Agency Record of a Trade Secret Dispute Case in a Mold Customization Contract

The cause of the dispute is due to the lack of integrity on both sides of the cooperation

In August 1995, an electrical company and a mold factory signed a contract for the joint development of plastic parts molds for motorcycles in order to jointly develop the Feiling 125 motorcycle. It was agreed that a mold factory would produce motorcycle molds, and both parties would bear the cost equally; After a contract was signed between a mold factory and an electrical company to jointly develop motorcycle molds, it was handed over to four mold workers outside the factory for production; The mold was initially manufactured at the end of March 1996 and put into mass production in the second half of the year. In March 1997, both parties signed a motorcycle plastic parts purchase and sales contract, which stipulated that a mold factory would use jointly developed molds to produce plastic parts and supply them to an electrical company. Due to a dispute between the two parties over the settlement of payment for motorcycle plastic parts, a mold factory refused to supply a certain electrical company. A certain electrical company, citing that the plastic parts for motorcycles supplied by a certain mold factory did not meet the quality requirements, began in October 1996 by entrusting a mold worker and others to remake the same mold as the joint venture mold. Due to the lack of cooperation between the two parties, a dispute arose over the joint venture mold contract (this lawsuit) and a dispute over the purchase and sales contract for plastic parts produced by the joint venture mold (counterclaim); During this period, a certain mold factory filed a trade secret infringement lawsuit against the four mold workers to the Huangyan District People's Court of Taizhou City in September 1997, citing the infringement of their mold manufacturing technology trade secrets by the four mold workers.

The dispute lies in the existence of trade secrets

A mold factory filed a lawsuit against the four molds, claiming that after signing a mold joint venture contract with an electrical company, they had invested a large amount of funds in computer surveying and design for the development of motorcycle molds, and developed a complete set of drawings and technical data. The four mold workers used the above information to make the same mold for a certain electrical company, violating the confidentiality obligation stipulated in the contract.

In response to the lawsuit filed by a certain mold factory, the four mold workers argued that: 1. During the period when the four mold workers were producing molds for a certain mold factory, they had assumed the confidentiality obligation stipulated in the contract and had returned the actual samples required for mold production without any retained facts; 2. The fact that the so-called technical data and drawings of a certain mold factory did not contain the above information during the contract signing and subsequent performance process, and the relevant drawing clauses in the contract were crossed out; 3. A mold factory provides actual samples of engraved molds, which are purchased by an electrical company from the market and handed over to a mold factory. The actual samples are not public, and the technical data obtained from computer surveying using the actual samples can also be obtained by any unit or individual as long as they have computer surveying technology, equipment, etc. The technical data is public and does not meet the conditions for forming trade secrets; 4. If the technical information can become a trade secret, there is no evidence in this case that a certain mold factory has taken any form of confidentiality measures for the above-mentioned technical information. It can be seen that the so-called trade secrets of a certain mold factory do not exist.

No specific content of trade secrets found in the initial trial

The court, based on the focus of the dispute between the two parties, requested a certain mold factory to provide the content required to protect trade secrets. A certain mold factory believed that the trade secrets in this case were mold production technology and its materials, as well as production drawings. According to the evidence provided by a certain mold factory, only the so-called mold production drawings were listed. Lawyer Zhou Xiangen, as the agent of the four mold workers, believes that as a trade secret drawing that requires protection, it should be known to the four mold workers during the signing or performance of the contract or handed over by a certain mold factory to the four mold workers' technical data. As the drawing does not have a production time or producer, and there are no technical parameters marked on the drawing, the time when the drawing was formed cannot be determined, Therefore, it cannot be protected as a trade secret; At the same time, this drawing is a product drawing, not a mold production drawing, which is inconsistent with the content that a certain mold factory needs to protect; And in this case, a certain mold factory did not provide other evidence to confirm the specific content of its trade secrets, so the so-called trade secrets of a certain mold factory in this case do not exist.

