*AI-generated translation, for reference only.

Keywords: civil; infringement of trade secrets; technical secrets; settlement agreement; duplicative litigation; subject matter of litigation; litigation claims; judgment outcome

Case Facts

Lu [REDACTED]qi and Handan Xin[REDACTED] Medical Oxygen Equipment Co., Ltd. (hereinafter "Xin[REDACTED] Oxygen Equipment Company") alleged as follows: They are the rights holders of the "Radial-Intake Turbulent Flow Smart Adjustable Adsorption-Type Oxygen-Enrichment Technology." During his tenure as a senior executive of Xin[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, in violation of confidentiality agreements and confidentiality regulations, clandestinely established Rui[REDACTED] Oxygen Supply Equipment Co., Ltd. (hereinafter "Rui[REDACTED] Oxygen Equipment Company") and recruited Li [REDACTED]hong and other technical backbone employees of Xin[REDACTED] Oxygen Equipment Company who possessed knowledge of the trade secrets at issue, thereby manufacturing and selling large quantities of medical molecular sieve oxygen generation equipment that infringed the trade secrets at issue, constituting infringement of such trade secrets. Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company accordingly filed a lawsuit requesting that the court order Li [REDACTED]xian, Li [REDACTED]hong, and Rui[REDACTED] Oxygen Equipment Company to cease infringing the trade secrets at issue and to jointly and severally pay compensation of RMB 5,000,000 (same currency unit hereinafter).

The court found through trial as follows: In August 2012, Xin[REDACTED] Oxygen Equipment Company had filed a lawsuit against Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong before the Handan Intermediate People's Court of Hebei Province (hereinafter "Handan Intermediate Court") on the same grounds, claiming: (1) that Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong be ordered to cease infringing and to destroy the infringing products; (2) that Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong be ordered to jointly and severally compensate Xin[REDACTED] Oxygen Equipment Company for economic losses of RMB 1,500,000 for their disclosure and use of Xin[REDACTED] Oxygen Equipment Company's trade secrets; and (3) that Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong be ordered to bear joint and several liability in accordance with the law. Under the mediation of the Handan Intermediate Court, Xin[REDACTED] Oxygen Equipment Company reached a mediation agreement with Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong. On November 22, 2013, the Handan Intermediate Court rendered Civil Mediation Statement (2012) Han Shi Min Si Chu Zi No. 27 (hereinafter the "No. 27 Case"), confirming: (1) that Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong would make a one-time payment of RMB 3,000,000 to Xin[REDACTED] Oxygen Equipment Company upon the effective date of the mediation statement; and (2) that the parties would not pursue any other legal liability against each other, with no further disputes.On November 23, 2013, Lu [REDACTED]qi, Xin[REDACTED] Oxygen Equipment Company, Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong signed a Settlement Agreement, the contents of which included the following: (1) all series of medical molecular sieve oxygen generation equipment manufactured and sold by Rui[REDACTED] Oxygen Equipment Company are lawful and do not constitute infringement of the trade secrets or any other rights of Xin[REDACTED] Oxygen Equipment Company and Lu [REDACTED]qi; Li [REDACTED]xian and Sun [REDACTED]yong likewise do not constitute infringement of the trade secrets or any other rights of Xin[REDACTED] Oxygen Equipment Company and Lu [REDACTED]qi; and none of them shall bear any legal liability; (2) Xin[REDACTED] Oxygen Equipment Company and Lu [REDACTED]qi shall not report to the relevant authorities or seek criminal liability against Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, or Sun [REDACTED]yong; otherwise, Xin[REDACTED] Oxygen Equipment Company and Lu [REDACTED]qi shall refund all amounts received; and (3) this Agreement shall take effect upon signature and sealing by all parties.

On December 29, 2021, the Handan Intermediate People's Court of Hebei Province rendered Civil Judgment (2019) Ji 04 Zhi Min Chu No. 152, dismissing all of Lu [REDACTED]qi's and Xin[REDACTED] Oxygen Equipment Company's claims. Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company appealed. On October 16, 2023, the Supreme People's Court rendered Civil Judgment (2023) SPC IP Civ Final No. 120: (1) revoking Civil Judgment (2019) Ji 04 Zhi Min Chu No. 152 of the Handan Intermediate People's Court of Hebei Province; (2) ordering Li [REDACTED]xian, Li [REDACTED]hong, and Rui[REDACTED] Oxygen Equipment Company to immediately cease infringing the "XLY Medical Oxygen Generation Technology" trade secrets of Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company; (3) ordering Li [REDACTED]xian and Rui[REDACTED] Oxygen Equipment Company to jointly and severally compensate Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company in the amount of RMB 5,000,000 within ten days from the date on which this judgment becomes legally effective; and (4) ordering Li [REDACTED]hong to bear joint and several liability for RMB 1,000,000 of the above compensation amount within ten days from the date on which this judgment becomes legally effective.

