Laws of the Guangdong Province

Regulations of Shenzhen Special Economic Zone on the Protection of Technical Secrets of Enterprises

(Adopted at the fifth meeting of the Standing Committee of the second Shenzhen Municipal People' s Congress on December 26, 1995)

Chapter ¢ñ General Provisions

Article 1 In order to protect the rights and interests of the enterprises lawfully owning technical secrets, preserve the initiative enthusiasm of scientific investment of enterprises, maintain the economic order of socialist market, and promote the technological advances of enterprises in Shenzhen Special Economic Zone (hereinafter referred to as "Special Zone" ), these regulations are formulated in accordance with relevant laws and administrative regulations of the State, as well as the actual circumstances of Special Zone.

Article 2 These regulations apply to the protection of technical secrets lawfully owned by the enterprises in Special Zone.

"Enterprise" in Special Zone refers to the enterprises as legal person and non-legal person registered in Special Zone.

Article 3 "Technical secret" in these regulations refers to the non-patent technology and technical information that are not known by the public, can bring economic interests to the public, have utilities, and have been taken confidential measures by enterprises.

Article 4 "Confidential measures" referred to in these regulations are:

(1) The enterprises lawfully owning technical secret have concluded confidential contract with the employees who have necessity to know the technical secrets and those persons who are relevant in business, or have filed a written requirement of confidentiality and informed it definitely to the relevant personnel and persons relevant in business;

(2) The enterprises lawfully owning technical secrets have already taken effective measures of control and management in deposit, use and transference.

Article 5 "Technique and technical information" referred to in these regulations include design, technology, data, formula, knack, etc, which are expressed through physical, chemical, biological and other forms.

Article 6 If different persons develop independently the same technical secret, every independent developer can use, transfer or disclose this technical secret, whatever the priority of development.

When the independent developer uses, transfers or discloses the technical secret, he shall provide relevant documents testifying the independent development.

Article 7 Any technical secret, which violates laws and regulations of the State, impairs national interests, social public interests, and departs from public morals, is not protected by these regulations.

If an enterprise doesn' t take effective confidential measures, which results in the disclosure of relevant technique and technical information, it is not protected by these regulations.

Article 8 The technical administrative department of Shenzhen Municipal is the competent department for the protection of technical secret of enterprises (hereinafter referred to as "municipal competent technical department " ). The municipal competent technical department is responsible for organizing and implementing these regulations, directing the protection of technical secrets of enterprises, supervising as well as investigating and prosecuting activities violating these regulations and assisting the judicial organization to appraise the technical matters in the case of infringing the technical secrets of enterprises.

Chapter ¢ò Protection of Technical Secret of the Enterprise

Article 9 If an enterprise requires its employees to keep the technical secret of the enterprise confidential, it shall conclude written confidentiality contract. If there is no written contract or the written contract is not definite, the expiration date of the employee' s obligation to keep confidential is the date when he leaves the enterprise.

If the employee having concluded the contract still has the obligation to keep confidential after he leaves the enterprise, the enterprise shall pay him confidentiality fees. The amount of the confidentiality fees is determined by the enterprise and the employee.

Article 10 The contract of confidentiality shall be concluded in written form, and conclude the following main articles:

(1) the content and scope of confidentiality;

(2) the rights and obligations of the two parties of the confidentiality contract;

(3) the time limit of the confidentiality contract;

(4) the amount and the mode of payment of the confidentiality fees;

(5) the liabilities for breaching the contract.

Article 11 The employees shall perform the following obligations during the lime of efficacy of the confidentiality contract:

(1) observe strictly the confidentiality system of this enterprise, and prevent the disclosure of technical secret of the enterprise;

(2) may not disclose the technical secret of the enterprise to other person;

(3) may not use the technical secret to carry out activities of production and operation or use the technical secret to engage in new research and development.

Article 12 The confidentiality contract terminates automatically when:

(1) the technical secret has already been public;

(2) the enterprise fails to pay confidentiality fees pursuant to the confidentiality contract.

