Precautionary measure for protecting business secrets

14:04, September 01, 2009        

In China, once the infringement happens, it will be difficult to take measures to protect business secrets; moreover, the cost is high. So, Chinese enterprises should take comprehensive measures to protect their own business secrets before infringement, they strive to minimize the infringement risks. There are some referential experiences about how to keep business secrets as follows:

  1. Verify the business secrets: the development and protection of the enterprises' business secret is a dynamic process, it would be best to verify periodically: the plan for filtering business secrets, finding out the potential business secrets and making sure they are under protection.

  2. Stipulating restrained "zone of access", password and safety inspection of the entire secret information user.

  3. Encrypt sensitive materials and put them into a safe place to store.

  4. If possible, the users of the secret information only have right to use the necessary parts of the information.

  5. Resort to the way of classification, for instance, sealing in the materials to mark "secret" or "confidential".

  6. Make confidentiality agreement and competition restriction with people who will get access to business secret.

  7. The employees shall be required to present their ID card; the visitors shall be required to present their permit.

  8. Make and distribute manual to the employees, providing the regulation on relevant business secret and copy.

  9. Recommend and inspect background of the administrators, principle employees and some other people who get the access to secret information frequently.

  10. Have a face-to-face talk with employee who will leave, reminding him of having the confidentiality obligation continuously.

  11. Sign related contract about business secret with employee:

  11.1. Employee's confidentiality agreement: Article 102 of Labour Law provides: Labours who revoke labour contracts in violation of the conditions specified in this law or violate terms on secret-keeping matters agreed upon the labour contracts and thus caused economic losses to the employing unit shall be liable for compensation in accordance with the law.

  If possible, confidentiality agreement should clearly define the scope of confidential information, including all relevant instructions about a certain product, plan for develop, marketing and so on. The more detailed and distinctive, the more advantageous in possible infringement proceedings in the future.

  11.2. Competition restriction agreement: Labor Contract Law, came into effect in January 1th 2008, stimulates: An employer and a employee may include in their employment contract provisions on confidentiality matters relating to maintaining the confidentiality of the trade secrets of the employer and to intellectual property. If a employee has a confidentiality obligation, the employer may agree with the employee on competition restriction provisions in the employment contract or confidentiality agreement, and stipulate that the employer shall pay financial compensation to the employee on a monthly basis during the term of the competition restriction after the termination or ending of the employment contract. If the employee breaches the competition restriction provisions, he shall pay liquidated damages to the employer as stipulated. Competition restriction agreement should include the following content:

  a. the special scope of competition restriction.

  b. period: under Labor Contract Law, a person is subject to competition restrictions in terms of his working for a competing employer that produces the same type of products or is engaged in the same type of business as his current employer, or in terms of his establishing his own business to produce the same type of products or engage in the same type of business, shall not exceed two years.

  c. compensatory amounts: as for compensatory amounts, the Labor Contract Law does not prescribe clearly the payable compensatory standard. When the enterprises make competition restriction agreement, they should fix reasonable economic compensation and payment method in the light of the Labor Contract Law, local regulation and practical situation.

  d. payment methods of compensation.

  e. the liability of violating the agreement.

  Source:IPR in China

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