Report on the Second Trial Agency of a Trade Secret Dispute Case in a Labor Contract Dispute

——Lawyer Zhou Xiangen

The company's technical personnel in arrears are hereby terminated from their labor contracts

Chen was originally a technical personnel recruited by a certain chemical building materials limited company (hereinafter referred to as the limited company) in October 1996. The labor contract between the two parties stipulates that: 1. Chen worked for a period of three years; 2. Position of Chen: Assistant to the General Manager; 3. Chen's responsibility: to safeguard the company's rights and comply with the company's rules and regulations, confidentiality systems, and other contents. After the contract was signed, Chen served as an assistant to the general manager of the limited company and was responsible for technical work, as well as technical information on plastic buckle plate formulas. In September 1997, the limited company decided to withhold 15% of employees' salaries in response to the phenomenon of technical personnel leaving the company. From November 1997 to February 1998, the limited company retained a total of 1320 yuan from Chen's salary; In March 1998, Chen submitted his resignation to the limited company, but the limited company did not respond. In early April 1998, Chen handed over relevant technical information, including plastic buckle formula technical information, to the company and proposed to terminate the labor contract. Later, Chen did not return to work at the limited company.

Market waiting to be hired by similar enterprises

As a technical staff member, Chen applied for employment at the talent market in a certain urban area at the end of April 1998 to showcase his own skills. In May of the same year, the decoration material factory established by Jia as the owner hired Chen as the technical staff member through the talent market, and Chen was also responsible for the production of plastic buckle plates. A customer of Jiamou Original Co., Ltd. sells plastic buckle plates for the limited company.

Zhengde Xianji Co., Ltd. filed an application for labor dispute arbitration

Due to the fact that the limited company has no technical personnel or backbone in charge since Chen resigned, the production situation has directly turned down, and the company's products have been returned due to quality issues, resulting in an increase in product production scrap rate. In this case, the limited company has submitted a labor dispute application to the local labor dispute arbitration committee, requesting that: 1. Chen continue to fulfill the labor contract; 2. Requesting Chen to cause losses of approximately 250000 yuan to the company due to his unauthorized resignation; 3. Requesting compensation of 150000 yuan from Chen and Jia for the economic losses caused by Chen's leak. After hearing, the Labor Arbitration Commission found that due to the unilateral deduction of Chen's salary by the limited company, which violated the prohibitive provisions of Article 50 of the Labor Law, Chen has the right to unilaterally terminate the labor contract in accordance with Article 32 of the Labor Law. Therefore, the request of the limited company to continue fulfilling the labor contract is not supported; At the same time, support Chen's request for the limited company to refund the deducted salary. Support the request of the limited company for a loss of 150000 yuan caused by Chen and Jia's leakage of information.

Litigation against arbitration decision not supported by first instance court

Chen and Jia filed a lawsuit with the local people's court regarding the ruling of the labor dispute arbitration committee, requesting the revocation of the ruling of the labor dispute arbitration committee and requesting compensation from the limited company for the return of the deducted salary and the payment of overtime wages; After trial, the court of first instance held that due to the unilateral deduction of wages by the limited company, which violated the prohibitive provisions of the Labor Law, Chen had the right to terminate the labor contract accordingly. Chen's request to return the deducted wages and pay overtime wages was not inappropriate, and he supported it in accordance with the law. However, as a technician in charge of plastic buckle plates in a limited company, Chen has a confidentiality obligation for the technology in charge, that is, he should still have this obligation after the contract is terminated; Within less than two months after the termination of the labor contract with the limited company, Chen was recruited by Jia to be responsible for the production technology of plastic gusset plates. The products produced by him were "similar to those produced by the limited company, and their formulas were basically the same." Therefore, Chen violated the confidentiality obligations stipulated in the contract and legal provisions. Therefore, the judgment was made as follows: 1. The limited company paid Chen 1320 yuan in arrears of wages within 7 days after the judgment came into effect; 2. Chen and Jia jointly compensated the limited company with a loss of RMB 150000 within 7 days after the judgment came into effect.

Encountering a scholar judge to argue the case clearly

After the first instance judgment, Chen and Jia refused to accept and appealed to the Intermediate People's Court of Taizhou City. The main reasons for the appeal were: 1. The first instance judgment found that the plastic buckle plate formula and process provided by Limited Company were trade secrets and lacked basis; 2. Even if trade secrets exist, Chen and Jia have not infringed on the trade secrets of the limited company. During the second instance, Chen and Jia entrusted Lawyer Zhou Xiangen as their litigation representatives; Lawyer Zhou Xiangen raised his own different views on the key issues of this case during the trial:

1、 The right holder of a trade secret infringement dispute should first provide evidence on the scope of the trade secret

