Since the beginning of the industrial age, companies have outsourced part of the manufacturing process to third-party providers. In the twentieth century, as manufacturing processes became more complex and distribution more global, this trend accelerated.
By David Cohen & Donal O’Connell
“China national charged with stealing trade secrets” – U.S. Justice Department
“Chinese battery expert is charged with stealing trade secrets from US employer, as he prepared to join mainland firm” – South China Morning PostRead more
This paper was originally written as a source material for my presentation at the ABA’s 2017 IP West as part of the The China Paradox – October 11-12, 2017, Long Beach, CA, and subsequently edited and supplemented.
I. The Vringo Background
The following paper is a short history of the thirty-nine-month battle between Vringo, Inc. and ZTE Corporation. Vringo (now called FORM Holdings) was a technology company that became involved in the worldwide patent wars. The company won a 2012 intellectual property lawsuit against Google, in which a U.S. District Court ordered Google to pay 1.36 percent of U.S. AdWords sales. Analysts estimated Vingo’s judgment against Google to be worth over $1 billion. The Court of Appeals for the Federal Circuit overturned the District Court’s ruling on appeal in August 2014 in a split 2-1 decision, which Intellectual Asset Magazine called “the most troubling case of 2014.” Vingo also pursued worldwide litigation against ZTE Corporation in twelve countries, including the United Kingdom, Germany, Australia, Malaysia, India, Spain, Netherlands, Romania, China, Malaysia, Brazil and the United States. The high profile nature of the intellectual property suits filed by the firm against large corporations known for anti-patent tendencies has led some commentators to refer to the firm as a patent vulture or patent troll. Read more
In a case designed to hit as many buttons as possible of IP futurists, a suit in the US for theft of trade secrets under DTSA responded to with a patent lawsuit and injunction request in China. Should be interesting to see how this turns out.
“US lawmakers have long worried about the security risks posed the alleged ties between Chinese companies Huawei and ZTE and the country’s government. To that end, Texas Representative Mike Conaway introduced a bill last week called Defending U.S. Government Communications Act, which aims to ban US government agencies from using phones and equipment from the companies.”
I would have thought so. Probably in Chinese companies’ own interests to make sure trade secret protections are strong as well. From the article: A senior executive at Taiwanese memory chipmaker Nanya Technology said Tuesday that Chinese rivals will face increasing global scrutiny over trade secret violations as Beijing aggressively builds up a domestic semiconductor industry in large part by acquiring foreign companies and poaching talent. “These emerging Chinese competitors will face stricter reviews on how they obtain memory chip technology and whether they are involved in trade secret theft,” said President Lee Pei-Ing of Nanya Tech.
While Qualcomm has a virtually unassailable lead globally (nearly double Samsung its closest rival), in China with 18% of global 4G-LTE patents are Chinese rights (second only the US) it is effectively tied with Huawei.
A number of years ago I was involved in a small little monetization campaign where we utilized European and other anti-piracy laws to seize equipment that infringed our patents. During one of their seizures our team was inspecting impounded equipment to determine infringement and at the same time local customs officials were showing a rather large Chinese delegation around explaining how the European anti-piracy laws work and how their can be used for utility patents as well.
I guess they learned from the experience and how… It was reported recently that that in Shenzhen, local customs administrators, as the result of 73 investigations, have seized 260,000 export-bound products that infringe patents held by local companies. While it’s a fairly large number, it could be that many of the seizures stem from design patents, infringement of which would be more straightforward for customs officers to spot. Apparently SEP owners have been able to do the same, though with less fanfare.
This article has nice summary of the situation in China. I agree that part of the reason for the low success rate is the newness of the laws and resultant inexperience of most practitioners, as well as the difficulties under Chinese evidentiary law in getting usable evidence.
That said, as the author rightly notes, in China as elsewhere, implementing appropriate preventative measures to prevent theft and to actually prove that the trade secret was in fact “Secret” is key to a successful case.
Another reason why trade secret audits make sense…