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posted 8 years ago
Trade secret is one of the key factors which enable the company to
keep competitive in the market. However, due to the increased
competition in the market, many companies are concerned with the
disclosure and improper use of trade secret, among which, the disclosure
of trade secret by the employee is one of the reasons leading to
disclosure of trade secret.
The disclosure of trade secret by the employee can be caused due to one of the following reasons:
Despite of the disclosure of trade secrets, many companies may find
themselves difficulty to pursue against the employee for legal
liability, which is usually caused due to the lack of sense for
protection of trade secret and the incompletion of company regulation.
So when the regulation for confidentiality is planned, what shall be noted?
I. What is trade secret?
Many companies will include the clause of confidentiality in the
employment contract with the employee. However, according to our
observation, these clauses are very general which may cause dispute over
the definition and scope of trade secret.
Trade secret, according to the definition in the Law of Anti-unfair
Competition, refers to technology information and operation information
which is not known to the public and capable of bringing economic
benefit to the holder, and has practical utility with measures taken by
the holder to keep confidential.
Therefore, trade secret consists of technology information and operation information.
Technology information including programs, designs, manufacturing
processing, product formula, manufacturing method etc; Operation
information including management know-how, client list, goods resource
intelligence, production and marketing strategy, base price of the
tender and content of bid document etc.
When the company defines the scope of confidential information for
protection, it shall fully understand the definition of trade secret by
the law. That means, not all information relating to the company can
constitute trade secret by the law.
II. Confidentiality Agreement
The conclusion of a confidentiality agreement is an important measure
to protect confidential information, which is also one of features to
identify the trade secret. When concluding and enforcing the
confidentiality agreement, the followings shall be noted
1. Definition of Confidential Information
The company shall define the scope of confidential information in accordance with the nature of its business.
If the company is a manufacturer or technology-oriented development
company, it shall particularly emphasize on the protection of technology
information while a marketing-oriented company or trading company shall
emphasize on the protection of operation information.
2. Explicit measures shall be taken to protect confidential information
Besides the conclusion of confidentiality agreement, during the
course of delivering documents containing confidential information to
the employee, or access to the place or system containing confidential
information by the employee, the company shall mark the nature of
confidentiality of the information in an explicit way. For example, the
company can mark “confidentiality” on the first page of the document
containing confidential information, or add a lock to the carrier of
confidential information. Meanwhile, a record of receipt of or access to
the confidential information by the employee shall be maintained. In
doing so, the company can remind the employee receiving the confidential
information of the nature of information received, on the other hand,
once these information is disclosed, it will be easier to define the
scope of disclosed confidential information
3. Penalty
In the confidentiality agreement, penalty can be agreed if the employee breaks the obligation of confidentiality.
However,
it shall be note that under current practice in Shanghai, the penalty
for breaking the confidentiality obligation will actually apply to
following situations:
III. Confidentiality and Non-competition
Confidentiality agreement and non-competition agreement are inter-linked but two separate legal concepts:
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