*AI-generated translation, for reference only.

[Case Number] the Supreme People's Court (2022) SPC IP Civil Final 1592 [Shen[REDACTED] Group Co., Ltd. and Shenyang Tou[REDACTED] Machinery Co., Ltd. v. Shenyang Si[REDACTED] Machinery Co., Ltd., Shenyang Si[REDACTED] Machinery Manufacturing Co., Ltd., Sun [REDACTED] Liang, Yin [REDACTED] Yang, and Wu [REDACTED] Po (Dispute over Infringement of Computer Software Copyright and Trade Secrets)]

[Basic Facts] Shen[REDACTED] Group Co., Ltd. (hereinafter referred to as "Shen[REDACTED] Group") and its subsidiary Shenyang Tou[REDACTED] Machinery Co., Ltd. (hereinafter referred to as "Tou[REDACTED] Company") sued, alleging: the two companies own the core technologies for the design and manufacture of centrifugal compressors (including the impeller model basic-stage data and the selection software). Shenyang Si[REDACTED] Machinery Co., Ltd. (hereinafter referred to as "Si[REDACTED] Company") and its subsidiary Shenyang Si[REDACTED] Machinery Manufacturing Co., Ltd. (hereinafter referred to as "Si[REDACTED] Machinery Company"; collectively, "the two Si[REDACTED] Companies") are enterprises that Sun [REDACTED] Liang, Yin [REDACTED] Yang, and Wu [REDACTED] Po (collectively, "the three natural persons") participated in establishing and controlled, and they jointly committed computer software infringement and technical secret infringement. The Court of First Instance held that the two Si[REDACTED] Companies had committed infringement of the technical secret in the "impeller model basic-stage data", and rendered judgment ordering the two Si[REDACTED] Companies to cease the infringement and to compensate for economic losses of RMB 25 million (including reasonable expenses for rights protection). On second instance, the Supreme People's Court found that, based on the evidence adduced by Shen[REDACTED] Group and Tou[REDACTED] Company and the evidence obtained from the local market regulatory authority and the public security organ, it was sufficient to prove that, during the period from 2008 to 2011 after the two Si[REDACTED] Companies were established, the two Si[REDACTED] Companies had actually obtained, by improper means, Shen[REDACTED] Group's and Tou[REDACTED] Company's design and manufacturing drawings for centrifugal compressors as well as the software at issue and the related basic-stage data, and had designed and manufactured multiple accused infringing products. At that time, the then legal representative of the two Si[REDACTED] Companies confirmed the two Si[REDACTED] Companies' trade secret infringement and guaranteed that they would no longer use Shen[REDACTED] Group's trade secrets; Si[REDACTED] Company also undertook on October 17, 2011 to cease the infringement and obtained Shen[REDACTED] Group's forgiveness, and the local public security organ closed the case on June 20, 2013. However, the two Si[REDACTED] Companies, on the basis of their previously committed trade secret infringement, illegally obtained and used the technical secrets at issue, and this has continued to the present. Based on 8 sets of accompanying materials attached to the accused infringing products, Shen[REDACTED] Group and Tou[REDACTED] Company explained in detail the naming pattern of the impeller designations of the accused infringing products and the correspondence between such designations and the technical secrets asserted by Shen[REDACTED] Group and Tou[REDACTED] Company. The reverse-derivation proof by Shen[REDACTED] Group and Tou[REDACTED] Company could obtain performance data identical or substantially identical to that in the above accompanying materials. The two Si[REDACTED] Companies could neither give a reasonable explanation for the consistency in the naming patterns of the two sides' products, nor provide evidence sufficient to rebut.

On second instance, the Supreme People's Court held that, as to the selection software, it had a unique correspondence with the basic-stage data, and the two could not be used separately. The two Si[REDACTED] Companies obtained and used, by improper means, the selection software and the basic-stage data, thereby committing infringement of the technical secrets at issue and infringement of the software copyright at issue. While employed by Shen[REDACTED] Group, Sun [REDACTED] Liang and Yin [REDACTED] Yang jointly established Si[REDACTED] Company with others and held shares through their spouses, engaging in same-industry competition with Shen[REDACTED] Group and benefiting themselves at the expense of the company, in evident violation of the principle of good faith. The two of them, together with the two Si[REDACTED] Companies, constituted joint infringement. Wu [REDACTED] Po participated to a certain extent in the two Si[REDACTED] Companies' infringing conduct and provided assistance in the infringement. Accordingly, the court rendered judgment that: the two Si[REDACTED] Companies and the three natural persons immediately cease illegally obtaining, disclosing, using, and permitting others to use the selection software and the impeller model basic-stage data; the two Si[REDACTED] Companies, Sun [REDACTED] Liang, and Yin [REDACTED] Yang jointly and severally compensate Shen[REDACTED] Group and Tou[REDACTED] Company for economic losses of RMB 166,147,802; and Wu [REDACTED] Po bear joint and several liability for the aforesaid compensation within the scope of RMB 3 million. The second-instance judgment also specified the penalty for delayed performance of the non-monetary obligations such as cessation of infringement and of the monetary obligation to compensate for losses, so as to urge the infringers to perform the judgment promptly and fully.

[Typical Significance] This case is a typical example of forcefully cracking down on the conduct of covertly establishing a same-industry company and misappropriating the original employer's technical secrets. The adjudication of this case clarified such issues as the burden of proof for repeatedly committing trade secret infringement, the liability of employees who covertly establish a company to infringe their employer's trade secrets, the determination of infringement involving computer software that has a unique correspondence with specific data, and the limitation-period determination of the liability for damages for continuing infringement. This case has reference significance for the adjudication of similar cases.