellectual Property Agent Ltd.

Tel: 86 10 84891188

Fax: 86 10 84891189

Email: LTBJ@lungtin.com