The technical secrets at issue, the “RT Pace process” and the “4020 process”, with a total of 22 secret points, were initially developed by Sennics, one of the world’s largest producers of RT Pace and 4020 antioxidants.
The lawsuit filed by Sennics was accepted by the Jiangsu Higher People’s Court on 29 April 2019. Sennics claimed that during the period from 2007 to 2012, Chen and Xiangyu Company actually controlled by him stole the technical secrets, by way of baiting one of engineers working for Sennics, and utilized the technical secrets to renovate and build new production lines of RT Pace and 4020 antioxidant. On 28 December 2018, the Jiangsu Higher Court ruled that Xiangyu Company constituted the crime of infringing trade secrets. However, after the criminal case, they did not stop the infringing behavior, but had been using the production line to continue to produce infringing products. In 2017, Chen set up a separate Jinteng company, continuing to use the production line as well as the technical secrets to produce infringing products, thus, Chen and Jinteng Company constituted a joint infringement. Sennics requested the court: 1) to order the defendants to immediately stop the infringement of its technical secrets; 2. to order the destruction of the infringing production equipment which was manufactured by using its technical secrets; 3. to order Chen and Jinteng Company to jointly and severally compensate it for the economic loss of RMB201.54 Million, and reasonable expenses for the investigation and suppression of the infringement, including the attorney’s fee, notary’s fee, and travel expenses, totaling RMB 469,542.
The Jiangsu Higher Court recognized the duration of the claimed infringement as the period from 2007 to 2019, in its first instance judgment. The court also concluded that technical information such as dimensional values, equipment conditions, design parameters, process indicators, technical requirements, orifice distribution diagrams and orifice table data in the drawings, tables, and operating procedures corresponding to each of Sennics’ 22 confidentiality points were not available to the public, and Sennics had taken reasonable measures to maintain confidentiality, by formulating a confidentiality system, signing technical confidentiality agreements with equipment suppliers, and taking various internal control. Chen and Xiangyu Company committed the joint infringing acts of obtaining, disclosing and using the technical secrets by improper means from 2007 to 2019, and Jinteng Company knew of the above violations and still used the technical secrets, which constituted the joint infringing acts with Chen and Xiangyu Company from 2017 to 2019.
Based on the above, the Jiangsu Higher Court, in accordance with Articles 9, 17, 32 of the PRC Anti-Unfair Competition Law, Articles 8, 15 of the PRC Tort Liability Law (which has been repealed as of 1 January 2021, the date of entry into force of the Civil Code), Articles 9, 11, 16, 17 of the Interpretation of the SPC on Several Issues Concerning the Application of Law to the Trial of Civil Cases of Unfair Competition, and Article 142 of the PRC Civil Procedure Law (amended in 2017), determined that Chen and Jinteng Company should immediately stop infringing on Sennics’ trade secrets, until the trade secrets have been known to the public, destroy, within fifteen days, the allegedly infringing production equipment manufactured using Sennics’ trade secrets (which was necessary, as per the court, even if the equipment was under a finance lease). Regarding the compensation, the court ordered the defendants to fully compensate Sennics for the economic loss of RMB201.54 Million, the license value of the complete process technology for the production of rubber antioxidant 4020, calculated based on the market value of Sennics’ technical information as of 21 April 2012 using the income approach, as documented in the appraisal opinion of an appraisal report. Further, Sennics’ request for reasonable fees of RMB 469,542 was also upheld in full by the court.
Dissatisfied with the judgement of first instance issued by the Jiangsu Higher Court on 15 November 2021, Chen and Jinteng Company appealed to the SPC. The panel questioned the parties on 8 November 2022, and heard the case in closed session on 15 March 2023. On 27 December 2023, the SPC made a final decision, and the decision was published on 17 January 2024.
According to the final decision, the SPC affirmed the facts set forth in the first examination as true, and accordingly maintained the Jiangsu Higher Court’s conclusions on infringement and specific amount of compensation. But the SPC withdrew the judgment of the court of first instance on the destruction of the infringing production equipment and requested the court of first instance to conduct a new trial, after the addition of the interested parties, considering that there was a dispute between the parties as to the attribution of the rights to the infringing equipment.
This case is monumental for several reasons. First, it demonstrates China’s evolving and strengthening stance on protecting trade secrets, an area historically perceived as lacking rigorous enforcement. The hefty compensation and the court’s detailed analysis of the infringement reflect a serious commitment to intellectual property rights. Second, the retrial order on the equipment destruction issue highlights the complexities involved in executing court judgments, especially when third-party rights are implicated. It underscores the necessity for respecting all parties’ legal rights.
This landmark case not only reinforces the legal protections for trade secrets in China but also symbolizes a significant stride towards a more just and equitable intellectual property regime. This decision is a clear message to the global business community about China’s dedication to upholding the sanctity of trade secrets and fostering a fair competitive environment. It serves as a warning to potential infringers and a reassurance to innovators that their intellectual assets will be robustly protected under Chinese law.