Ms Pagnattaro Does Not Keep It A Secret How To Protect Your Trade Secret In China

Marisa Anne Pagnattaro wrote a very good paper: ‘‘‘The Google Challenge’’: Enforcement of Noncompete and Trade Secret Agreements for Employees Working in China’, American Business Law Journal Volume 44, Issue 4, 603–637, Winter 2007.

If you don't need to share a product, idea or ingredient with the world, then don't. Keep it a business secret, just like Coca-Cola who never patented its drink's ingredients. Easier said than done, though. At Coca-Cola only two people in the board of directors have each half the number combination to a safe. And there are a lot of things you should pay attention to protecting your trade secret. Trade secret is considered often as the ugly stepdaughter of the IP system. But it can be very effective.

In China the Provisional Regulations of the State Council on Technology Transfer, promulgated
January 10, 1985, and the Regulations on the Administration of Technology Acquisition Contracts, May 24, 1985, hereinafter Technology Acquisition Regulations Detailed Rules and Regulations for the Implementation of the Regulations on the Administration of Technology Import Contracts, December 30, 1987, are relevant. However, all of these rules and regulations are contract based and, accordingly, are not binding on third parties. Additionally, no legal penalties are specified; the only remedy is for
breach of agreement.

The Law Against Unfair Competition, September 2, 1993, and Regional regulations: Labour Contract Regulations of Shanghai Municipality, effective May 1, 2002.

Ms Pagnattaro illustrates the relevance of protecting trade secrets by showing the case of Dr. Kai-fu Lee who first worked for Microsoft and then for Google. Even more interesting is the conclusions she is drawing from this case.

The duration of the noncompete agreement should be limited to the amount that is just enough to protect the employer. "The longer the period, the more evidence you need to prove that the period is reasonable and necessary to protect against unfair competition and not an undue restrain on the employee’s right to work."

Limit the Scope of the Information covered by the noncompete agreement. "It is advisable that the noncompete clause expressly states that it is designed to preserve business secrets, thereby tying the agreement to a legitimate business reason and undermining any defense that the agreement is an unfair restriction on labor or creates undue hardship on the employee."

Tailor the geographic scope of the noncompete agreement to protect legitimate business interests.

Provide compensation in exchange for the noncompete agreement.

Limit access to the trade secret information. Files and other places containing trade secrets should be labeled.

Ensure that the information claimed to be a trade secret has economic value and practical applicability realizable utility.

Take active steps to protect the business secret.

The policy should also include penalties for improper use or disclosure of the information and enforcement of the penalties.

Incorporate a provision addressing trade secrets developed by the employee.

Take Action When an Employee Resigns. "Notify new employers of the secrecy obligations after a key employee leaves, the employer may want to follow upon where the employee goes, to protect against breaches of the noncompete agreement as well as the development of any competitive practices that infringe on business secrets to which the former employee was privy."

Is Hong Kong's Copyright Stopping the Publication of Li Peng's Historic Significant Diary?

Benjamin Kam Lim reports for Reuters that the diary of Li Peng that describes Li's version of what happened during the events that lead up to the June 3, 1989 massacre, that Hong Kong publisher New Centuty Press was going publish this June 22, will be halted, because the copyright holder allegedly is banning it.

The South China Morning Post quotes Cai Yongmei, editor-in-chief of Hong Kong's Open Magazine saying that she believes that Beijing intervened, because the diary could stir controversy, especially about premier Wen Jiaobao and president Hu Jintao's allegedly agreement over the intervention of the People's Liberation Army at the Square of the Heavenly Peace. Another possibility is that Hong Kong exerted self-censorship.

Whether the prohibition of the publication of the diary because of the copyright is not applicable, Ms Cai is alleging, because of the significance of its historical content, is dubious. One can still study it and write about it, without publishing the original.

In Germany the publication of Hitler's 'Mein Kampf' is prohibited because the copyright holder, the State of Bavaria does not allow it. Only after the German copyright (death of the author plus 70 years) expires, which will be in 2015, the book falls into the public domain. See more here.

According to Hong Kong's Copyright Ordinance (which is in this respect the same as China's Copyright Law), the copyright length is life of the author plus 50 years. Li Peng, is still alive, so after his death it will take another 50 years.

So who has the copyright over the book? Did Li Peng assign his copyright to someone else who does not give his permission?

