Case of Dispute of Jiaxing Zhonghua Chemical Co., Ltd., Shanghai Xinchen New Technology Co., Ltd. against Wanglong Group Co., Ltd. over Infringement of Technical Secrets

August 23, 2022

Case brief:

Jiaxing Zhonghua Chemical Co., Ltd. (hereinafter referred to as Jiaxing Zhonghua Chemical company) and Shanghai Xinchen New Technology Co., Ltd. have the technical secrets of using glyoxylic acid method to prepare vanillin. Based on this process, Jiaxing Zhonghua Chemical company has become the largest vanillin manufacturer in the world, accounting for about 60% of the global market. Wanglong Group Co., Ltd. (hereinafter referred to as Wanglong Group) and its legal representative illegally obtained the technical secret through the deputy director of vanillin workshop of Jiaxing Zhonghua Chemical company, and used the technical secret process to produce vanillin products on a large scale, resulting in the decline of vanillin product price and the reduction of market share of Jiaxing Zhonghua Chemical company. Jiaxing Zhonghua Chemical company filed a lawsuit to the court. The court of first instance determined that Wanglong Group constituted infringement of partial technical secrets, and ordered it to stop the infringement and compensate the economic loss of 3.5 million yuan. At the same time, the court made a ruling on action preservation and ordered to immediately stop the infringement of the technical secrets involved. After the judgment of the first instance, Wanglong Group continued to carry out the infringement. Both parties filed an appeal. As deemed in the second instance of the Supreme People's Court, Wanglong Group was established by its legal representative for infringement, and its legal representative actively participated in the implementation of the infringement. Therefore, Wanglong Group and its legal representative constituted joint infringement of all technical secrets and should bear the joint and several liability. According to the economic loss data provided by the right holder, and taking into account the factors such as the high commercial value of the technical secrets involved, the bad infringement circumstances, and the defendant's refusal to execute the people's court's action preservation ruling, the judgment was changed to the joint and several compensation of 159 million yuan for Wanglong Group and its legal representative.

Typical significance:

This case is the case of infringing trade secrets with the highest amount of compensation determined by the effective judgment of the people's court in history. The judgment of this case raises the cost of infringement and effectively protects the core technology of important industries, which is of reference significance for the determination of damages in the case of infringement of technical secrets.

(Source of case: Supreme People's Court of the People's Republic of China)