In today’s highly digitalised business landscape, a company’s core value is increasingly defined by its trade secrets. For internet and technology companies in particular, digital assets such as technical specifications, algorithmic models, and user data form the foundation of their competitive edge.
Senior executives, at the heart of corporate operations, necessarily have deep access to these sensitive materials. Their departure, therefore, becomes a critical juncture at which the risk of trade secret leakage sharply increases. The challenge for legal and corporate governance lies in finding the right equilibrium; safeguarding a company’s intangible assets while preserving fair and reasonable mobility for top talent.
Digital trade secrets
Ethan Zhang
Senior Partner
Joint-Win Partners
In the digital era, the form, medium and value-creation mechanisms of corporate trade secrets have evolved profoundly from their traditional counterparts. According to article 10 of China’s Anti-Unfair Competition Law, a trade secret is defined as “technical or business information that is not publicly known, that possesses commercial value, and for which the rights holder has adopted corresponding confidentiality measures”.
Within the digital business ecosystem, core source code, proprietary algorithms, dynamic database architectures and real-time user profiles have emerged as key components of trade secrets, forming the most critical competitive barriers for many enterprises.
From a legal perspective, a trade secret must still satisfy the three fundamental elements of secrecy, commercial value and reasonable efforts to maintain confidentiality. Yet in the context of digitalisation, the notion of “confidentiality” has taken on new dimensions.
Beyond traditional institutional safeguards such as non-disclosure agreements and access-control protocols, companies must also employ technologically adaptive measures, ranging from data encryption and tiered access permissions to operational log tracking and cybersecurity audits, to demonstrate their “reasonable efforts” at preserving confidentiality.
In practice, the adequacy and adaptability of an organisation’s confidentiality framework, particularly amid cloud deployment, rapid iteration and multi-terminal access, have become decisive factors in judicial determinations of whether digital assets qualify as legally recognised trade secrets.
Senior executives
In the digital world, the confidentiality duties of senior executives have become broader, deeper and more technically complex, shaped by both statutory responsibilities and contractual obligations.
First, the scope of executives’ confidentiality obligations has expanded. What needs to be protected is no longer confined to traditional business information. It now extends to emerging categories of digital assets such as user data, machine learning models, system architectures and unreleased product logic.
Second, the nature of these obligations has evolved. Executives are not only bound by a negative duty to refrain from disclosing confidential information but also by a positive duty to manage it responsibly, overseeing data classification, access controls and cybersecurity protocols. The digitalisation of operations has accelerated the flow of information, making any leak spread swiftly and its damage hard to contain.
Third, the expectations placed on executives’ confidentiality practices have become more stringent. For instance, a recent high-profile leak at a technology company revealed that marketing strategies and product blueprints under an executive’s remit were closely tied to the company’s AI transformation and algorithmic applications, illustrating how senior roles now inherently combine strategic and technical responsibilities within a tightly integrated confidentiality framework.
Under the digital governance framework, executives now stand at the centre of corporate data compliance and trade secret protection, with their confidentiality duties increasingly dynamic, technology-driven and system-based.
Digital compliance shield
The protection of trade secrets has moved beyond traditional physical boundaries. In the digital economy, companies must establish a dynamic and intelligent defence system that spans the entire data lifecycle. Drawing on current technological trends and legal practice, enterprises can strengthen their “digital immune system” through several key strategies.
Establish a comprehensive data governance framework. By leveraging data classification and grading technologies, companies can automatically identify and label information that qualifies as trade secrets. A closed-loop management mechanism covering creation, storage, transmission and destruction should be implemented, supported by encrypted storage, access logging and digital watermarking. Such measures enable full traceability of data operations.
Implement dynamic access and permission controls. Adopt role and context-based mechanisms that align data privileges with specific job functions and project requirements. Support these with multi-factor authentication, endpoint monitoring and anomaly alerts, and apply the “minimum necessary” access principle alongside dynamic data masking for highly sensitive information to reduce the risk of internal privilege abuse.
Promote technology-enabled auditing and training. Use digital learning platforms to deliver regular, scenario-based confidentiality training. At the same time, deploy user-behaviour analytics and data loss prevention systems to audit data flows and detect unauthorised exfiltration in real time, integrating intelligent interception to shift from passive response to proactive protection.
Strengthen digital compliance and contracting processes. Use electronic signatures and online workflows to have employees sign confidentiality and data-protection agreements promptly at key stages such as onboarding, job transitioning and system access approval. Automated compliance tools should be used to review data protection performance regularly, ensuring that technical safeguards and management policies operate as a coherent, legally enforceable system.
In the digital economy, businesses should build adaptive and well governed systems to protect trade secrets, rather than relying on non-compete clauses to keep talent in place. Executives should also respect the boundaries of law and professional ethics, and treat trade secrets with genuine prudence.
The digital economy will only prosper if companies can strike a lasting balance between protecting core competitiveness and upholding the lawful rights of their people.
Ethan Zhang is a senior partner at Joint-Win Partners
Joint-Win Partners
Room 6101, Shanghai Tower
479 Lujiazui Ring Road, Pudong New Area
Shanghai 200122, China
Tel: +86 21 6037 5888
Fax: +86 21 6037 5899
E-mail: zhangyichen@joint-win.com
www.joint-win.com