Judge's Opinion

The central issue in this case was whether the lawsuit filed by Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company in this case constituted duplicative litigation.

First, the standard for identifying duplicative litigation is found in *Article 247(1)* of the *Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China* (hereinafter the "Civil Procedure Law Interpretation"), which provides that "a party files a new lawsuit on a matter that has already been litigated, either during the pendency of the original proceeding or after a judgment has become legally effective." It follows that the threshold condition for finding duplicative litigation is that the party files a new lawsuit on a matter that has "already been litigated" — *i.e.*, filing a new lawsuit on a matter already litigated is a necessary condition for a finding of duplicative litigation. A "new lawsuit" arises primarily in two scenarios: (1) filing a new lawsuit while the original proceeding is pending; or (2) filing a new lawsuit after a judgment has become legally effective. Accordingly, in determining whether a subsequent action constitutes duplicative litigation relative to a prior action, one must first assess whether the matters asserted in the subsequent action were already asserted in the prior action. In this case, the infringing facts underlying Xin[REDACTED] Oxygen Equipment Company's claims in the No. 27 Case were the infringing acts committed by Li [REDACTED]xian, Sun [REDACTED]yong, and Rui[REDACTED] Oxygen Equipment Company against the trade secrets at issue prior to August 2012 (the time when Xin[REDACTED] Oxygen Equipment Company filed the No. 27 Case). The infringing facts underlying Xin[REDACTED] Oxygen Equipment Company's claims in the present case were the infringing acts committed by Li [REDACTED]xian, Li [REDACTED]hong, and Rui[REDACTED] Oxygen Equipment Company against the trade secrets at issue during the period from November 2013 to May 2020. Therefore, the matters litigated in the present case and those litigated in the No. 27 Case are not the same. In other words, Xin[REDACTED] Oxygen Equipment Company's filing of the present action does not constitute "filing a new lawsuit on a matter already litigated."

Second, a finding of duplicative litigation further requires that all three conditions set out in *Article 247(1)* of the Civil Procedure Law Interpretation be met, namely: (1) the parties to the subsequent action and the prior action are the same; (2) the subject matter of the subsequent action and the prior action is the same; and (3) the claims in the subsequent action and the prior action are the same, or the claims in the subsequent action substantively negate the outcome of the prior judgment. In this case, Xin[REDACTED] Oxygen Equipment Company's filing of the present action likewise did not simultaneously satisfy all three conditions: (1) As to the parties: the plaintiff in the No. 27 Case was Xin[REDACTED] Oxygen Equipment Company, and the defendants were Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Sun [REDACTED]yong; in the present case, the plaintiffs are Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company, and the defendants are Rui[REDACTED] Oxygen Equipment Company, Li [REDACTED]xian, and Li [REDACTED]hong — the parties in the two cases are not identical. (2) As to the subject matter: the infringing facts alleged in the No. 27 Case primarily concerned acts occurring prior to 2012, while the infringing facts alleged in the present case primarily concerned acts occurring during the period from November 23, 2013 to May 19, 2020 — the subject matter of the two cases is different. (3) As to the claims: the claims in the two cases are likewise not identical.

Finally, regarding the intent expressed in the Settlement Agreement entered into by Xin[REDACTED] Oxygen Equipment Company and its legal representative Lu [REDACTED]qi in the No. 27 Case: pursuant to *Article 107* of the Civil Procedure Law Interpretation, even if Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company expressed in the Settlement Agreement in the No. 27 Case that "Rui[REDACTED] Oxygen Equipment Company … shall not bear any legal liability," such expression shall not be used as a basis adverse to Lu [REDACTED]qi and Xin[REDACTED] Oxygen Equipment Company in the present case, and certainly shall not serve as a basis for restricting their right to file a lawsuit pursuant to law with respect to new infringing acts.

Judgment Digest

In determining whether a subsequent action constitutes duplicative litigation relative to a prior action, one must first assess whether the matters asserted in the subsequent action were already asserted in the prior action; one must further verify that the following conditions are all satisfied: (1) the parties to the subsequent action and the prior action are the same; (2) the subject matter of the subsequent action and the prior action is the same; and (3) the claims in the subsequent action and the prior action are the same, or the claims in the subsequent action substantively negate the outcome of the prior judgment.

Related Index

*Articles 107 and 247(1)* of the *Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China* (as amended in 2022)

First Instance: Handan Intermediate People's Court of Hebei Province, Civil Judgment (2019) Ji 04 Zhi Min Chu No. 152 (December 29, 2021)

Second Instance: Supreme People's Court, Civil Judgment (2023) SPC IP Civ Final No. 120 (October 16, 2023)