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Advice for Protecting Trade Secrets in China

China was admitted into the World Trade Organization in 2001. Before this date the country required many foreign companies to become partners with Chinese companies. This put the foreign companies in jeopardy concerning their trade secrets since the Chinese company had access to privileged information about products, lists of customers, processes for manufacturing the products as well as the suppliers of materials. Since joining the WTO, China has relaxed its regulations allowing foreign companies to become wholly foreign-owned enterprises (WFOE). This helped to prevent Chinese manufacturers taking any of the foreigners' trade secrets.

Although there are now measures to help prevent the stealing of trade secrets, the crime still exists to some degree. Some measures that can be used to safeguard trade secrets are suggested below.

Steps to help control the stealing of secret information should include clearly identifying which information qualifies as trade secrets. Then, access to this information must be carefully monitored. Who is allowed to have access to particular pieces of information must be enforced and reviewed periodically.

Carefully monitoring company computers, documents, equipment and even areas of the factory can help to eliminate any leakage of information. Any privileged document or information on computers should be clearly labelled with access controlled with access codes.

Stealing and/or selling of private company information often involves present or former employees of the company. When hiring Chinese employees, a clear contract needs to be stressed with consequences clearly spelled out. No employee should be hired who will not sign an agreement to protect the company's trade secrets.

Former employees who had access to privileged information are hard to prosecute in China due to non-compete clause situations in the country. It is best to prevent employees from acquiring top-secret information which would be valuable to competitors.

China has had problems enforcing intellectual property (IP) laws. Sometimes it is because of IP laws which go against some of China's other laws. Other times, however, it is due to corruption in the country.

Some smaller companies which steal a foreign company's secrets simply relocate under a new name when they are about to be caught. The cost of finding and bringing them to court is sometimes too high for the foreign company to pay. At times, when a case does come to court, it is difficult to know if trade secrets were stolen or if a product was simply copied with a few changes being made in it.

Prevention is the best policy to pursue concerning protecting trade secrets. Enforcement of lawbreakers is too unreliable.

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