Trade Secrets

Know-how and trade secrets are often the basis for commercial success. Such know-how can give a business a substantial competitive edge. Information is therefore very much an asset of any business.

In order to stay ahead it is necessary to keep confidential information and know-how out of the public domain. Once the information is in the public domain its value is lost.

There is no statutory protection for confidential information.

The courts in Hong Kong will, however, act to prevent improper use or dissemination of confidential information and trade secrets in certain circumstances.

In essence the circumstances in which the courts would be prepared to act are:

• the information must be capable of being protected, for example a secret formula or method of manufacture;
• the information must have been obtained in circumstances that gave rise to an obligation of confidence; and
• unauthorized disclosure of the information would be damaging to the business.

There are various steps a business can and should take to ensure that it will be able to prevent unauthorized use of information by employees. For example a clause that prohibits misuse of information acquired while employed, placed in the employment contract of all employees and in the service contracts of directors, imposes a binding contractual obligation on them with which they must comply.

Failure to take appropriate steps may result in a business being unable to prevent misuse of information.