Read Benjamin Kang Lim's article here.

With An Eye On ACTA: China Champion of TRIPs Freedoms and Flexibilities

During the TRIPs Council, which was held June 8 and 9, China told delegates it was concerned about developed countries that want provisions (for example the lower thresholds for criminal enforcement of counterfeiting and piracy) that go beyong TRIPs. This could lead according to China, to barriers to legitimate trade (when customs can seizure goods too easily) and restrict the flexibilities of TRIPs. And each country should be able to make decisions about the allocation of resources to enforce IPRs.

China points out all the provisions of TRIPs that makes their dramatic low IPR enforcement level arguably not noncompliant to TRIPs.

- Article 7 and 8 TRIPs: which gives a country leeway to not enforce in case of a public health or security emergency.
- Article 41(5) TRIPs: I called this in my master's thesis the Achilles heel of TRIPs: because it says that a country has the souvereignty to decide how much of its resources it would allocate to TRIPs.
The DSU panel at the WTO who decided over DS663 'China - Measures Affecting the Protection and Enforcement of Intellectual Property Rights' made it clear that China's level of numerical thresholds of criminal enforcement was not noncompliant to TRIPs.

Obviously China is not falling for ACTA's charms of the promise of high enforcement levels. And maybe even some obligations of measures. One could say that ACTA is demanding a monotonous relationship with right holders. China rather wants to continue its marriage of convenience with TRIPs because it gives it only the obligation to legislate, not a single obligation of measure, let alone obligation of result. TRIPs allows room for a romance with other goals than only enforcement on behalf of right holders: technology transfer, public dissemination of information, developing regions, indigenous innovation.

Read Catherine Saez' article about the TRIPs Council meeting for Intellectual Property Watch here.

Professor Llewelyn: "Leverage Your IP Rights"

This Morning IP Dragon attended a breakfast seminar by Professor David Llewelyn (IP Academy of Singapore and Of Counsel at White & Case in Singapore). Even though it was quite early, many people interested in how to maximise the use of IP did show up at the office of White & Case in Central, Hong Kong. Professor Llewelyn's presentation was about Intellectual Property Rights as a Balance Sheet Asset. In other words how to commercialise your intellectual property rights. Below is a brief impression:

Professor Llewelyn rightly made the point that IP is not just a legal tool. That the IP assets are fast becoming a focus of the investment world. The securitization of intellecutal property rights is in Asia nascent. Article 26 Copyright Law 2010 even mentions this possibility explicitly: "Where a copyright is used as a pledge, both the pledgor and pledgee shall register the pledge with the copyright administrative authorities of the State Council."

China's leadership understands that it has to climb the value chain in order to continue its economic growth. And IP is protecting this added value. Professor Llewelyn covered the different kinds of intellectual property rights (he can cover all IPR in one hour, see here) and explained the origin of patent (to disclose the information in exchange for a temporary monopoly) as the opposite of latent (which one could apply to trade secrets).

Llewelyn described how Li Ning (athletic shoes and sporting goods) used a combination of the swoosh of Nike, the stripes of Adidas and the wave of Puma and using the slogan "Everything is possible" (while Adidas uses the slogan "Impossible is nothing", read an article by Drog Poleg on Danwei here) and still gets away with it.

About trademarks Professor Llewelyn said that many companies did not pick a very good name. He illustrated this by drawing the travails of China's computer manufacturer Lenovo, who used be called Legend. But this laudatory name was very hard to trademark in other countries. So it had to rename itself to Lenovo (Legend + Novo), which must have been a costly operation.

He made the distinction between copyrights which give the copyright holder the right to exclude others from copying their work, but is not giving a monopoly to the holder as is the case with patents.

In China most companies have utility patents which are not examined, therefore cheap, but really do not tell competitors anything about whether they are valid or not. Professor Llewelyn told about the IP game, of patent trolls (non-practising entities), licensing and sub licensing etc. which, of course, is a serious game, because a lot can be at stake. Valuation of IP can be very difficult. But it is getting more important, since many companies start to park their IP assets in "tax neutral" jurisdictions such as the Cayman Islands, Guernsey, Jersey etc.

You should know first what you have. Then use what you have. Leverage your IP rights.

Professor Llewelyn made a case for using IP strategically. And to bring IP out of the marketing and legal departments into the boardroom. One of the board should own the IP issue internally and deal with the IP challenges.