The previous case has not been resolved, and the grassroots court has decided to suspend the trial

Due to the ongoing trial of the mold joint venture contract and purchase and sales contract between a certain electrical company and a certain mold factory by the Taizhou Intermediate People's Court, the first instance court suspended the trial of the trade secret infringement dispute in this case based on the results of other cases; During this period, the four mold workers and a certain electrical company reported to the preliminary court that the trade secret dispute in this case was not related to the mold joint venture dispute or purchase and sales contract dispute between a certain electrical company and a certain mold factory. They requested the resumption of the trial of this case and did not obtain a preliminary trial permit. After five years of litigation, a certain electrical company and a certain mold factory finally made a final judgment in October 2001 by the Zhejiang Provincial High People's Court. The final judgment had both sides winning and losing.

Resumption of trial: Electrical company added defendant

The final judgment on the joint venture contract dispute and purchase and sales contract dispute between a certain mold factory and an electrical company states that a certain electrical company entrusted a mold worker to manufacture the joint venture mold behind the back of a certain mold factory, and made the same mold according to the joint venture mold, violating the principle of good faith that should be followed in contract performance... At the same time, a mold factory has delivered a complete set of plastic mold surveying drawings to a certain electrical company according to the joint venture contract provisions; A mold factory, based on the final judgment, requests the first instance court to add an electrical company as the defendant in this case and increase the litigation request, requesting:

1. Stop infringing on the mold manufacturing technology of a certain mold factory and the molds and products produced using this technology;

2. Request four mold workers and an electrical company to compensate for losses of over 3.04 million yuan. Considering that a certain mold factory claimed that it exceeded the jurisdiction of the first instance court, the first instance court transferred the case to the Taizhou Intermediate People's Court for trial. During the trial, a certain mold factory expressed the trade secrets of this case as: computer models, drawings, and data. The carriers of this part of technical information are CD and drawings, respectively.

Regarding the evidence provided by a certain mold factory, Lawyer Zhou Xiangen, who serves as the legal advisor and agent of the four mold workers for a certain electrical company, believes that:

1. The CD and drawings provided by a certain mold factory do not record the production time, production personnel, and product name, so it cannot be proven that the recorded content is that the so-called processing technology and program of a mold factory were used in the joint venture mold in dispute, and the four mold workers used the above technology in the mold processed for a certain electrical company.

2. The so-called trade secret technical parameters of a certain mold factory refer to the technical parameters measured using the modeling technology in the purchased CAD computer-aided design software, which only uses three-phase coordinates to measure the external shape data of a certain object. This technology is well-known and can be completed by any unit that owns the instrument and equipment; The physical objects used by a certain mold factory are Honda 125 motorcycle parts purchased by an electrical company from the market. Therefore, the technical parameters measured by a mold factory using the modeling technology in CAD computer-aided design software are directly accessible to the public through public channels and do not have the characteristic of trade secrets being "unknown to the public".

3. The so-called trade secret drawings of a certain mold factory are legally obtained by an electrical company due to the provision in the mold production joint venture contract and its technical agreement that a mold factory should submit a complete set of drawings to a certain electrical company after the mold production is completed; At the same time, there are no provisions or restrictions in the contract regarding whether the drawing is confidential or usable. According to Article 341 of the Contract Law, both parties have the right to use or transfer it. Therefore, even if an electrical company provides the drawing to a mold worker for use, it does not constitute infringement on a mold factory.

4. If the above parameters and drawings can become trade secrets of a certain mold factory, then in this case, a mold factory has no evidence to prove that it has taken any confidentiality measures. The first instance court, after trial, found that the trade secrets of the mold manufacturing technology that a certain mold factory requested to protect were publicly known technology. The basis for the lawsuit requiring four mold workers and an electrical company to bear infringement liability was insufficient, and rejected the lawsuit request of a certain mold factory.