Article 13 The enterprises may conclude confidentiality contract with the persons relevant in business who know the technical secret of the enterprise because of the necessity of business contact or the lawful assignee of the technical secret of the enterprise.

During the confidentiality contract' s period of validity, the persons relevant in business or the lawful assignees who take confidentiality obligations shall take effective confidential measures to prevent the disclosure of the technical secret according to Article 21, and Article 22 of these regulations. They may not betray, disclose or make public the technical secret of the enterprise.

The persons relevant in business who take the confidentiality obligations may not use this technical secret to carry out the activities of production and operation, or engage in new research and development.

Article 14 The enterprises may conclude contract of business restriction with employees who know or may know the technical secret of the enterprise.

The contract of business restriction refers that the enterprise agrees with employee that the employee may not hold a post in other enterprises producing the competing products of the same kind, and the enterprise pay certain amount of compensation fees to this employee.

Article 15 The contract of business restriction shall be separately concluded in written form and have the following main articles:

(1) concrete scope of the enterprises producing competing product of the same kind;

(2) time limit of business restriction;

(3) amount and mode of payment of the compensation fees;

(4) liabilities for breaching the contract.

Article 16 The time limit of business restriction may not exceed 3 years at the longest.

If the time limit is not agreed on in the contract of business restriction, it is 3 years.

Article 17 The compensation fees agreed on in the contract of business restriction may not be less than 2/3 of the total payment that the employee obtains from the enterprise in the last year before he leaves the enterprise.

If the compensation fees is not agreed on in the contract of business restriction, it shall be calculated pursuant to the lowest standard prescribed in the preceding paragraph.

Article 18 The enterprises shall put on record to the municipal competent technical department within 15 days from the date on concluding the contract of business restriction.

Article 19 The contract of business restriction terminates automatically, if one of the following conditions happens:

(1) the technical secret has already been public;

(2) the employee taking the confidentiality obligation doesn' t contact with the technical secret in fact;

(3) the enterprise violates labor contract to discharge the employee in advance;

(4) the enterprise violates the contract of business restriction, failing to pay the compensation fees or being behind in payment of the compensation fees without reasonable ground.

Article 20 When the enterprise amalgamates, splits or terminates, the contract of confidentiality and the contract of business restriction shall be taken or separately taken by the parties after the alteration, which perform the obligation of the contract and enjoy the due rights.

Chapter ¢ó Management of the Technical Secret of the Enterprise

Article 21 If an enterprise lawfully owns technical secret that need protecting, it shall establish and improve the internal management system of technical secret and appoint full time or part time managerial personnel of technical secret to conduct standard management to the technical secret of the enterprise.

Article 22 The enterprises shall confirm explicitly their lawful owned technical secrets. The ways of confirmation include the following:

(1) to stamp identification of confidentiality;

(2) if identification of confidentiality can not be stamped, it shall be confirmed by the special enterprise' s documents, which shall be served to relevant personnel who take the confidentiality obligation;

(3) other ways of confirmation that can be understood by the obligor.

Article 23 Enterprises may determine the degree of secrets and the time limit of confidentiality by itself in accordance with the length of life cycle of the technical secret, mature degree of the technologies, and the potential value as well as the market demands of the technologies, etc, unless laws and administrative regulations provide otherwise.

Article 24 Enterprises shall determine corresponding confidential measures to the scientific research project that need protecting when it is established.

Chapter ¢ô Legal Liability

Article 25 If any individual or organization infringes the technical secret of the enterprise and causes losses, he or it shall bear liability for compensation or other civil responsibilities, and take the reasonable fees that the enterprise being infringed paid for investigating the activities that infringes its lawful rights and interests.

Article 26 If the technical secret of the enterprise is infringed and losses are caused, the enterprise being infringed may select one of the following ways to calculate the compensation for the losses:

(1) taking the actual losses caused to the enterprise that lawfully owns the technical secret for being infringed as compensation;

(2) taking the total incomes that the infringer gains from infringement as compensation.

If the act of tort results in the complete openness of the technical secret, the infringer shall compensate the total value of the technical secret. The total value of the technical secret may be assessed by the appraising institution of immaterial assets approved by the State.