I am looking forward to read his book: 'Invisible Gold in Asia', which deals about the same crucial subject matter that only becomes more important for each and every company: Creating wealth through intellectual property.

China's National Intellectual Property Strategy, What's The Progress? Website To Stay Updated

September 11, 2008 IP Dragon published 'China's National IP Strategy 2008: Feasible Commitments or Road to Nowhere Paved With Good Intentions.' To "popularise" and to keep those interested in the progress of China in implementing its National IP Strategy a website was launched on June 5th, see here (Chinese).

The site has 10 main categories:

• Important news;
• Media viewpoint;
• National strategy;
• Ministry developments;
• Regional strategy;
• Industry strategy;
• IPR protection;
• International developments;
• Strategy research;
• Strategy special.

Below I summarise the first article in the category 'Important news':

Li Changchun (a Politburo politician at the Standing Committee): 'Cultural Industries Are the Resource for Intellectual Property Rights Output'. June 16th, 2010, Mr Li's article 'Correctly understanding and handling the cultural construction and development efforts to the relationship between a number of aspects of major socialist culture with Chinese characteristics and the path of development.

Mr Li understands that by developing Chinese culture new intellectual property rights will be created. This will involve many jobs, for which no plants are needed nor land. For this the relationship between culture and intellectual property must be researched. Also the relationship between culture and economy; culture and technology must be correctly understood. And the relationship between domestic and foreign culture. "Foreign culture must be actively absorbed."

Read the full article here in Chinese.

Guest Blogger Mathijs van Basten Batenburg On The People's Courts of China

IP Dragon asked Matthijs van Basten Batenburg legal counsel of several Chinese and Dutch SME at MvBB Ltd. in Shanghai to write a guest column. IP Dragon does not necessarily agree with the content, but wants to present a forum for all opinions that have something to do with IPR in China.

Inside a Chinese Courtroom presentation for the EU Chamber of Commerce Shanghai by Stéphanie Balme of the China EU School of Law.

By Mathijs van Basten Batenburg in Shanghai

On Thursday March 4 I attend a breakfast seminar organised by the EU Chamber of Commerce in Shanghai. At 8 in the morning I join one of the tables with legal professionals who have flocked to hear a reading that has the tantalizing title “Inside a Chinese Courtroom”. Today’s subject has indeed made many curious, including myself, and I later learn that the turnout for this meeting is indeed well above average. This curiosity might be explained due to the fact that many foreigners have extremely low hopes for a fair trial in a Chinese Courtroom. The result of a small survey over the first cups of coffee of the day is in line with my own prejudices: all the lawyers on my table regard the Chinese judiciary system as a venue to be avoided at all costs, and if unavoidable, either find a Chinese lawyer to “negotiate” with the judge handling the case, or just write the file off altogether. No small wonder we are all keen to hear an expert’s opinion on this subject.

Ms. Balme turns out to be very enthusiastic speaker and it is immediately clear she has a passion for China and its judicial system. For her research she has travelled extensively throughout the country, has interviewed judges and attended court sessions.

We learn that the Chinese government is seriously committed to improve accessibility to the legal system and to modernize the courts. In practise this is mostly taken literally: old, shabby, courts are demolished and replaced by shiny, steel and concrete palaces. The government has also instated some Western rituals such as the robe and gavel, although many Chinese judges are apparently still not sure what to use these weird objects for.

Despite these investments by the government, the quality of the rulings is still questionable. By and large, judges lack a law degree and principles such as “equality before the law” are not applied. It is also good to note that there is no “division of the powers” in China: judges are considered civil servants and are subordinate to the government. Furthermore, public opinion exerts great influence over the rulings of Chinese judges. The well-known case Danone vs. Wahaha (where the Chinese company established mirror companies of their joint-venture with Danone, later forcing the French company out of the joint-venture altogether) is given as a typical example. What doesn’t come as a surprise to most of the listening lawyers is that corruption is still very real and very common, also in China’s major cities. Most of the time litigation fees are still paid cash and judges are commonly presented with “gifts” by the litigants.

