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Tech secrets and doing business in China

Technological information means profits for American companies. But loss of that information due to trade theft can be extremely costly.

American companies make a variety of concessions when doing business in China. Before doing business, the Chinese government requires American companies to provide technological information regarding their products and services.

Ordinarily, Chinese officials ask American companies to form joint ventures with existing domestic firms in China. This allows those Chinese companies to gain access to information that otherwise remains secret. China requires that technological information be stored locally. This means government officials have the ability to review and control such information.

What are the consequences of such stringent requirements?

The access to American company information by Chinese local officials makes possible greater theft of trade secret information. This theft includes sales of pirated software and counterfeit goods. This costs the American economy between $225 billion to $600 billion annually.

As China wishes for a more high-tech economy, the incentive to infringe on American technology is strong. It’s not just domestic Chinese businesses interested in this information. The Chinese government wants for its country to become dominant in this area. China is interested in advancements in the area of artificial intelligence, electric cars and in mobile networks.

With over a billion people residing in China, it’s obvious why American companies wish to do business there. Yet because many American companies may not understand Chinese legal requirements, it is important to have access to legal advice from attorneys who understand the ramifications of Chinese trade law.

Especially when it comes to technological innovations, trade secret information can be an American company’s most important asset. It is therefore important to take every precaution in protecting this information.

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