Undisclosed Commercial Information – Trade Secrets
August 14, 2010
Trade secrets and undisclosed commercial information are confidential information in a commercial setting, such as formulaes, methods, technologies, designs, product specifications, business plans and client lists, that have commercial value. In Hong Kong, trade secrets and undisclosed commercial information are protected by common law of confidence. An obligation of confidence will arise whenever the information is communicated to or acquired by a person who knows or ought as a reasonable person to know that the other person wishes to keep that information confidential. An industry or trade custom or practice may also impose an obligation of confidence. The release of trade secrets and undisclosed commercial information would be detrimental to the owner or advantageous to his or her competitors or others. The remedies available for breach of confidence include injunctions, damages, account of profits and delivery up of materials containing confidential information. To enhance the protection of trade secrets and undisclosed commercial information, you should sign non disclosure agreement with everyone who has knowledge of your secrets.
Protection of trade secrets and undisclosed commercial information is of particular importance when the IP is not registrable or you find the period of patent protection (20 years) not long enough. Whereas patents enjoy a limited term of protection, trade secrets and undisclosed commercial information protection last until the information becomes public knowledge. The formulae for Coca Cola is a good example of long-kept trade secrets and undisclosed commercial information. However, trade secrets and undisclosed commercial information do not give you exclusive rights. Your competitors may independently invent an identical product or process or come up with the same ideas which they can exploit freely.
How do trade secrets and undisclosed commercial information differ from patents or copyright?
The application for a patent requires disclosure of details of invention. In other words, details of a patented invention cannot be kept confidential as trade secrets and undisclosed commercial information. As said above, patents enjoy a limited term of protection but trade secrets and undisclosed commercial information last for as long as the information remains confidential.
Copyright only protects the form in which ideas and information are expressed, but not ideas and information per se. The law of confidence protects the substance of ideas and information, no matter how they are expressed. There are statutory permitted acts for works protected by copyright but not works protected by confidence.
The above only set out some basic principles of trade secrets and undisclosed commercial information. You may seek independent professional advice for protection of your trade secrets and undisclosed commercial information from Ming Dynasty (HK) Limited.
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Contract Damages
June 20, 2009
Chinese contract law is far more flexible with respect to remedies than the common law since it is based on civil law. China makes no distinction between law and equity. As a result, in addition to money damages, Chinese law provides for specific performance, contract liquidated damages, deposit, loss of bargain damages and incidental damages. Most importantly, the use of one remedy does not exclude the application of another remedy. For example, if contract damages are not sufficient to compensate for a party’s actual damages, Article 114 of the Contract Law provides that the injured party can request that the court order payment of an amount sufficient to allow for complete relief. However, to prevent abuse, the reverse is also true. Contract Law Article 114 provides that where stipulated contract damages are “excessively higher than actual damages”, the defendant may request a reduction in the amount. Explanation 29 provides that an amount 130% higher than actual damages will generally be considered “excessively high.” However, the burden of proof in establishing the amount of actual damages is on the defendant. In the absence of clear proof, there is a strong tendency for Chinese courts to accept the stipulated contract damage amount.
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