China Labour Law and IP management

As I’m in Shanghai this week, and further to my recent post on employee IP, I recently had reason to look into the June 2007 update to the Labour Contract Law of China (which will come into force on 1 January 2008).

Some interesting points from the law:

  • non-compete periods are allowed, but up to a maximum of 2 years (these are unenforceable in many countries);
  • breaking a non-compete results in paying liquidated damages;
  • the parties to sort out the terms – including period, geographical reach, compensation to the employee (if at all), etc.

The new Law has been widely acclaimed as protecting worker’s rights, though it would appear that from an IP standpoint, this isn’t so clear cut.

Companies engaged in confidential and high tech industries are no doubt happy enough with the above changes. Those with a global presence may want to consider this as one of the reasons to scale up their Chinese presence.

2 Comments on “China Labour Law and IP management

  1. What you have written about here has pretty much always been allowed in China.  The new labor law (like so many of China’s laws) merely states in a new place that it is allowed.  China not only allows non-competes, it also allows trade secret provisions. 

  2. Dan / Steve – thanks very much for your comment and welcome.Great – so they’re not changes at all – just a codification of what was already there.  Has it given a bit more certainty to the situation though?Did you want to comment on the impact of non-competes being allowed in China given that they can be unenforceable elsewhere?

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