China sets new damages record in EV trade secrets case
Supreme People’s Court delivers $88m verdict after ‘large scale poaching’ of employees | Defendant launched electric vehicles “in short period of time” using rival’s technical information.
China’s Supreme People’s Court has set a record for the amount of compensation awarded in a trade secrets case in China, handing 640 million yuan ($88 million) to an automobile company after the “large-scale poaching” of nearly 40 employees by a rival.
The judgment, released on Friday, June 14, marks the first trade secrets case in China related to electric vehicles—concerning technical information about new energy vehicle chassis technology.
China’s IP court also explored new measures for stopping the infringement of trade secrets, which included ruling that the court could “directly use its authority when necessary to refine the specific way, content, and scope of stopping infringement as much as possible”.
According to the judgment, nearly 40 senior managers and technical personnel from Chengdu Gao Automobile Industry—a subsidiary of Zhejiang Ji Group—resigned and went to work for Wei Automobile Technology Group.
In 2018, Ji Group discovered that Wei Group had applied for 12 utility model patents covering new energy vehicle chassis technology, using some of its former personnel as inventors or co-inventors.
Wei Group also “launched Wei EX series electric vehicles in a short period of time without any technical accumulation or legal technical sources”, purportedly having used Ji Group’s trade secrets, the court said.
Ji Group filed a lawsuit with the first instance court, requesting 2.1 billion yuan in damages. The court held that the defendant had infringed Ji Group’s technical secrets and ordered it to pay 7 million yuan in total.
Clarity on relief for secrets infringement
The company appealed the judgment to the Supreme People’s Court, which held that the case was an infringement of trade secrets “caused by the organised and planned large-scale poaching of new energy vehicle technical talents and technical resources by improper means”.
For cases such as these, the court said that it should pay attention to overall analysis and comprehensive judgment when hearing, and that it was “no longer necessary to compare the specific secret information points in the technical secrets involved in the case one by one”.
It also clarified the specific methods, contents and scope of stopping the infringement, which in this case included: preventing the defendant from using Ji Group’s trade secrets until they become known to the public; barring the defendant from using, licensing or selling the 12 utility model patents that had been gained using the trade secrets; and destroying all materials containing the proprietary information.
When determining the damages, the court said that Ji Group had failed to provide direct evidence of the actual losses suffered due to infringement.
The court took into account the research and development costs or losses reduced by the infringement of the trade secrets, and applied double punitive damages based on the “egregious” circumstances of the infringement.
However, it was reported that the defendant was bankrupt and collection was unlikely.
