In 2011, several employees of a foreign-invested company in
Shanghai decided to leave their employer to establish a direct
competitor. Planning their escape well in advance, the employees
collected customer lists and product information from the
subsidiary, and transferred these to their personal email accounts.
A company was established through proxies, meanwhile the employees
resigned one by one. When the company discovered what had happened,
most of the damage was already done. Through their former sales
manager the competitor had approached many of its clients: Using
the confidential information taken from the foreign-invested
company, the competitor offered the same products at terms which in
each case were slightly more attractive.
The company decided to fight this injustice, and approached
R&P to represent it. To determine the optimum strategy, our
client identified three priorities:
To be able to tell and show the market that our client was
fighting for its rights;
To do all we could to make it as difficult as possible for the
competitor to develop its business at our client's
To win the case, and obtain compensation for damages.
We advised to file a claim jointly against the former employees
and the competitor, for infringement of our client's trade
secrets. The client agreed, and so the case was filed, bank
accounts of the defendants were frozen, and we dug in for the long
Trade secret infringement cases are particularly difficult to
win in China. The burden is on the victim to prove a number of key
steps, which in this case included:
that the stolen information meets the restrictive definition of
trade secrets under Chinese law, with respect to the nature of the
information (e.g. is it really not available in the public sphere)
the actions that our client had taken to keep it secret, its
commercial value and whether it is practically applicable;
that these trade secrets had in fact been stolen by the
that these trade secrets had been passed on to the competitor,
and that the employees and the competitor had actually used them
for commercial gains;
that our client had suffered substantial damages as a result of
the infringement, with a calculation such damages to guide the
court on compensation.
For the IP division of the Putuo District Court, this case was
only the few trade secret infringements they had ever handled -
another clear sign of how unusual these cases really are.
Fortunately, we were able to convince the court to take this case
seriously. The judge even agreed to proceed to the tax office to
determine the amount of business that the competitor had done with
our former customers, information we could not have obtained
without the court's assistance. With this information, we could
determine how much the competitor had profited from this
information, which became the legal basis to calculate our
After almost two years, the Putuo District Court finally issued
its judgment in late November of 2013. The court did not only
confirm the trade secret infringement by the competitor and one of
the employees; it also ordered these two parties to pay a
substantial amount of damages to compensate our client. The
favorable judgment further allowed our client to inform its
customers of the true nature of this "competitor",
support that our client's sales people gladly accepted to
regain some of the lost market share.
We are grateful for the patience and trust that our client has
shown in China's judicial system; court cases are never easy in
China, but the efforts required this time were unusually great. We
also commend the strong showing of the Putuo District Court in
recognizing the infringement and protecting the legitimate rights
of foreign investors. Last but not least, our congratulations to
Mr. Lu Zhiqian, Ms. Teresa Su and Mr. Maarten Roos for bringing
this difficult case to a good end!
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