## Facts

- Jiaxing Zhonghua Chemical Co., Ltd. and Shanghai Xinchen New Technology Co., Ltd. jointly developed a vanillin production process and treated it as a technical trade secret.
- Fu Xianggen, a former Jiaxing employee, allegedly accepted remuneration and disclosed the process to personnel affiliated with Wanglong Group.
- Beginning in June 2011, Wanglong-affiliated companies used the process to manufacture vanillin at scale, becoming a major global producer; plaintiffs alleged market-share loss and price effects.
- Plaintiffs sued multiple Wanglong entities and two individuals for trade-secret misappropriation, seeking damages and injunctive relief.
- The first-instance court (Zhejiang Higher People’s Court) found infringement of some asserted technical secrets, issued an injunction, and awarded RMB 3.5 million (losses plus reasonable expenses).
- Both sides appealed to the Supreme People’s Court (Intellectual Property Tribunal), disputing the infringement scope and damages.

## Issues

1. Whether the vanillin process qualified as a protected technical trade secret (commercial value, secrecy, and reasonable confidentiality measures).
2. Whether defendants improperly acquired, disclosed, and used the technical trade secret through a former employee’s breach of confidentiality.
3. Whether infringement covered all asserted technical secrets or only part of them.
4. How civil damages should be determined where defendants failed to provide complete accounting and financial information.
5. Whether the duration and scale of use warranted a substantially higher award than the first-instance damages.

## Decision

- The Supreme People’s Court held that the vanillin process constituted a protected technical trade secret and that defendants’ acquisition and use were improper.
- The court found defendants liable for infringing all technical secrets involved, expanding the infringement scope beyond the first-instance findings.
- The court upheld cessation of infringing acts and imposed joint liability among corporate defendants and involved individuals.
- The court substantially increased damages to RMB 159,000,000 (including litigation expenses), replacing the first-instance damages determination.
- The court indicated the conduct was suspected of criminal trade-secret infringement and that materials could be transferred for potential criminal investigation.
- The damages award covered acts from 2011 through the end of 2017, while signaling that continued infringement after January 1, 2018 could support separate claims including punitive damages under the amended Anti-Unfair Competition Law.

## Legal Principles

- A technical trade secret requires commercial value, non-public status, and reasonable measures to maintain confidentiality.
- Paying or inducing a former employee to disclose confidential technical information constitutes improper acquisition; subsequent use and onward disclosure by recipients constitute trade-secret infringement.
- When defendants refuse to produce relevant accounting records or disobey evidence-production orders, courts may draw adverse inferences and estimate profits and damages using plaintiff-side evidence and market-based indicators.
- Damages may include profits attributable to infringement, assessed with reference to the scale and duration of the infringing production and the value of the misappropriated technology, plus reasonable enforcement expenses.
- Remedies may extend beyond civil damages and injunctions where facts suggest criminal trade-secret infringement, and later-period conduct may be addressed in separate proceedings under updated statutory remedies.

## Conclusion

The Supreme People’s Court held Wanglong-related entities and responsible individuals fully liable for misappropriating and using a vanillin-process trade secret, expanded the scope of infringement to all asserted technical secrets, and sharply increased compensation to RMB 159 million by relying on adverse inferences and plaintiff-supported estimates after defendants failed to provide complete financial records, while preserving injunctive relief and noting potential criminal and post-2018 punitive-damages exposure.


Jiaxing Zhonghua Chem. Co. v. Wanglong Grp. Co., (2020) Zui Gao Fa Zhi Min Zhong No. 1667 (Sup. People’s Ct. Feb. 26, 2021)