Introduction

Introduction

It took six years and tens of millions of dollars to win this lawsuit, establishing the dignity and exemplary significance for intellectual property protection in the automotive industry.

Author: Du Yuxin

Responsible Editor: Cao Jiadong

Editor: He Zengrong

Six years ago, the shocking 2.1 billion yuan lawsuit between Geely and WM Motor, which shocked the industry, finally ended with Geely's victory.

On the evening of June 14, the Intellectual Property Tribunal of the Supreme People's Court announced the judgment of this case, holding that it was a case of organized and planned large-scale poaching of new energy vehicle technical talents and technical resources through improper means, resulting in infringement of technological secrets.

"It was not easy, the difficulty of evidence collection was beyond imagination." A Geely official familiar with the case told "Auto Commune". According to the information on the judgment document, Geely spent over 13 million yuan to win this lawsuit.

The Supreme People's Court ultimately ruled that WM Motor should compensate Geely for economic losses and reasonable expenses for safeguarding rights, totaling approximately 640 million yuan, setting a new record for the amount of compensation awarded in intellectual property infringement lawsuits in China.

However, considering that WM Motor has entered bankruptcy liquidation proceedings, the total amount of confirmed claims currently stands at 3.376 billion yuan, while the audited total assets are only 3.988 billion yuan, and liabilities amount to 20.367 billion yuan. There is widespread concern about whether the 640 million yuan can be recovered.

But for Geely, the core purpose of making this technology theft case into an ironclad case is not to obtain compensation, but to fight for its reputation. In fact, along with the industry's internal competition in the past one or two years, Geely has been emphasizing legality, compliance, originality, and technology, fighting an ethical battle, which is a cry and appeal against industry chaos.

Geely's victory in this lawsuit is more symbolic than practical. The core is to use this as a typical and exemplary case to remind the industry and enterprises to respect technological research and development, respect intellectual property rights, effectively demonstrating the country's high attention to the protection of automotive technological innovation and its determination to protect enterprise intellectual property rights and safeguard the legitimate rights and interests of enterprises. This point is also clearly stated in the disclosure of the Intellectual Property Tribunal of the Supreme People's Court:

This judgment made groundbreaking explorations in specific ways, contents, and scopes of civil liability for stopping the infringement of technological secrets, as well as the delayed performance fee and its calculation standard for refusing to perform non-monetary obligations such as stopping the infringement.

This judgment is a vivid embodiment of the people's courts' proactive performance of duties, actively regulating and guiding enterprises to operate with compliance and integrity, effectively protecting enterprise innovation and development, and contributing judicial wisdom and strength to accelerating the cultivation and development of new productive forces.

The first major case triggered by job-hopping

In China's automotive market, where there are so many automotive brands and fierce industry competition, talent mobility in automotive technology should be a very common phenomenon. However, as cars evolve towards intelligence and electrification, and more new brands emerge, many automakers' R&D and technical talents are being taken away by emerging companies.

Although there are so-called non-compete agreements, in the past, companies did not take very stringent measures against the phenomenon of technical teams like Geely being taken away en masse. Even if they wanted to sue, on the one hand, such litigation was difficult to obtain evidence, and on the other hand, there was no very strong legal force or paradigm to support the plaintiff. Therefore, many companies let it go.

Before studying this case, it is necessary to mention the relationship between WM Motor and Geely. Those familiar with Geely and WM Motor understand that WM Motor's founder, Shen Hui, was a former core employee of Geely. He once served as a director and vice president of Geely Holding Group, as well as a global senior vice president and chairman of Volvo Cars in China. During his tenure at Geely, Shen Hui led the Geely team to complete the overseas acquisition of Volvo Cars and was responsible for Volvo's landing in the Chinese market.

When Shen Hui founded WM Motor, he also took away a group of Geely's core strength, especially talents in R&D, technology, and quality control. This includes Dr. Xu Huanxin, WM Motor's partner and chief operating officer, who previously led new energy technology at Volvo. In addition, WM Motor's CFO, Zhang Ran, once served as Geely's CFO; the current supervisor, Zhou Peng, once served as the director of the Volvo China Chairman's Office.

Of course, there are also well-known figures such as Du Ligang, Lu Bin, and Hou Haijing, who all come from Geely's core management team at WM Motor, in addition to a group of related important management and technical personnel. Shen Hui also told the media in 2016 that WM Motor had more than 200 core employees at the time, all of whom were his former colleagues. It can be said that they mastered a lot of operational and financial core secrets of Geely and Volvo. These operational, technological, and financial control experiences have also helped WM Motor avoid many detours, which is one of the reasons why WM Motor developed relatively quickly among the new forces at that time.

However, with Geely uncovering WM Motor's veil of technology theft in 2018 and the "sky-high" compensation claim of 2.1 billion yuan, the protection of intellectual property rights in car manufacturing technology was once again put on the industry's agenda, after all, it is the highest amount claimed in intellectual property disputes in China to date.

At that time, Geely used some departing employees as inventors or co-inventors to apply for 12 utility model patents based on the new energy vehicle chassis application technology they had accessed and mastered at Geely, as well as the technical information carried by 12 sets of chassis component drawings and digital models. Meanwhile, WM Motor, without any technical accumulation or legal technical sources, quickly launched the WM EX series of electric vehicles, suspected of infringing on Geely's technological secrets. Geely sued WM Motor to stop the infringement and compensate for its economic losses and reasonable expenses for safeguarding rights totaling 2.1 billion yuan.

