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trade secrets; IP; Contracts;China;International

Checklist on Protecting Trade Secrets in China

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Given the global economy, how can trade secrets be protected both in the U.S. and abroad?

Last week, we spoke on Protecting Trade Secrets in China at the USPTO China Road Show in Denver.

Here’s Colson Quinn’s one page checklist on things you can do to protect your trade secrets when you do business in China and/or abroad.

1. What trade secrets do you have that are worth protecting? Prioritize. Use physical, contractual and technical barriers to keep the information secret.

2. Limit access to need to know. Designate specific individuals in your foreign contracts who have access, change only in writing.

3. Get executed agreements before you allow anyone access to trade secrets. Whether it’s your employees (US and foreign), a Chinese company, or subcontractors or vendors, agreements need to be in place. Don’t fall for negotiating ploys that this is hostile or unnecessary.

4. Keep production of critical components in the U.S. Check what can be reverse engineered. Make sure you can even import your technology to a foreign manufacturer.

5. Be wary of business brokers who assist in getting you to foreign manufacturers. Get referrals from trusted sources, e.g. law firms with US connection, US trade groups, etc.

6. Do due diligence on foreign company you plan to work with, including background of principal officers and directors. Ask for existing customer list.

7. Don’t rely on Memorandums of Understanding (MOUs) or emails to ensure your trade secrets are protected.

8. If you are going to enter into a venture with a foreign company, make sure you have a lawyer who is familiar with that country’s IP law. Are you operating legally in that country? Even if you choose US law to apply to a contract, the foreign country’s laws may still apply in critical IP areas re IP rights and ownership.

9. In foreign licensing agreements, consider carefully if you are giving up IP cheaply just to do business in the country, e.g. China. Make sure you get most payments before you release technology. Don’t allow assignment of contract to a subsidiary (no assets, no payment).
Don’t assume licensing agreement won’t be breached. Deadbeats exist worldwide.

10. Don’t rely on a NDA for protection of trade secrets abroad. Get a NNN agreement, i.e. non-disclosure, nonuse and non-circumvention agreement. And make sure trade secret protection provisions and non-compete provisions applying to the term of the contract and after contract expiration. Get contract provisions that provide clear audit and access rights.
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