Trade Secret Protection in Hong Kong

Protecting business secrets in Hong Kong is not only an option but also a mandatory requirement for businesses to survive and thrive in a highly competitive environment. From securing sensitive customer data to protecting unique manufacturing recipes, every business needs to build a comprehensive security system. By investing in state-of-the-art technology solutions, raising awareness among employees, and strictly complying with legal regulations, businesses not only protect their valuable intangible assets but also build trust with customers and partners. Viet An Law would like to guide you on how to protect your trade secrets in Hong Kong through the following article.

The concept of trade secrets in Hong Kong

Information can be categorized into three categories:

• Business Secrets: This is the type of information that has the core value of a business, helping to create a competitive advantage. Trade secrets include information that has not been made public, such as manufacturing recipes, proprietary business processes, lists of important customers, etc.
• Confidential information: This type of information is sensitive and needs to be protected but has not yet reached the level of a trade secret. Examples include internal business plans, undisclosed financial information, etc.
• General knowledge and skills: This is general, non-proprietary, and easily searchable.

The key difference between trade secrets and confidential information lies in the level of protection. Trade secrets are strictly protected by law, even after the employee leaves the company. In contrast, confidential information is only protected while the employee is still working for the company. In order to protect confidential information after the end of the labor contract, the enterprise needs to have binding terms in the contract. This clause will limit the unauthorized disclosure or use of confidential information by employees.

In short, trade secrets are valuable intangible assets of businesses. The effective protection of business secrets is an important factor for businesses to maintain competitiveness and sustainable development.

Identifying Business Secrets in Hong Kong

 Business secrets are proprietary information or knowledge, which is the core that makes a difference and competitive advantage for a business. Specifically, trade secrets must meet the following criteria:

• Core elements of the business: This information plays an important role in business activities, contributing to the creation of value and profits.
• High security: Information is not publicly available and is strictly protected. Only a few people in the organization know about it.
• Valuable: This information brings economic benefits to the business, as it helps the business create unique products and services or minimize costs.
• Protected by confidentiality measures: Businesses take measures to keep information confidential and avoid being exploited by competitors.
• Damage if disclosed: If information is leaked, competitors can take advantage of it to harm the business, such as copying products, discounting competitive prices, or stealing customers.

Some examples of trade secrets: proprietary manufacturing formulas, special production processes, VIP customer lists, long-term business plans, software algorithms, unique product designs, etc.

Guide to the Protection of Trade Secrets in Hong Kong

Establishing internal processes and policies is extremely important. These regulations not only clearly define what information is a trade secret, but also instruct employees on how to handle and protect this information.

• Identification and classification: Businesses need to clearly identify what information is confidential and classify them according to their importance.
• Restricted Access: Only employees who really need it are allowed access to confidential information. Limiting access helps minimize the risk of information leakage.
• Confidentiality agreements: When working with partners or suppliers, businesses should require confidentiality agreements to ensure that information is not disclosed to the outside world.
• Propaganda and training: Employee awareness of the importance of protecting trade secrets is crucial. Businesses need to organize training sessions to raise awareness for employees.
• Handling of violations: Enterprises need to take strict measures to handle cases of violation of regulations on protection of business secrets.

One of the effective ways to protect trade secrets is to adopt a “need to know” policy. Accordingly, only employees who are directly related to the work have access to the necessary information. This helps to minimize the possibility of information leakage.

However, protecting trade secrets is not always easy, especially in the face of competitors who are willing to use all tricks to steal information. Therefore, businesses need to continuously update and improve protection measures to ensure the safety of their intellectual property.

Handling in case of detecting violations of trade secret protection in Hong Kong

When your trade secrets are unauthorised, you can do the following:

• Temporary restraining order: You can ask the court to issue an immediate restraining order for unauthorized use of your trade secrets. This injunction will prevent possible damage while waiting for the lawsuit to be officially resolved.
• Damages: If you can prove that the disclosure of trade secrets caused damage to you, you have the right to seek compensation from the breaching party. The amount of compensation can include both direct (e.g., loss of revenue) and indirect (e.g., damage to reputation).

Two common forms of litigation:

• Breach of contract: If you have a contract with the breaching party, which includes a confidentiality policy, you can sue them for breaching the contract. The contract will be strong evidence to prove the ownership and confidentiality of the information.
• Breach of trust: Even in the absence of a contract, you can sue the infringer based on the principle of confidentiality protection. The condition for determining a breach of trust lawsuit is that the information must be highly confidential, that you have taken measures to protect the information, and that the infringer has used it unauthorized.

Conditions for determining a breach of trust lawsuit:

• Confidentiality: The information should be confidential, not public.
• Confidentiality obligation: The recipient of the information must clearly understand that the information is confidential and has an obligation to keep it confidential.
• Unauthorized Use: The recipient of the information has used or disclosed such information without your permission.