China gets tough on locals over iPad trade secret theft

Part of the fun of attending the International Trademark Association (INTA) Annual Meeting is that you find yourself engaged in conversation with all sorts of good souls into whom one does not often have the opportunity to bump when wandering around the vicinity of The Old Nick in search of a pint of Badger.  One such soul is Michael Lin from Marks & Clerk's Hong Kong office.  Being based in Hong Kong, Michael is often fast asleep when the London Kats are awake, and vice versa, but blog team members Jeremy and Annsley were in the same time zone as Michael when they met in San Francisco, which made their dialogue a little easier.

Michael is our guest-blogger for the piece below, for which we thank him kindly:

"Shenzhen court convicts three Chinese of iPad 2 trade secret theft

The Guangzhou Daily Chinese-language microblog (which, funny enough, links to WSJ China) reports that a Shenzhen Court convicted three local Chinese of "violating commercial secrets" --in this case, trade secret theft -- related to the iPad2's casing design (see here, here and here).  This theft of trade secrets allegedly led to fake iPad 2s and/or iPad 2 covers (there seems to be some confusion in the reports over exactly which) being sold in China prior to Apple's official launch. 

Foxconn: bigger population than some EU member states

In short, Foxconn manufactures the iPad, iPhone, and many other products in a HUGE factory (No kidding: the factory, at ~400,000 people, is larger than many cities) in Shenzhen.  The head of a Chinese electronics company allegedly induced a Foxconn R&D employee to divulge iPad 2 design documents via an intermediary.  After a trial, the Shenzhen Court sentenced the head of the Chinese company, the intermediary and the Foxconn employee to jail and also imposed large (for China) fines.  

While trade secret theft cases are relatively common in many jurisdictions (cars, software), this case stands out for a few reasons.  First, it is rare for a Chinese court to convict Chinese citizens of stealing trade secrets.  Second, the aggrieved party in this case was a foreign company. Third, given that there is no "discovery" in China, and given how difficult it is to prove trade secret cases generally, it is quite interesting to see that this case was taken by the prosecutors (note: once a case is accepted by the prosecutors, the prosecutors invariably win in China). 

So what? 

Old Chinese proverb: he who plays
with fire has flash in pan

At least this case indicates that in some cases, trade secret theft and economic espionage may be taken seriously by the Chinese courts, even when the victim is a foreigner.  While this case may be atypical for now, at least the prosecutors accepted it, and more significantly the Chinese press reported it.  As everything reported by the Chinese press inherently possesses the government's stamp of approval, this may indicate a growing intolerance of such activites.  We can all just hope that this is the start of a trend, and not a flash-in-the-pan".

iPads here
iPeds here

A shout-out to Hannah Kuchler at FT tilt for discussing this case with Michael and helping him organize his thoughts