The slides show how to handle the situation when company's trade secrets is lost in China.

1. when
trade secrets is lost…
criminal approach – a true case in China
2016/09/05©Xiunan Jin

2. It has been difficult for a non-Chinese or a non-Chinese company to
understand how the lost of trade secrets can be handled in China.
Therefore, I use a true case that its judgment was published on the website
of China Judgment Online. The purpose is to show you the procedures
including timelines, involved parties, required evidence, etc.
From this case, you will understand, especially, what kind of preventive
measures in daily business are useful in legal proceeding and what the
lessons learnt are in my view.
However, not all such kind of cases are necessarily going through a criminal
proceeding. One has to balance the pros and cons of different approaches,
so I post a question for discussion at the end.
Enjoy reading!
Preface

3. R&D Service Contract
Employer - Employee
Pfizer
USA
AppTec
Shanghai
Wu Guang
Shanghai
There are 3 parties in this case. They are…

4. Once upon a time in 2008,
Mr. Wu Guang was hired by AppTec…

5. some time ago… 2008.03.18 2010.10.16 2010.10.20 2011.03.02 2011.03.11 2011.06.02
Pfizer and AppTec signed
R&D Service Contract that
AppTec should synthesize
designated compounds and
seek for suitable synthetic
routes for pharma use.
Wu Guang joined AppTec
as a researcher working
on the Pfizer project to
synthesize compounds.
During September and
October, Wu Guang stole
the hard disks from
colleagues’ computers a
few times. He was caught in
the night on October 16 at
the office area.
Wu Guang was fired by
AppTec due to the theft.
He signed a declaration
not to disclose any
AppTec’s trade secrets to
others incl. customers.
Wu Guang posted the
chemical structures of
compounds from the hard
disk on SciFinder, ACDFIND
and his own potential
company website.
Wu Guang posted
additional chemical
structures of compounds
from the hard disk on
SciFinder, ACDFIND and his
own company website. It
was totally 89 chemical
structures were published.
Wu Guang registered his
own company Innocechem
to provide R&D services.

6. If you are from Pfizer
or AppTec, what can
you do with such
situation?

7. The very first thing is to
STOP further leakage
of the trade secrets.

8. The fastest way in China is
Reporting to Police
immediately.
Look what happened after reporting to police.

9. 2011.12.22 2012.02.13 2012.04.13 2012.05.09 2012.07.08
2012.08.082012.09.28
AppTec reported to Shanghai
Pudong Public Security Bureau
(PSB).
Pudong PSB engaged Shanghai
Science and Technology
Consulting Center to do patent
search to evaluate trade secrets.
Pudong PSB decided to accept
the case.
Pudong PSB decided to bail a
pending trial to Wu Guang.
Pudong PSB engaged Shanghai
Gongxin Accounting Firm to
evaluate financial damages.
Pudong PSB arrested Wu Guang.Shanghai Pudong Procuterator
sued Wu Guang to Shanghai
Pudong Court for the crime of
infringing trade secrets.
2013.08.052013.08.222013.12.22
Pudong Court set up the
judgment panel.
Pudong Court heard the case
confidentially.
Pudong Court decided the
judgment.
overview

10. During the whole
legal proceeding,
you should prove
2 things.
The disclosed information is trade secrets.
The damage caused is above 500,000 RMB.

11. Who can provide
the evidence?
What are the evidence?
Not known
to the public
Economically
valuable
Useful
Protected by
preventive
measures
Infringing
Act
Damages
Owner R&D service contract between Pfizer and AppTec yes yes
Employment contract between AppTec and Wu Guang yes yes
Agreement of employee’s confidentiality obligation yes
Job description of Wu Guang yes
Acceptance of confidentiality obligation after employment yes
IT guideline of AppTec yes
Public notary office Notarization of chemical structure published on website by Wu Guang yes
Notarization of chemical structure published on SciFinder and ACDFIND
by Wu Guang
yes
Accounting firm Accounting book of the payment from Pfizer to Apptec for the
compound synthesis
yes
Technical experts Patent search report yes
Technical evaluation report yes yes yes yes
Police Confiscated hard disk yes
Evaluation report about the content in the hard disk yes
Testimony of witnesses yes
How do you make good use of evidence to prove the 2 things?

12. Facts
Decision
JUDGMENT
• Wu Guang stole the trade secrets and
disclosed it;
• The disclosure was limited to the chemical
structure;
• The damages was around 2.6 million RMB,
including the cost of design of the chemical
structures and synthetic work;
• The trade secrets was not put in use, so no
illegal income was generated;
• The reputation of AppTec was damaged.
• Wu Guang constituted crime of infringing
trade secrets;
• Wu Guang was sentenced to prison for 3
years and 6 months;
• Wu Guang shall pay fine 100,000 RMB.

13. Lessons Learnt
Company should set up regular monitoring on the market to check whether any trade
secrets is leaked out. Especially when ex-employee was fired due to theft of trade
secrets, company should take much closer look into the market. In this case the gap
between the discovery and reporting to the police was about 9 months, which was
too long.
Company should have reported to the policy while the thief act was discovered in this
case. Especially, the hard disks or any other media should be immediately confiscated
by the police. This may prevent further disclosure or illegal use of the trade secrets.

14. Further Thinking:
If the trade secrets is not disclosed to
the public, but to a specific company
which decides to secretly use your
trade secrets, will you still go through
the criminal proceeding? Why?
You are invited to share your thoughts.
THE END