Disappointed appeal, intense debate and confrontation in the second instance court

A certain mold factory appealed, and the second instance court conducted six public hearings and one pre-trial evidence exchange. The two sides provided new evidence and cross examined whether a certain electrical company and four mold workers constituted infringement, and engaged in intense debate; A certain mold factory not only adjusted the scope of trade secrets and the content of evidence, but also changed its proxy lawyer. A debate on the issues related to trade secrets involved in this case was conducted, with a focus on the following aspects:

1、 Can a certain mold factory expand the scope of trade secrets during the appeal period

After four trials by the second instance court, a certain mold factory has determined the scope of trade secrets in this case, that is, defining the disputed trade secrets in this case into five categories and seven small points, namely computer models, drawings, data, technical know-how, and production methods, and providing a seven point differentiation explanation of the content to be protected for each category. The scope of the above-mentioned trade secrets has expanded the scope of a mold factory's original litigation requests. Therefore, regarding the latter two technical information, Lawyer Zhou Xiangen expressed an opinion that:

1. The scope of trade secrets determined by a certain mold factory in the second instance procedure, including the latter two categories, goes beyond the scope of the original claim and is an added scope of trade secret protection in the second instance procedure, which should not be supported in the second instance procedure. Article 184 of the Supreme People's Court's Opinion on Several Issues Concerning the Application of the Civil Procedure Law of the People's Republic of China has already been stipulated.

2. As a trade secret, it should exist and meet the requirements of trade secret characteristics when a certain mold factory sues; As an infringement dispute for protecting trade secrets, the scope proposed during the first instance should prevail, because with the deepening of evidence provided by both parties, if the licensed rights holder constantly changes and arbitrarily increases the scope of trade secrets, the scope of protection that the rights holder needs to protect will always be in an uncertain state, and as the accuser of the rights holder, they cannot defend themselves in litigation.

3. The trade secrets that the right holder requests to protect should only be allowed to provide explanations and supplementary explanations in the litigation, and the scope of rights protection cannot be expanded. The lawyer representing a certain mold factory believes that the scope of trade secrets reported by the mold factory for protection has not been expanded, but has been classified and explained based on the materials submitted in the original trial court. This explanation does not exceed the scope of the original trial claim, but the latter two types of technical information, as what type of technical information is included in the original trial claim, have not been classified and classified. The court of second instance did not support the determination that the second class technical information does not belong to the technical secrets that a certain mold factory needs to protect, as it is considered as an added trade secret.

2、 Can the "Gypsum Graphite Copying Technology" Method Be Used to Make Molds

A certain mold factory believes from the first to second review that the fourth mold worker and an electrical company used their computer model, drawing, and data technical information to carve the same mold for a certain electrical company for use; And the four mold workers believe that both the joint venture molds they have made for a certain mold factory and the molds they have made for an electrical company are used. Therefore, both parties conducted evidence and cross examination on the issue of production methods. In order to prove that a certain mold factory possesses computer model, drawing, and data technical information and that the four mold workers have access to this technical information, new evidence such as invoices for imported CAD/CAM computer-aided design software system equipment, factory contract contracts and salary schedules signed between the four mold workers and them were presented to the court in the second instance, Based on the above evidence, Lawyer Zhou Xiangen believes that the CAD/CAM computer-aided design software system imported from abroad is only a production tool for mold production, and cannot prove that a certain mold factory naturally possesses the technical information in this case; Although the contract name signed between the four mold workers and them is an internal contract, it cannot be determined that the four mold workers are their employees because the contract specifies that the four mold workers are required to issue processing value-added tax invoices. Therefore, it can be inferred that the legal relationship between the two parties is a customized contract, rather than an internal contract legal relationship; The payment received by the four mold workers in the name of salary is the mold processing payment. As the contract stipulates that the four mold workers provide value-added services, the invoice amount is 75%, and the other 25% is paid in the form of salary; At the same time, in the second instance trial, the legal representative of a certain mold factory clearly informed that the relevant computer-aided software installed in the CNC machining center must be operated by specialized personnel, and the relevant technical information cannot be opened or removed without specialized technology; The four mold workers are not specialized technical personnel and are unable to access and master the relevant technical information mentioned above. Therefore, even the four mold workers in their factory do not use CAD/CAM computer-aided design software systems to make molds. To verify the feasibility of its production method, the Fourth Mold provided the court of second instance with the process of using the "gypsum graphite imitation process" for its mold production, and stated on the spot that if a mold factory submits a deposit of 1 million yuan for mold remaking to the court, the Fourth Mold worker can submit any mold specified by the court within two months; In fact, using the "gypsum graphite molding process" to make molds still exists today; Due to the difficulty in distinguishing the authenticity of the two methods mentioned above, the second instance court has decided to initiate the appraisal procedure.