Article 27 If there exists one of the following acts of tort, the municipal competent technical department shall order the infringement to be stopped immediately and impose a fine more than 30,000 RMB but less than 150,000 RMB in accordance with the circumstances:

(1) The person, who bears the obligation to keep the technical secret confidential, discloses or uses this technical secret without the written consent of the lawful owner of the technical secret.

(2) The person, who bears the obligation of business restriction, holds a post in the enterprise producing the competing products of the same kind, or produces or trade in the competing products of the same kind, without the written consent of the lawful owner of the technical secret.

(3) Although the enterprise is fully aware that a person may not hold a post in it for bearing the obligation of business restriction, it still employs that person.

Article 28 If any enterprise or individual obtains technical secret through deception, theft, lure by promise of gain, coercion, subornation or other illicit means, the municipal competent technical department shall order it to stop the infringement immediately, return the materials and equipments relevant to the technical secret and impose a fine more than 50,000 RMB but less than 500,000 RMB.

Article 29 If any enterprise or individual obtains the technical secret through illicit means mentioned above and discloses, uses or transfers it, the municipal competent technical department shall order it to stop the infringement immediately, return the materials and equipments relevant to the technical secret and impose a fine more than 100,000 RMB but less than 1,000,000 RMB.

Article 30 If any individual or enterprise, which is fully aware or shall be aware that the technical secret is disclosed by breaching the contract or obtained through illicit means, assigns, uses or re-discloses the technical secret to others, the assignment contract is invalid and the individual or enterprise takes the joint liability for compensation. The municipal competent technical department seals up the materials and equipments relevant to the technical secret and impose a fine more than 50,000 RMB but less than 300,000 RMB.

Article 31 If the enterprise fails to pay confidentiality fees or compensation fees according to the contract of confidentiality or contract of business restriction, it shall take the liabilities for breaching the contract in accordance with the contract of confidentiality or contract of business restriction.

Article 32 If any individual or enterprise steals illegally the technical secret lawfully owned by other enterprise, and the circumstances are serious enough to constitute a crime, the judicial department shall pursue the party' s criminal liabilities with the crime of theft.

If any individual or enterprise steals illegally the technical secret lawfully owned by other enterprise and causes great losses to the enterprise, the judicial department shall pursue the party' s criminal liabilities.

Article 33 If the assignee or the person who knows the technical secret doesn' t know and has no reasonable basis to know that this technical secret is transferred illegally or disclosed by breaching the contract, the liabilities of compensation is taken by the illegal transferor or the discloser who breaches the contract. If the technical secret has not been public yet, the assignee or the person in the know shall stop using it immediately after learning that it is transferred illegally or disclosed by breaching the contract, and take reasonable and effective means to keep it secret. The losses caused to the assignee or the person in the know and the fees of taking confidential measures may be recovered form the illegal transferor or the discloser who breaches the contract. If it could not be recovered, it shall be divided by the enterprise lawfully owning the technical secret and its assignee or the person in the know. The assignee or the person in the know of technical secret may use it continuously with the written agreement of the enterprise lawfully owning it.

Article 34 When the dispute about the protection of the technical secret of the enterprise arises between parties, if there is arbitral agreement, the parties may apply for arbitration to Shenzhen Arbitral Commission.

Article 35 If the parties don' t accept the penalty decisions, they may apply for review to the Administrative Review Department of Shenzhen People' s Government within 15 days from the date on receiving the notice of a penalty decision; if they don' t accept the decision of reconsideration, they may file a lawsuit to People' s Court within 15 days from the date on receiving the decision of reconsideration. The parties may also file a lawsuit directly to People' s Court.

If the parties don' t file a lawsuit delinquently or implement the penalty decisions or reconsideration decisions, the municipal competent technical department may apply for coercive execution.

Chapter ¢õ Supplementary Provisions

Article 36 If the content of the technical secret is disclosed in the internal or external mass media, or is used publicly in domestic, it is deemed to be public already.

Article 37 Shenzhen People' s Government may formulate the implementing rules according to these regulations.

Article 38 These regulations shall go into effect as of January 1, 1996.