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Use caution in trade secrets despite China trade deal assurances

by | Jan 27, 2020 | Trade deals

A recent trade deal between the U.S. and China will have an enormous impact on how the two countries interact. One of the largest ramifications could address problems involving trade secrets, but that isn’t guaranteed to make them the preferable option.

In the past, China required U.S. companies to transfer technology over to Chinese companies in order to enter the market. Presenting technology that is protected by trade secrets is an exercise in trust, to be sure. While the pact signed recently says this will no longer be a requirement going forward, you may still want to think twice about protecting your valuable ideas with a trade secret label.

Close to the vest

Trade secrets differ a good deal from protections like patents, and they certainly can have some benefits. A trade secret typically lasts as long as it remains a secret, while a patent requires upkeep and will expire after 20 years. There are no costs for registering a trade secret, aside from those used to keep the information secure. That said, it all hinges on confidentiality, and there are ways that you could lose protections.

Behind the mystery

Problems can arise when your secrets are exposed:

  • Reverse engineer: Just because you haven’t put the blueprints of your idea out for the world to see, doesn’t mean they aren’t going to look. The competition can legally attempt to reverse engineer your product to determine how it all fits together.
  • Public access: When a competitor picks apart your ideas and puts them back together, they can market the product or otherwise publicize the information.
  • Theft: Trade secrets have been stolen by Chinese nationals and divulged to private companies or the Chinese government for use by state-owned entities. The recent trade deal includes promises by China to provide additional protection and enforcement, as well as mechanisms if that does not occur.

Trade secret protection can come with unique challenges. Often, pursuing patent protection is a more secure approach.