3、 Is it necessary to first determine the existence of trade secrets when identifying disputes over infringement of trade secrets

Due to the existence of two different production methods for the mold in this case, and both parties claiming to be able to produce the mold and the joint venture mold, the second instance court determined whether the fourth mold worker had infringed on the trade secrets of a certain mold factory by starting with the mold worker's production method; If it is determined through appraisal that the four mold workers can produce molds using the "gypsum graphite molding process" method for a joint venture mold made by a certain mold factory and a mold made by an electrical company, even if a certain mold factory has trade secrets, the actions of the four mold workers do not constitute infringement. On the surface, it is believed that the court's decision is correct and reasonable, but in reality, it hides the key fact that the focus of this case is whether the trade secrets of a certain mold factory exist. If the appraisal conclusion determines that the four mold manufacturing methods cannot be established, it lays the foundation for the correctness of the mold factory's manufacturing methods; To discuss the correctness and irrationality of the court's appraisal method, Lawyer Zhou Xiangen and the lawyer representing a certain electrical company both believe that the first thing to determine in this case is whether the trade secret claimed by a certain mold factory actually exists. If it does not exist, it is unnecessary to conduct appraisal on the four mold production methods in this case; If a certain mold factory has trade secrets, it should be evaluated whether the production method provided by the mold factory can produce molds, rather than the four mold production methods; The second instance court denied the reasonable opinion of the appellant's lawyer and instead decided to conduct an appraisal of the mold making method that is not a trade secret; The second instance court used reverse thinking logic to determine the resolution of the trade secret infringement dispute in this case, which is unfair to the fourth mold worker.

4、 The production method of the four mold workers was rejected by the appraisal unit

Considering that the second instance insisted on evaluating the production method of the fourth mold, the appraisal result was that the use of gypsum graphite molding technology based on the actual sample cannot produce the joint mold and the disputed mold in this case. The reason is that the production method is traditional and outdated technology, and can only produce simple or low precision molds. However, the disputed mold in this case has high requirements for shape and accuracy, ranking at the leading level of similar products in China. Both the joint venture mold and the mold in this case were made using CNC machining method, namely CAM/CAD method. In response to the appraisal conclusion, Lawyer Zhou Xiangen raised a written objection on behalf of the Fourth Molder and a certain electrical company, stating that: 1. The appraisal personnel did not measure the mold itself, and the accuracy of the mold was only determined based on the technician agreement signed between the Fourth Molder and a certain electrical company; 2. The appraisal object of this case should be the mold itself, rather than the relevant technical clauses stipulated in the technical agreement; 3. The overflow of the mold is out of tolerance and can be adjusted to meet the accuracy requirements; 4. The appraisers used the statements of the four mold workers as the basis for the appraisal, which lacked scientific validity. Based on the above reasons, Lawyer Zhou Xiangen believes that the appraisal method in this case has flaws and the appraisal conclusion lacks scientific validity. And a lawyer representing a certain mold factory believes that the appraisal conclusion entrusted by the court has sufficient basis, scientific conclusion, and legal procedure, and should be used as evidence in this case. Lawyer Zhou Xiangen believes that even if the appraisal conclusion is correct, it is only an appraisal of the four mold manufacturing methods and not an appraisal of whether the disputed trade secrets in this case truly exist. The appraisal conclusion is not related to the infringement of trade secrets in this case.

