Chinese Court Ordered 35 Million Compensation in a Business Secret Cases

Fujian Fukang Pharmaceutical Co., Ltd. (hereinafter referred to as Fukang) purchased technical information from YU Ke, an employee of Zhejiang NHU Company Ltd. (hereinafter referred to as NHU) to develop production project of vitamin E, and YU Ke sold technical information for producing nerolidol, a Vitamin E intermediate, to Fukang at a price of 0.6 million Yuan. After that, YU Ke job-hopped to Fukang as deputy general manager, and used the technical data he secretly copied during prior job in Fukang’s R&D of Vitamin E intermediate. After the establishment of Fujian Haixin Pharmaceutical Co., Ltd. (hereinafter referred to as Haixin), Fukang transferred its vitamin E project team to Haixin, and YU Ke also jointed Haixin as deputy general manager.


NHU filed a lawsuit against Fukang, Haixin and YU Ke for jointly infringing upon NHU’s technical secrets. Shaoxing Intermediate Court made a judgement in 2017 that: 1) the three defendants shall immediately cease any act that infringes NHU’s business secrets until such business secrets become known to the public; 2) Haixin shall compensate NHU for economic loss of 35 million Yuan and reasonable expenses for enforcement of 220,000 yuan, with Fukang and YU Ke undertaking join liability; 3) Haixin shall compensate NHU for economic loss of 35 million Yuan, with Fukang and YU Ke undertaking join liability.


The compensation of 35 million Yuan for economic losses plus 220 thousand Yuan for reasonable expenses is the highest amount in business secrets cases by far. The first-instance court calculated the amount of compensation based on the infringers’ profits gained through infringement and, in consideration of the clear bad-faith intention of the three defendants and the serious consequences thereof, applied analogy of punitive damage to intensify the punishment, which reflects determination to protect innovation and create an environment for fair competition.


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