In the second instance procedure, the court generally requires the appellant to provide evidence on their own appeal claim. However, in this case, Lawyer Zhou Xiangen raised the issue of the burden of proof for trade secret infringement in the labor dispute, proposing that the right holder, i.e. the appellee Limited Company, should first provide evidence on the scope of trade secrets. The reason is: 1. Require the appellee to define the scope of trade secrets first, In order to determine whether the products produced by appellant Jia use the appellant's product production technical information and whether appellant Chen has engaged in a breach of confidentiality infringement; 2. Require the appellant to provide evidence on the confidentiality measures taken regarding trade secrets, in order to determine whether the appellant's actions violated the relevant confidentiality measures; Determining the scope of trade secrets helps to identify the form and method of infringement in this case; 4. The limited company provided different contents of plastic buckle plate formulas and process technical information in the first instance trial, first determining the scope of trade secrets, which helps to identify the target of infringement. The agent of the limited company believes that this case is a trade secret infringement dispute, and Chen and Jia should provide evidence that there is no infringement fact; Lawyer Zhou Xiangen believes that the view of the limited company agent is to assume the existence of the limited company's trade secrets as its prerequisite, which is precisely the premise to be solved in this case; Finally, the second instance court supported Lawyer Zhou Xiangen's claim, requiring the limited company to first determine the scope of protection for trade secrets.

2、 Can the plastic buckle formula and process provided by the limited company become its trade secret

In this case, the trade secrets required to be protected by the limited company include three parts: 1. the technical information of the plastic buckle plate formula provided by the machine equipment supplier; 2. Chen approved and approved the production technology of plastic buckle plate formulas for Unit 1, Unit 3 in Workshop 1, and Workshop 2. Lawyer Zhou Xiangen believes that the production technology of plastic buckle plate formula mentioned above does not meet the conditions for constituting trade secrets. The main reasons are: 1. In the first instance trial, the limited company was unable to determine which formula its products were produced based on, and the limited company did not establish technical or quality standards for plastic buckle plate production; At the same time, the ingredients contained in the production formula for plastic gusset plates provided by the limited company have been recorded in many published books, such as Li Zhiying's "Manufacturing and Application of Unplasticized Polyvinyl Chloride Plastic Shapes and Plastic Windows". In 1990, the magazine "Plastic Shapes" reported that more than 20 companies in China produce plastic gusset plate formulas, which are basically similar, indicating that the plastic gusset plate formula technology provided by the limited company has not been formed and is a well-known technology; 2. The shareholders' meeting minutes and accounting audit reports provided by the limited company can confirm that the limited company uses its own formula for production, which not only has unstable product quality but also cannot bring economic benefits to the limited company, indicating that the formula does not have economic value; 3. As a trade secret, the formula and process of plastic buckle plates cannot be determined by the limited company, indicating that the formula and process are not practical; 4. The limited company did not provide specific confidentiality measures to protect its formulas and processes.

3、 After hiring Chen, Jia did not utilize the limited company's formulas and processes for production.

Main manifestations: 1. Different production equipment. The production equipment of the limited company is single screw machine equipment, while the machine equipment used by Jia is double screw production equipment, and there is no interoperability between the two; If the limited company formula is set up on the equipment purchased by Jia for production, it is impossible to produce products. 2. The formula for plastic gusset plates comes from different sources. The formula for plastic gusset plates in our limited company comes from the equipment supplier, and the formula for plastic gusset plates used by Jiamou also comes from the equipment supplier. However, the two equipment suppliers belong to different enterprises. 3. The basic ingredients and content of the formula used by Jia are different from those of the limited company's products, and have been confirmed by the appraisal authority in the appraisal conclusion.

Dust settles and ponders over the case

After the second instance court held that Jia recruited Chen to work in the production technology of plastic gusset plates, but the formula used by Jia was similar due to different sources and production equipment, and the product ingredients of the enterprises producing the product nationwide were basically the same. The original trial court only relied on Chen's familiarity with the limited company's formula during his time at the limited company, citing the fact that the two products were "similar, but their formulas were basically the same", It is determined that Jia used the formula of the limited company for production and Chen leaked the information, but the evidence is insufficient. Therefore, the lawsuit of the limited company against Chen and Jia for infringement of trade secrets and compensation for losses is rejected.

Although the rights and interests of Chen and Jia in this case were safeguarded through the appeal process, the following aspects of this case should be considered:

1、 The second instance court did not confirm or deny in the final judgment whether the plastic buckle plate formula provided by the limited company belongs to a trade secret, which is a defect of the second instance judgment. However, citing relevant magazines and other materials from the judgment, the second instance court believes that the plastic buckle plate production formula is public technical information, not a unique trade secret of a certain enterprise.

2、 When any enterprise signs a labor contract with its employees, it is not only necessary to specify confidentiality clauses in the labor contract, but also to sign a confidentiality agreement specifically for key technical personnel, in order to ensure employees' confidentiality awareness.

3、 Enterprises should timely formulate confidentiality scope and measures for their own trade secrets in response to the constantly changing situation, in order to ensure that they have a reasonable basis in litigation related to trade secret infringement disputes.