Case Brief

Guangzhou Tian X High-Tech Material Company (Guangzhou Tian X company) and Jiujiang Tian X High-Tech Material Company (Jiujiang Tian X company) are the right holders of the technical secrets for the production of the raw material "Carbomer" for hand sanitizers. HUA X, from 2012 to 2013 during his tenure in Guangzhou Tian X company, repeatedly violated the company's management system and copied technical information related to the Carbomer production process from his office computer to the external storage medium, and took advantage of his identity as the person in charge of Carbomer production development to request drawings of equipment related to Carbomer production process technology from LI X Sheng, the production department director of Jiujiang Tian X company, a subsidiary of Guangzhou Tian X company. HUA X sent the illegally obtained drawings and documents related to the Carbomer production process to LIU X, the legal representative of Anhui NIU X Fine Chemical Company (Anhui NIU X company), ZHU X Liang, HU X Chun and others, and organized research and improvement. Later, HU X Chun amended the design drawings and purchased the related equipment. Finally, Anhui NIU X company produced Carbomer products and sold them at home and abroad. The court of first instance held that Anhui NIU X company, HUA X, LIU X, ZHU X Liang, and HU X Chun infringed on the technical secrets of Guangzhou Tian X company and Jiujiang Tian X company. The court ordered the infringers to stop infringement and determined the amount of damages based on 2.5 times the infringement profits. The court ordered that Anhui NIU X company compensated for an economic loss of 30 million Yuan, and HUA X, LIU X, ZHU X Liang, and HU X Chun assumed partial joint and several liabilities. Guangzhou Tian X company and Anhui NIU X company filed appeals. The Supreme People's Court held in the second instance that the determination in the first instance judgment that Anhui NIU X company, HUA X, LIU X, ZHU X Liang and HU X Chun infringed the technical secrets was proper, while the contribution degree of the infringed technical secrets to product profits was not taken into account in the determination of the amount of infringement profits. Therefore, in the case that the contribution degree was determined to be 50%, the relevant infringement profits were determined to be 6 million Yuan. Considering that Anhui NIU X company itself engaged in infringement as its business and continued with its production and sales to more than 20 countries and regions after its former legal representative was sentenced to criminal punishment for infringing on the involved technical secrets, fully showing evident infringement intention and serious infringement circumstances; therefore, the multiple of punitive damages was increased to the statutory maximum multiple. Considering that LIU X, as the former legal representative of Anhui NIU X company, played a key role in the infringement, LIU X was judged to bore joint and several liability for the full damages of the case. The Supreme People's Court ultimately made the judgment that the amount of damages was calculated based on 5 times the infringement profits, and Anhui NIU X company compensated Guangzhou Tian X company and Jiujiang Tian X company for an economic loss of 30 million Yuan and the reasonable expenses for right protection of 400 thousand Yuan, and LIU X, HUA X, ZHU X Liang, and HU X Chun bore joint and several liability for the aforementioned amount of damages within the range of 30 million Yuan, 5 million Yuan, 1 million Yuan, and 1 million Yuan, respectively.

Case Significance

The case is the first intellectual property infringement case ruled by the Supreme People's Court by applying the punitive damages in accordance with the law. The case explores the corresponding relationship between the severity of infringement circumstances and the multiple of punitive damages, and gives full play of the punitive damages system in effectively protecting right holders, deterring and curbing infringement behaviors, and warning potential infringers. The case has a positive significance in promoting the implementation of the punitive damages system in intellectual property infringement, enhancing intellectual property protection efforts, encouraging private enterprises to innovate and develop, and stimulating social innovation vitality. The case is a guiding case of the Supreme People's Court and has been selected into the "Typical Cases of the People's Courts Fully Utilizing Functions of Trial Roles to Protect Property Rights and the Lawful Rights and Interests of Entrepreneurs (Third Group)" and the "Typical Cases of Intellectual Property Infringement Civil Cases to Which the Punitive Damages Apply" published by the Supreme People's Court.

(Source: The General Office of the Supreme People's Court of the PRC)