Location of the US case for a technology dispute in China

By on May 28, 2021 0


Amid continuing diplomatic tensions between China and the United States, disputes stemming from the alleged theft of tech trade secrets by Chinese companies from rival US firms[1] found their way to federal courtrooms. This stems, in part, from the availability of a global injunction under the Defend Trade Secrets Act (“DTSA”), which provides US businesses with a robust tool to combat the misappropriation of trade secrets by foreign entities in cases where “an act to promote the offense has been committed in the United States. 18 USC § 1837 (2).

But the effectiveness of DTSA’s remedies depends on the ability of plaintiffs to pursue trade secret misappropriation claims against Chinese companies in US courts. This raises a new question: what if a Chinese defendant disputes a DTSA lawsuit over forum non conveniens land? Should the federal court dismiss the lawsuit and send the dispute back to the Chinese court system?

This specific question arose in the recent case of Inventus Power, Inc. et al. v. Shenzhen Ace Battery Co., Ltd., N ° 20-cv-3375, 2021 WL 1978342 (ND Ill. May 18, 2021). Based in Woodridge, Ill., Inventus has built advanced batteries and power systems for global original equipment manufacturers (“OEMs”) –for example, lithium-ion batteries, smart chargers and power supplies efficient in a wide range of portable, mobile and stationary applications – for over sixty years. See Inventus Power, Inc. et al. v. Shenzhen Ace Battery Co., Ltd., N ° 20-cv-3375, 2020 WL 3960451, to * 1 (ND Ill. July 13, 2020) (“TRO Order”). Inventus and its 100% Chinese subsidiary sued a Chinese competitor, Shenzhen Ace Battery Co., Ltd. (“ACE”), for misappropriation of trade secrets under the DTSA and the Illinois Trade Secrets Act, 765 ILCS 1065, and following. The Complainants’ complaint alleged that ACE had designed a program to recruit high-ranking Inventus employees who had substantial access to Inventus proprietary technology. See TRO order at * 2. Former Inventus employees reportedly downloaded over 100,000 confidential technical documents and source code from Inventus computers in the weeks and days prior to their departure to benefit ACE by facilitating its expansion on the battery market. Identifier.

On July 13, 2020, the court granted Inventus’ motion for a temporary restraining order and banned ACE from disclosing, using, selling or reviewing the stolen trade secrets. See Order TRO at * 15-16. The court also ordered the parties to conduct an expedited discovery in preparation for a preliminary injunction hearing. Identifier.

ACE then filed a motion to dismiss the trial in its entirety on forum non conveniens land. The tribunal dismissed ACE’s request on the main ground that China was not an “available” or “adequate” alternative forum.

As to availability, the court first ruled that ACE had failed to establish that the “Shenzhen City Local Court” in China would accept legal action regarding a US-based plaintiff injured in the US. United. See 2021 WL 1978342, at * 4. The court found this factor to be particularly salient given that the lawsuit had been pending in the Northern District of Illinois for nearly a year when the parties had made “substantial progress on the matter. discovery and other questions ”. Identifier. While these factors may have been enough to convince the tribunal to find China unavailable as a forum, the tribunal ultimately concluded that China was “currently unavailable” as an alternative forum due to continued travel restrictions imposed by the government. Chinese to control the COVID-19 pandemic. The inability of US-based witnesses to travel to China for a trial was therefore pivotal to the tribunal’s conclusion that Chinese courts were not available to adjudicate on the trial.

As to adequacy, the ACE argued that China is an adequate forum because trade secret violations are punishable under Chinese law, and also because entities that misappropriate “trade secrets” can be held liable. criminally responsible in China. The court disagreed for two reasons. First, the court credited a statement by the Inventus expert who said that no preservation order functionally similar to an injunction had ever been issued by the courts in Guangdong Province, where ACE and the subsidiary of Inventus. Second, even though an injunction was available in China, the tribunal found that ACE had failed to establish that a Chinese tribunal could monitor extraterritorial activity or require ACE to comply with an injunction outside of China. In stark contrast, the court’s TRO ordered ACE worldwide, and ACE had confirmed its compliance with the TRO. Based on these facts, the court could not conclude “with any confidence” that Inventus and its subsidiary would have a viable remedy in China if the court dismissed the action.

It remains to be seen which sustainable principles, if any, Inventus anticipates jurisdictional disputes between US and Chinese companies in future trade secret lawsuits. Eventually, the Chinese travel restrictions that led the Northern District of Illinois to declare Chinese courts “currently unavailable” for American witnesses will be lifted. And the court ruling indicates that China could potentially be called an “adequate” forum if the defendant proves that local Chinese courts have the power to grant a strong injunction applicable worldwide.

Even in a post-COVID world, however, it’s hard to imagine a federal court dismissing a DTSA lawsuit over forum non conveniens sol while the only alternative forum is China. The availability of injunctive relief worldwide under the DTSA reflects Congress’ judgment that U.S. trade secrets deserve global protection. The deterrent effect of the DTSA and the right of private action would both be seriously undermined if the courts were inclined to relegate trade secret disputes to a defendant’s foreign country – particularly in a country that has not. sufficiently solid analogue to DTSA.

[1] See, for example, Keith Bradsher, How China obtains US trade secrets, NY Times, January 15, 2020, https://www.nytimes.com/2020/01/15/business/china-technology-transfer.html.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 148



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