SME Case Study

• Pages: 10-10

7. SME Case Study

Background

A Chinese-foreign joint venture company (“Company A”) was engaged in the development and sale of integrated circuit

cards (“IC cards”). While still employed by Company A, an employee contacted a rival IC card manufacturer (“Company

B”) and helped it to establish a competing IC card manufacturing operation. Several months later, the employee quit.

Almost immediately aer the employee’s departure, Company A discovered that Company B was selling an identical IC

card system using nearly identical technology.

Actions taken

Company A requested the court to preserve evidence from Company B’s business premises and obtained the two

computers containing Company A’s soware, Company A’s design diagrams, customer lists, marketing materials,

technical documents, and note from the employee containing technical specications for modifying Company B’s IC

card soware. Company A then sued Company B and the former employee and provided evidence, such as Company

A’s employment contract including a condentiality clause and agreement that IC card technologies developed by

employees belong to the employer signed by the employee, striking similarities between the IC card systems, and a

statement from a customer of Company A stating that the employee had copied Company A soware from the IC card

system that he had purchased.

Outcome

The People’s Court determined that the Company A’s IC card technology was a trade secret because the technical

information disclosed had commercial value and the employment contract with condentiality provisions demonstrated

Company A’s eorts to keep the information a secret. The court also found that the employee had disclosed the

information without permission because the employee was simultaneously employed by both companies for a period

of time, the Company B’s product was almost identical to Company A’s product, and Company A soware and designs

were found in the Company B’s computers. The court awarded damages of RMB 136,450 (approximately EUR 14,800)

to Company A.

Protecting your Trade Secrets in China

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