Even if the judiciary system would function as in Western countries, the law itself would pose a challenge since laws are still quite chaotic and are often internally contradictory. Nevertheless, Chinese people increasingly use the courts as a way to settle problems as is shown by the stats of civil cases being filed each year. As opposed to the West, in China a judicial ruling is the start of the settlement of a conflict, not dissimilar to that the signing of a contract is still mostly the start of negotiations in this country. From a Western perspective this also means that enforceability of Chinese rulings is extremely difficult. Even if you find a judge that is prepared to rule in your favour, this doesn’t mean you can enforce the verdict!

Unfortunately we run out of time before Ms Balme is even halfway through her presentation. Reinforced in my slightly cynic ideas about the Chinese judiciary system, but once again fascinated by this country, I leave the gathering.

Written by Mathijs van Basten Batenburg, legal counsel at MvBB Ltd. in Shanghai.

IP Dragon does not necessarily agree with the content of this guest blog, but wants to offer a forum to all opinions that have something to do with IPR in China.

China Copyright and Media Looks At the Law of China's Entertainment Media

IP Dragon's friend Rogier Creemers has started a great website called 'China Copyright and Media, Looking at the Law of China's Entertainment Media', see here.

For this field of study it includes many relevant laws, regulations and rules, from the State Council of the National People's Congress, Central Committee, Supreme People's Court, Public Security Bureau (PSB), State Administration for Radio Film and Television (SARFT), General Administration for Press and Publications (GAPP), State Administration for Industry and Commerce (SAIC), Ministry of Commerce (MOFCOM), etc.

The database is in "beta", but it is already very interesting.
So check it out: China Copyright and Media.

Shanghai World Expo 2010 Exposes Organisers' Lack of Creativity

In 2007 the Bureau of the Shanghai World Expo 2010 Coordination promulgated a special regulatation (See here: No. 11) concerning intellectual property rights. In short all participants to the World Expo were warned that they should comply to China's IPR laws, regulations and rules far in advance. "The General Administration of Press and Publication and the National Copyright Administration have also called for a rapid-response mechanism to protect the intellectual property rights of the Shanghai World Expo, meaning that copyright departments at all levels will check materials that may infringe on the copyrights of the Shanghai World Expo as soon as they are found." Read more here. That is laudatory indeed, but what about the Shanghai World Expo 2010 organization themselves? Do they also have to comply to the very same IPR laws, regulations and rules?

You probably have seen that 'Haibao', the expo mascot, was an unauthorised copy of an American cartoon figure Gumpy, read the Japan Probe article about it here.

Then the Shanghai Expo theme song 'Right here waiting for you' is an almost completely plagiarized song by Maya Okamoto from 1997 called 'Stay the way you are', listen to the two songs and read Japan Probe's article here.
The Shanghai World Expo and organizers first paid 10 million yuan for the plagiarized song and then had to pay 300 million yen to Ms Okamoto to settle the case. According Elaine Kurtenbach who wrote an article about ti for the Associated Press, the Shanghai World Expo organizers said that Ms Okamoto was honored to have a chance to cooperate with the event. Read the AP article here.

IP Dragon's "Shock and Awe" Holiday Tips

When in Paris, IP Dragon does not only highly recommend you to visit le Louvre at the rive droite and le Musée d'Orsay at the rive gauche so you will be awed by the original works of great artists. For a more, let's call it balanced world view, you must also hop on le métro and stop at Porte Dauphine in the XVI arrondissment, and stroll to Rue de la Faisanderie where you will find a very special place at number 16. Here you can witness the shockingly ingenuity and deception of the pirated and counterfeited products devised by devious but sometimes likewise brilliant minds at Le musée de la Contrefaçon. Quelle horreur, but how interesting! The Union des Fabricants pour la Protection Internationale de la Proprieté Intellectuelle (UNIFAB) has founded this museum already in 1951. See here. Therefore you can see the developments of the fakes over more than half a century and you will be confronted with some of its dramatic consequences. "The imitation will not have a secret for you anymore", as UNIFAB states. At the museum you will see that many of the counterfeits originate from China.

If you are not going to Paris this year you can visit another museum which exhibits the same subject matter: the Counterfeit Museum, sponsored by law firm Lehman Lee and Xu. Most law firms that deal with intellectual property law have a kind IP altar in the office where the fake and genuine goods are standing next to each other. It is a great idea to share them with the world via a virtual museum. Each law firm could do this, or even better when they join in so the collection at one museum will be more interesting. So far the Counterfeit Museum has four rooms: Clothing and Accessories, Food and Restaurants, Movies and Music, and Appliances.