Canada: Protecting Canadian Companies' Trade Secrets In The Chinese Market

Last Updated: August 5 2013
Article by L.E. Trent Horne and Rebecca Huang

A company's most valuable assets are often its proprietary and confidential business and technological information. Executives and owners of Canadian businesses understand that they cannot ignore the Chinese market if they wish to grow their business internationally. However, they may, at the same time, be concerned about trade secret theft. As with any other business risks, Canadian companies can manage and minimize risks of trade secret theft by understanding applicable Chinese and Canadian laws, taking proactive steps to protect valuable confidential information, and aggressively enforcing rights that have been infringed upon.

Trade Secrets are Recognized and Protected in Canada and China

Trade secrets, also described as confidential business information, are protected in both Canada and China. The ability to enforce trade secret protection in the two countries is similar. However, there is a material difference in the procedural rules that has a significant impact on the prosecution of trade secrets disputes involving Chinese parties: the lack of a discovery process under the Chinese rules of civil procedure. Practically, it means that the plaintiff bears the burden to collect evidence on infringement prior to the commencement of an action. This burden of proof can be very difficult and onerous to discharge when the infringing products are not widely distributed.

In Canada, courts have recognized the commercial value of confidential business information and will provide remedies to a claimant who can establish that its rights to the proprietary information have been violated and the duty of confidence has been breached. To constitute trade secrets qualifying for common law protection, the information must be confidential and original. Further, the purportedly stolen information must have been acquired by the owner with the expenditure of time and effort, and be specific, identifiable and commercially valuable. Lastly, the owner of the trade secrets must have adopted judicious measures showing a clear intention to maintain the confidentiality of the information, and have communicated the confidential information on a need-to-know basis.

China is a civil law country in which legal rights and obligations are stipulated by statutes and regulations. The statutory protection of trade secrets is found in the Anti-Unfair Competition Act, 1993. In February 2007, the Supreme Court of China issued an explanatory note under the Act, which offers authoritative guidelines for the Chinese courts. The statutory criteria for trade secrets under the Act are similar to the factors set out by Canadian courts in the protection of confidential business information.

The statutory criteria qualifying trade secrets for protection under the Act are four-fold: (1) technological and business information; (2) unknown to the public and could not have been easily acquired by others without much effort; (3) commercially valuable and practical in that it would provide a competitive advantage to the owner, and (4) protected by confidentiality measures adopted by the owner.

Specific Confidentiality Measures are Key

Specific confidentiality measures are key to the protection of trade secrets in both countries. A blanket claim of confidentiality over documents and information is insufficient. If an owner of trade secrets fails to take adequate steps to protect the confidentiality of the information, it will have to counter the defence that the information is not in fact secret, and therefore not enforceable.

Chinese courts will assess the adequacy of confidentiality measures by taking into account a number of contextual factors including (1) the medium carrying the impugned information; (2) the owner's intention to maintain confidentiality; (3) whether the measures are easily identifiable; and (4) whether it is easy or difficult for others to obtain the same information through legal means.

Depending on the nature of the business and the trade secrets, Canadian companies should consider adopting the following confidentiality measures while selling products or services, whether in China or elsewhere:

  • Implement a written communication policy to ensure that trade secrets are disclosed only if needed;
  • Add privacy measures to the medium carrying the trade secrets, for example adding a password to electronic documents;
  • Mark the medium carrying the trade secrets as confidential;
  • Sign confidentiality agreements where necessary; and
  • Restrict visitor access to the machines or manufacturing plants that involve trade secrets.

A Successfully Prosecuted Trade Secrets Case

Wang Xiaohui worked as an engineer for GE from 1999 to 2002. He was trained by GE as a maintenance engineer to service the medical equipment distributed by GE in China. In July 2002, Wang resigned from GE. In July 2003, he registered a company under the name of Xi'an Jiuxiang Co. (X Co.) that offered installation and maintenance services of medical equipment to major Chinese hospitals, in direct competition with GE. The manuals and training materials used by X Co. were similar to those authored by GE.

GE sued X Co. and Wang in his personal capacity alleging that they jointly infringed both GE's rights of trade secrets under the Act and the copyrights attached to the training materials. In the end, the Chinese court found in favour of GE and issued a permanent injunction prohibiting the defendants from infringing GE's trade secrets until such time as the protected information become publically known. The damages awarded exceeded $1 million.

In this case, GE was able to demonstrate that all relevant documents contained core technological information developed by the company as a result of its own research and development, and they were of significant economic value to GE. Further, GE had taken a number of steps to maintain the confidentiality of those documents including marking them as copyrighted and confidential. In addition, there was a confidentiality provision in Wang's employment contract with GE. All of these measures were influential in the Chinese court's final decision in the case.


It is important for Canadian companies to assess their policies and practices for the protection of trade secrets when dealing with the Chinese market. The assessment should be conducted in view of the relevant laws in both Canada and China, the nature of the confidential information, and the categories of people who may have access to the confidential information. The best time to conduct such an assessment is prior to the entry into the market. The next best time to do so is now.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

L.E. Trent Horne
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.