5、 Expert questioning, expert appraisal conclusion denied

Due to the adverse effects of the appraisal conclusion on the four mold workers and a certain electrical company, the lawyer's strength alone is insufficient to refute the relevant arguments and reasons for the appraisal conclusion. In this case, the four mold workers and a certain electrical company have agreed to hire experts as their agents to argue the appraisal conclusion; During the testimony of the appraisers in court, Lawyer Zhou Xiangen raised questions about the appraisal conclusion to the appraisers based on the objection letter, and the questioning results confirmed the authenticity of the objection content; At the same time, the experts hired by the four mold workers asked the appraisers about the appraisal conclusion: whether there is an industry standard for precision in mold production, and the appraisers answered that there is no; The expert hired by the four mold workers presented the mold accuracy classification standards formulated by relevant national departments on the spot. Finally, the court denied the argument on the grounds that the appraisal method was flawed and the reasons and basis for its argument lacked persuasiveness.

Seven Year Litigation Finalized

After seven years of litigation, the second instance court issued a final judgment on December 9, 2003, regarding whether the four mold workers had infringed on the trade secrets of a mold factory. The judgment held that a mold factory claimed to possess mold manufacturing technology secrets and defined them as five categories. However, in the first instance, it only claimed the first three categories of the five categories. Therefore, the court's review of a mold factory's trade secrets was limited to these three categories of technical information. In order for these three types of technical information to constitute trade secrets, a certain mold factory must first provide evidence to prove that it is "not known to the public". The mold factory states that the actual motorcycle sample will be surveyed and a series of parameters obtained, as well as the CD and product drawings converted by technical personnel based on these parameters, cannot prove that the above technical information is used for the production of joint molds because the production time, personnel, and product name are not recorded. The delivery of drawings by a certain mold factory to an electrical company is a requirement stipulated in the joint venture contract and its technical agreement. The drawings do not have any confidentiality obligations with a certain electrical company. For a certain electrical company, owning the drawings is legal and there is no illegal contact with the drawings. Therefore, the drawings do not constitute a trade secret of a certain mold factory. To put it a step further, even if the data constitutes a technical secret, a certain mold factory still needs to provide evidence that the four mold workers used the same data when making molds for a certain electrical company, and cannot simply judge whether the product or method is the same, and consider the specific data to be the same. In summary, a certain mold factory's request for protection of trade secrets does not exist. Therefore, its request for an electrical company and four mold workers to bear infringement liability is not supported, and its appeal grounds are not credible. Therefore, the appeal is rejected and the original judgment is upheld.

Masking thinking

After seven years of litigation, this case has taught me a basic philosophy: no matter what kind of agency activities a lawyer participates in, they cannot do without an understanding of the basic facts of the case and in-depth discussion of the law. Only on this basis can the basic ideas of agency cases be determined. As a trade secret infringement dispute case, regardless of the party represented by the lawyer, the first thing to determine is "what is a trade secret?" What are the conditions for its composition? If it is an infringement, how can the infringement be manifested and implemented? As an agent in the seven year litigation of this case, I have always seized this central link for providing evidence and cross examination. Although there were some ups and downs in the middle, I have never left the center of the dispute in the case to express my own views. The reason why a certain mold factory lost the lawsuit in this case is that it was not determined what their own trade secrets were before the lawsuit was filed? Different expressions have been made in the first and second instance procedures regarding the trade secrets that the court has requested for protection. Therefore, in today's fiercely competitive market economy, enterprises not only need to make good use of their own trade secrets, but more importantly, protect their own trade secrets, in order to make themselves invincible in the market economy.