As the 13th National People’s Congress and the Chinese People’s Political Consultative Conference came to a successful conclusion, intellectual property protection has received considerable support at the political level. However, as for foreign-funded enterprises who have newly entered China, they are still faced with severe challenges in pre-emptive registration of trademarks, imitation of product appearance design and other aspects. Recently, the well-known intellectual property magazine Asia IP carried a special report on IP enforcement and protection, partner Charles Feng at East & Concord and other experts and lawyers took the interview.
Evidence collection on both the infringing party and the client’s operations is tricky in many IP enforcement cases; what complicates things further is the issue of trade secrets. In view of the fact, Attorney Feng says that administrative action to raid infringing production sites has become standard protocol and quite formulaic for the police, but when it comes to trade secrets, the court and law enforcement are much more cautious and hesitant; courts are unlikely to order a police investigation without sufficient preliminary evidence. Consequently, he suggests that it is all the more important to narrow down the scope reasonably and go through investigations under the radar so that no evidence is destroyed prematurely.
In this interview, Attorney Feng also shares a case in point. One of his clients found out that a former employee had stolen some design blueprints and sales contacts to set up a sizable operation in Shanghai using the same technology. The theft only came to light when a potential customer who was shopping around for suppliers raised the question: “Didn’t I just see this ‘proprietary technology’ when I was talking to another company last week?” To obtain further evidence of trade secret theft, Attorney Feng engaged his client’s customers for a covert operation to help investigate the technology behind the Shanghai company, successfully capturing in picture blueprints and designs that bore blatantly the logo of its original owner. In addition, coupled with analysis of recent leavers and the technology and division involved, they were able to provide the court with a very specific area for the proposed raid, and the burden of evidence collection in such a difficult case was shifted to law enforcement instead.
In this case the status of the client’s trade secret was well-established, but Attorney Feng is worried that many companies are not doing enough. Companies often think having employees sign non-disclosure agreements (NDA) upon employment implies important information is covered; but from the court’s perspective, an NDA that doesn’t discriminate against levels of information sensitivity may not be meaningful. If this piece of information is truly the core of a company’s competitive advantage, then only a small group of people should have access to it, and they should sign very different agreements from its average employees. Given the sensitive nature of assets concerned and the cautious attitude adopted by courts and administrative departments, companies are held to a higher standard when proving they have taken “reasonable action” to protect their corporate crown jewels. As a result, Attorney Feng estimates the share of trade secret cases accepted by the court in first instance to be less than 10%.
In respect of the above mentioned enforcement of trade secrets, Attorney Feng advises a good way to approach a trade secret is to embed it at the core of a company’s IP strategy. For what patents cannot legally cover, or core information that a company cannot risk to be disclosed in public or suffer from expiration of patent protection, trade secret protection could come to play. This requires engaging IP professionals not only at the enforcement or litigation stage, but also in stages from people and organization structuring to patent application and IP portfolio management.
In the end, Attorney Feng says that he expects trade secret enforcement to gain more attraction in the future as Chinese research and development continue to grow and fuel patent application, and globalized production and trade will necessitate technology transfer and related dispute resolution.
Click the following link for the original report.