The case was complex, with a huge amount of compensation claimed, and the companies and personnel involved were very crucial. Therefore, this dispute quickly attracted widespread attention from inside and outside the industry at the time. However, later, due to Geely's application for a closed trial, more information and details were not accessible to the outside world.

In September 2022, the first-instance judgment of the case was announced, showing that the plaintiff won the lawsuit, and WM Motor was required to compensate Geely 7 million yuan, including 5 million yuan for economic losses and 2 million yuan for various expenses to stop the infringement. In addition, WM Motor was ordered to stop using five automotive component drawings for the EX5 model. In this year, WM Motor encountered the most severe financial crisis and sought an IPO listing, but apparently, WM Motor, which was involved in a major case, did not achieve its desired results. Instead, it brought the entire enterprise to the brink of shutdown at the end of the year.

Unexpectedly, in June 2023, before WM Motor could escape the danger, the story took a turn. In the second-instance judgment, due to insufficient evidence relevance and incomplete evidence chains, Geely's claims were rejected. However, after another year of negotiations, the Supreme People's Court finally put an end to this matter, undoubtedly a strong response to Geely's defense of its rights over the past six years and also giving Geely's long-standing emphasis on "originality" the highest legal protection.

But for WM Motor, perhaps because of its current dire situation, this matter has come to a faster conclusion. It seems that WM Motor, which is mired in bankruptcy and reorganization turmoil, is no longer likely to turn things around. After all, the judgment in this case also stipulates that if WM Motor violates its obligation to stop using the technical secrets involved, it shall pay a delayed performance fee of 1 million yuan per day; if it擅自处分 the 12 patents involved, it shall pay a one-time fee of 1 million yuan for each patent; and if it fails to comply with the contract as stipulated, it shall also support a delayed performance fee of 100,000 yuan each time.

Shortcuts aid internal competition, compliance wins respect

The reason why this case is considered a benchmark is that it mainly determines how to analyze and judge acts infringing on technological secrets, how to refine the civil liability for stopping the infringement, how to determine the amount of compensation for this case, and how to ensure the performance of non-monetary obligations. It has set an example for similar intellectual property disputes in the future.

This is a result that both the legal and automotive communities are happy to see.

In fact, there are not a few lawsuits and cases regarding trade secrets and intellectual property rights in the automotive industry. Whether it was Honda suing Shuanghuan for copying, Land Rover suing Landwind for plagiarizing designs, or Tesla and the FBI accusing XPeng employees of stealing autonomous driving technology, most of these cases ended without resolution due to difficulties in obtaining evidence and safeguarding rights.

Especially now that competition within the automotive industry is intensifying, product and technology homogeneity is becoming more apparent, and the flow of technical personnel between automakers is becoming more frequent. With the electrification and intelligence of automobiles, the importance of software has been further enhanced, and the flow of more software developers has also increased the risk of corporate trade secret leakage to a certain extent.

Copying and plagiarism are the fastest shortcuts to success. Why can many new automotive brands achieve rapid development in a short time? On the one hand, they benefit from China's vast industrial chain ecosystem and clusters, but more importantly, the flow of core technical talents and the unseen or difficult-to-prove intellectual property leakage behind this flow have indeed brought more shortcuts to emerging brands.

Data shows that up to 59% of departing employees admit to privately taking away company confidential documents and data when leaving. Nowadays, many companies have increased their efforts to combat employees stealing company trade secrets, taking a firm stance on pursuing legal responsibility for violating non-compete restrictions, disclosing company trade secrets to third parties, or even direct competitors.

Although almost all technology-based companies have strict confidentiality and self-protection regulations, driven by interests, the theft of company secrets still occurs frequently. Undoubtedly, as automotive core technology increasingly becomes a key competitive advantage for companies, automakers are paying more attention to the protection of intellectual property rights.

Therefore, as the phenomenon of core employees job-hopping and being poached increases, it has also led to many legal issues. With the increasingly frequent talent mobility, the protection of trade secrets and intellectual property rights has become even more important.

As Li Shufu of Geely previously discussed internal competition at the Chongqing Forum, he pointed out that sound laws, strict enforcement, and transparent and fair competition are good things. Only through legal and healthy competition can sustainable high-quality development be achieved. China's achievements in electric vehicles can only be consolidated and respected by others.

Li Shufu also said that China does not lack automakers today, but what it lacks are automotive companies with original capabilities. The nature of the industry determines that automakers themselves must attach great importance to compliance and ethical bottom lines. Enterprises should prioritize consumer rights and interests, adhere to legal compliance and global compliance, and pursue long-term and sustainable development.

The development of China's automotive industry has now risen to a new level, and China's automotive intellectual property awareness and system are also maturing. Especially now that new energy vehicles have become the core force for China's automotive industry to continue to grow and go overseas, it is necessary for every innovation to be treated fairly and justly, and every original spirit to be respected.

Obviously, Geely's current market performance, capabilities, and reputation are in stark contrast to the current state and situation of emerging companies like WM Motor. Car manufacturing is a marathon, and automotive companies need to return to rationality, value, righteousness, justice, compliance, laws, and ethics. As the saying goes, the right path in life is full of hardships.