Geely carmaker's trade secrets worth 640 Million RMB

In a landmark ruling, China’s Supreme People’s Court (SPC) set a new precedent in intellectual property enforcement by ordering WM Motor to pay approximately 640 million yuan (more than 89 million US$) to Geely. 

This significant decision was made in a second-instance ruling where the SPC applied double punitive damages, marking a decisive stance on the protection of trade secrets and intellectual property rights in China.

The case involved allegations by Geely that WM Motor had misappropriated trade secrets and engaged in technological infringement. The SPC ruled in favor of Geely, not only ordering WM Motor to compensate for the economic losses but also including reasonable expenses in the total award. 

The application of double punitive damages by the SPC underscores the court’s commitment to deterring intellectual property theft and sending a clear message about the seriousness of such violations.

This ruling is particularly notable as it represents the highest compensation ever awarded in an intellectual property infringement lawsuit in China, highlighting the country’s increasing emphasis on the protection and enforcement of intellectual property rights, especially in emerging industries like the automotive sector.

The case involving WM Motor and Geely is a significant development in China's intellectual property (IP) enforcement landscape, particularly in the context of trade secrets.

Here’s a more detailed overview.

Background

The dispute between Geely and WM Motor is rooted in a series of events that began in 2016, when a significant number of Geely's senior management and technical personnel resigned and subsequently joined WM Motor Technology Group Co., Ltd., a newer competitor in the Chinese automotive industry. The case highlights issues related to employee mobility, trade secrets, and the legal implications of intellectual property misappropriation in highly competitive industries.

In fact, nearly 40 senior management and technical personnel from a Geely subsidiary left the company. Out of these, around 30 individuals immediately joined WM Motor. The mass resignation of key personnel raised concerns for Geely, particularly regarding the potential transfer of sensitive technical knowledge and trade secrets.

In 2018, Geely discovered that WM Motor and its affiliated companies had filed applications for 12 utility model patents. These patents listed some of the former Geely employees as inventors or co-inventors. The patents were related to chassis technology for new energy vehicles (NEVs), which was an area where Geely had been actively developing proprietary technology.

Geely alleged that these patents were based on chassis component drawings and digital models that the former employees had accessed during their tenure at Geely. This suggested that the technology in question had been taken from Geely without authorization and was being used by WM Motor to advance its own product development.

Geely further accused WM Motor of launching its EX series electric vehicles (EVs) in an unusually short period, without having the necessary technical foundation or legitimate sources of the required technology. This rapid development raised suspicions that WM Motor had used Geely's trade secrets to quickly bring a competitive product to market, thus bypassing the time and cost involved in independent research and development.

Legal Actions

Based on the above findings, Geely initiated legal proceedings against WM Motor, accusing them of misappropriating trade secrets and infringing on its intellectual property. The lawsuit focused on the alleged unauthorized use of proprietary chassis technology, which Geely claimed had been crucial to the development of WM Motor's EVs.

The case initially went through the lower courts, where Geely sought compensation for the economic losses it claimed to have suffered due to WM Motor's actions. The key issue was whether WM Motor had unlawfully obtained and used Geely’s trade secrets, which are crucial to maintaining a competitive edge in the rapidly evolving NEV market.

Supreme People’s Court Ruling

In the second-instance ruling, which acts as the final appeal, the Supreme People’s Court (SPC) sided with Geely. The court found that WM Motor had indeed engaged in the misappropriation of trade secrets. 

The SPC not only upheld the lower court’s decision but also imposed double punitive damages, a relatively new and stringent measure in Chinese IP law designed to serve as a deterrent against such infringements.

Compensation Awarded

The SPC ordered WM Motor to pay Geely approximately 640 million yuan (more than 89 million US$). This amount included compensation for economic losses as well as reasonable expenses related to the case, such as legal fees and costs associated with justifying the damage caused by the infringement.

Significance of the case

Employee Mobility and IP Protection: The case underscores the challenges companies face in protecting trade secrets, particularly when key employees move to competitors. It also highlights the importance of robust IP protection mechanisms and the potential legal consequences of failing to respect trade secrets.

Highest Compensation: The ruling marks the highest compensation ever awarded in an IP infringement lawsuit in China, reflecting the seriousness with which the court views the protection of trade secrets.

Use of Punitive Damages: The application of double punitive damages is a landmark move that underscores China’s evolving approach to IP enforcement, particularly in complex and high-stakes industries like automotive technology.

Implications for the Industry: The decision is likely to have wide-reaching implications for the Chinese automotive industry and other technology-intensive sectors, as it sets a strong precedent for the protection of trade secrets and the consequences of IP theft.

Precedent for Future Cases: This case sets a strong precedent in China for the application of punitive damages in trade secret misappropriation cases, signaling a stricter approach to IP enforcement in the country.

This case is a clear signal of China’s increasing commitment to strengthening IP protection, especially as China seeks to foster innovation and technological advancement in critical industries.