Mr. Wang (“Wang”) and Company A (“A”) have signed “Confidentiality Agreement”, in which stipulated that Wang shall keep confidential A’s trade secrets, including the experimental data and etc., and the confidential term shall be the term of the employment and 2 years after termination of this employment. 2 years after the termination of this employment, Wang disclosed the experimental data to Company B. By using those data, Company B produced similar products and sold them at a low price, which helped it to occupy the market quickly. A found Wang’s disclosure action, it filed a lawsuit against Wang for the infringement of trade secrets immediately. However, Wang refuted A’s application by explaining that the confidential term had expired, which means that he could disclose relevant information upon the expiration of such confidential term.
“Anti-Unfair Competition Law” Article 10 Section 1 has stipulated that in violation of the agreement or against the obligee’s demand for keeping trade secrets, disclosing, using or allowing others to use the trade secrets he possesses, such action shall be deemed as the infringement of trade secrets, but “Anti-Unfair Competition Law” is used to regulate business operators, there is controversy on whether it can be used to regulate employees. “Several Provisions on Prohibiting Infringements upon Trade Secrets” (Order No. 86 of the State Administration for Industry and Commerce) has stipulated the forbidden provisions on the action that for an employee of the obligee of trade secrets, his breaching the contract or violating the obligee’s requirements about disclosing, using or allowing others to use the trade secrets he has access to. In view of this, if the obligee has made an agreement with the employee on the confidential term, when the term is expired, can we comprehend that the employee has the right to disclose the obligee’s trade secrets?
In practice, where the obligee has made an agreement with the employee on the confidential term, when the term is expired, usually the employee may not be bound by the confidentiality agreement. In this case, Wang and A have signed the confidentiality agreement, in which has stipulated the confidential obligations and term, it is highly possible for Wang to win the case, because he is not bound by the confidentiality agreement. Whether A can plead that Wang has breached A’s regulations that the employee shall keep trade secrets confidential during the employment and after the termination of the employment? In other words, where any discrepancy arises between the confidentiality agreement and the obligee’s demand for keeping trade secrets on the confidential term, whether the obligee can assert that the employee has violated the company’s regulations and this disclosure action shall be deemed as the infringement of trade secrets?
According to the “Labor Contract Law” and the relevant judicial interpretations, where any discrepancy arises between the employer’s internal rules and regulations, and the labor contract, if the employee applies that the latter one shall be prevailed, the court shall sustain this apply. Normally, the provisions in the confidentiality agreement may be deemed as having priority to the employer’s internal rules and regulations. However, if the labor contract has stipulated that the internal rules on confidentiality of trade secrets are the attachments of the labor contract, and shall have the same legal effect with the labor contract, it is possible for A to argue for Wang’s infringement based on this reason.
In practice, many employers have stipulated the confidential provisions and non-competition provisions in the same agreement, since “Labor Contract Law” stipulates that the non-competition term shall be no more than 2 years, most of these employers may stipulate the confidential term referring to the non-competition term. In fact, neither “Labor Contract Law”, nor other laws or regulations have stipulated the restriction provisions on the confidential term, so there is no benefit for the employer to stipulate the confidential term.
Meanwhile, as mentioned above, in order to avoid the risks or losses, the employers shall coordinate the consistency among the content of internal rules and regulations, labor contract and other agreements, the effectiveness of the provisions of various documents, based on the specified circumstances.