and Technology. The ICT rules for banks were not published in advance for public comment and were not published in their entirety in final form. These rules would regulate the use of ICT products, services, and technologies by financial institutions operating in China by requiring that an increasing percentage of these products, services and technologies be purchased from suppliers whose IPR is indigenously Chinese. In addition, the rules would require foreign firms to conduct ICT-related R&D in China and to divulge proprietary intellectual property as a condition for the sale of ICT products in China. On April 13, 2015, China issued an official notice to its banking sector, including to Chinese and foreign-owned banks, suspending its September 2014 ICT rules for banks. The United States welcomes this suspension and looks forward to receiving reports that conditions for U.S. ICT firms and market practices have returned to normal. The United States calls on China to engage with the United States and other governments and industry as it develops ICT policies in line with its international commitments and consistent with global standards and industry best practices. In discussions to follow, it is imperative to ensure that foreign and domestic IPR is treated the same and to ensure that product choice is decided by businesses independently and not as a pre-condition for market access.
Trade Secrets
Trade secret theft is a serious and growing problem in China. Misappropriation of a trade secret may arise in a variety of circumstances, including those involving departing employees, failed joint ventures, and cyber intrusion and hacking. Particularly troubling is misappropriation reportedly arising from the misuse of information submitted to government entities for purposes of complying with regulatory obligations. The misappropriation of trade secrets and their use by a competing enterprise can have a devastating impact on a company's business, making the company's recourse to adequate and effective legal remedies particularly important.
Under Chinese law, however, available remedies are difficult to obtain, given that civil, administrative, and criminal enforcement against misappropriation of trade secrets remains severely constrained. Enforcement obstacles include deficiencies in China's AUCL, constraints on gathering evidence for use in litigation, difficulties in meeting the criteria for establishing that information constitutes a trade secret, and criminal penalties that are not clearly deterrent. In addition, the AUCL's primary application is to "commercial undertakings" and not individual actors, and requires that a trade secret have "practical applicability," which may limit the scope of protection for early stage research. There are other important weaknesses in China's civil enforcement system, which relate to mechanisms for gathering evidence, and procedures for obtaining preliminary injunctions. Without changes to address these weaknesses, some of which are not specific to IPR but relate to China's civil process generally, effective enforcement against misappropriation of trade secrets in China will remain challenging.
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