1 SCOPE AND TERM OF PROTECTION 1.1 The Anti-Unfair Competition Law prohibits unauthorized use of trade secrets by third parties. 1.2 The definition of "trade secret" includes technical data and business information unknown to the public which can result in economic benefits to the owner. The owner must have taken appropriate security measures to preserve its confidentiality. 1.3 Under the Anti-Unfair Competition Law, it is possible to take action against those who: 1.3.1 obtain a trade secret from its owner by means of stealing, co-ercion, bribery or other improper means; 1.3.2 disclose, use or permit the use of a trade secret so obtained; or 1.3.3 act in breach of a confidentiality agreement or in breach of conditions of confidentiality imposed by the owner of the trade secret by disclosing, using or permitting its use without the owner's authorization. 1.4 A third party who comes into possession of a trade secret will also infringe the law if he knows or should have know that it was wrongly obtained, used or disclosed. 2 OWNERSHIP AND SUBSISTENCE 2.1 The "owner" of a trade secret is not prescribed by the Anti- Unfair Competition Law. By implication, the owner is the person with whom the secret originates. 2.2 It is unclear to what extent, if at all, trade secrets may be assigned. The surest way is to an exclusive licence, with covenant to assist in enforcing against those who misuse the trade secrets, plus a covenant to keep them confidential in the meantime. 2.3 Trade secrets remain protectable for as long as: 2.3.1 they have not entered the public domain; and 2.3.2 appropriate measures have been taken to protect them (see para 1.2 above). 2.4 Protection for trade secrets may be further augmented by contractual provisions, extending the scope and duration of protection. Such provisions are, however, enforceable only against the contracting party/ies. 3 REGISTRATION REQUIREMENTS 3.1 There is no requirement to register trade secrets to secure protection for them. 3.2 Licences for the importation of technology into the PRC must be approved at the relevant level of the Ministry of Foreign Trade and Economic Co-operation (MOFTEC). Unless special approval is obtained, such licences may not contain certain types of restrictive clauses. For example, the trade secrets may not be retained by the licensor after the licence expires, and the licence typically must not last more than 10 years (see further section on Licensing and Franchising). 4 FURTHER EVIDENTIAL MEASURES DESIRABLE 4.1 To persuade the authorities to act, it is desirable to retain as extensive as possible a record of the trade secrets in question. When trade secrets are licensed, the record should be countersigned by the recipient with an express acknowledgment of receipt. 4.2 Trade Secrets may also be protectable by way of copyright, provided always that the copyright has not been registered and so put into the public domain. 1 May 1996 LINKLATERS & PAINES, HONG KONG OFFICE - Contact Partner Tom Hope Internet address - thope@landp.com Tel - 852 28424888 Fax - 852 28108133
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