Richard Yong WANG  Partner, Attorney-at-law and Patent Attorney

 

On June 14, 2024, the Intellectual Property Tribunal (IPT) of the Supreme People's Court (SPC) released the final ruling for Geely vs WM Motor technical secret infringement case ((2023) SPC IP Final No. 1590). With a compensation amount exceeding RMB 640 million, it set a new historical record for the amount of damages ever awarded in intellectual property infringement litigation in China. The ruling in the case not only awarded huge economic damages but also made pioneering explorations in addressing several hot and difficult issues concerning the trial and enforcement of technical secret cases. SPC announced it as Guiding Case No. 273 in its 49th batch of specialized guiding cases on February 26, 2026. This article aims to go into the judicial details of the case and explore its profound significance as a guiding case.

 

I. An Overview of the Case: Technology Hijacking Triggered by Cross-Enterprise Talent Mobility

 

This case is a typical infringement case occurring in the field of core technologies for new energy vehicles. Around 2016, Chengdu Gaoyuan Company, a subsidiary of Geely Group (Geely), experienced a significant talent loss. Nearly 40 senior executives and core technical personnel, including the general manager, project team leader, and technical department director, collectively resigned and promptly joined the WM Motor Holdings Limited (WM Motor) and its affiliated companies.

 

Geely subsequently discovered that WM Motor, an auto manufacturer with almost no technological foundation and accumulation, launched the EX series electric vehicles in only about two years, and filed 12 utility model patents for Geely's core chassis technology with the aforementioned departed personnel listed as inventors. Geely then filed a lawsuit with the Shanghai Higher People's Court (first instance court), with the claim amount reaching RMB 2.1 billion. The first-instance court only ordered WM Motor to compensate RMB 7 million, and both parties appealed to SPC. In the second instance, the SPC comprehensively determined the facts of the infringement and increased the compensation amount to over RMB 640 million and imposed extremely stringent enforcement measures for ceasing the infringement.

 

II. Refinement of Access and Substantial Similarity Principle: Shifting the Burden of Proof under the Background of Mass Personnel Poaching

 

In technical secret infringement cases, the basic and fundamental principle is “the party who asserts must prove”. However, for the plaintiffs in technical secret cases, presenting evidence has always been a thorny issue. Technical secrets, as a type of information, can be recorded on any medium in various forms. In practice, proving that a defendant possesses a medium recording technical secrets is extremely difficult. To alleviate the plaintiff's burden of proof, the 2019 amendment to the Anti-Unfair Competition Law of the People's Republic of China specifically clarifies the rules for shifting the burden of proof under particular circumstances.

 

In this guiding case, the primary judicial focus is to clarify that: when an alleged infringer creates channels for acquiring the technical secrets by recruiting employees and manufactures similar products within an unreasonably short period, the establishment of infringement can be presumable.

 

1. Overall Determination of Technical Secrets and Timely Shift of Burden of Proof

 

In the past, to prove that a defendant had infringed upon its technical secrets, a right holder was required to first specify each secret point and then compare them one by one. However, under the background of large-scale, organized employee poaching, such a requirement seems excessively stringent. In this case, SPC, based on the spirit of Article 32 of the Anti-Unfair Competition Law and considering the special backdrop of the large-scale, organized poaching, established a holistic assessment model for this case and refined the rules for shifting the burden of proof to the alleged infringer:

 

• Determination of the channels and opportunities: SPC determined that nearly 40 personnel of Chengdu Gaoyuan Company--including the general manager, the project R&D team leader, and the head of the technology department, all of whom had had access to the secrets--joined WM Motor in a short period to engage in R&D work in the same field. Before their departure, these individuals not only had extensive access to the drawings involved but also engaged in bulk downloading of the technological data, which is sufficient to prove that WM Motor had real channels and ample opportunities to obtain Geely’s technical secrets.

 

• Unreasonable R&D Cycle: SPC introduced the R&D patterns as the basis for factual presumption in the case. According to the expert opinions, the forward R&D cycle for developing the chassis for a new energy vehicle typically exceeds three and a half years (42 months). However, WM Motor (Wenzhou) was incorporated in May 2016, and its EX5 model reached mass production and was launched on the market in September 2018. This means it took only about two years from the personnel recruitment to mass production, which manifestly contradicts the established R&D patterns. Therefore, SPC presumed that it had used Geely’s technical secrets.

 

• Shift of the burden of proof: Given the existence of acquisition channels, the use of similar technology, and the highly unreasonable R&D duration, and in light of WM Motor failure to provide complete independent R&D records or proofs of legitimate technical sources, the court, by transferring the burden of proof for refuting infringement to the defendant, directly presumed that WM Motor had obtained and used all the technical secrets involved.

 

2. Judicial Rejection of Whitewashing Infringing Technology

 

In previous judicial practice, it was required to compare technical secrets point-by-point. The second instance ruling in this case pointed out that chassis design has the characteristics of integration and systematization, and when technicians package and take away all the technologies they have developed, the rights holder should not be mechanically required to prove the use of each individual secret point. Although WM Motor claimed that some of its technologies were different from Geely's and constituted independent improvements, the second instance ruling explicitly stated that: even if modifications, improvements, or optimizations were made based on the original technologies, as long as the substantially similar features remain unchanged, it still constituted infringement. This effectively blocked WM Motor's attempt to evade infringement liability through minor modifications.

 

III. Comprehensive Enforcement of Stopping Infringement: From "Paper Judgment" to "Practical Enforcement"

 

Guiding Case No. 273 made a pioneering exploration into the methods of assuming liability for ceasing infringement, embodying the judicial wisdom of prompting the obligors to voluntarily comply with the court ruling.

 

 

1. Innovation in Restricting Patent Disposal Rights

 

One highlight of this final ruling is that WM Motor is not allowed to implement, license, transfer, pledge, or dispose of the 12 patents applied for based on the infringing technology without permission. This not only includes prohibiting transfer, but also explicitly forbids maliciously abandoning patent rights, such as by failing to pay annual fees. The second instance court held that patents applied for using others' technical secrets constitute a continuation of the infringement, and restricting disposal rights is intended to protect the legitimate interests of the true rights-holder before the change of patent ownership, which was extremely rare in previous rulings. Extending the measure to stop infringement to include patent disposal rights addresses the risk of subsequent consequences of infringement and represents a significant breakthrough in the judicial field.

 

2. Comprehensive Enforcement Pressure Constructed by the Special Requirements

 

Another major highlight of the case lies in addressing the prevalent difficult-to-enforce issue. Considering factors such as duration, method, scope of infringement, and extent of damage related to the technical secret in question, SPC provided a detailed explanation of the order of ceasing the infringement in the main text of the judgement, thereby making these obligations fully implementable. Specifically, the court established the special requirements, extending liabilities to both upstream and downstream entities:

 

• Prohibiting manufacture and sales: cease manufacturing and selling the chassis and whole vehicles that use the technical secrets involved;
• Destroying carriers: under court supervision or with the rights holder's witness, destroy or hand over all the drawings and digital models containing the secrets;
• Risk Notification: require WM Motor to notify the shareholders, executives, former employees, and upstream and downstream suppliers through public announcements and internal communications;
• Making individual commitments: require all relevant R&D personnel and suppliers to sign the written confidentiality and non-infringement commitments;
• Submitting reports: require WM to submit reports on enforcement to the court and allow Geely to inspect them.

 

3. High-Amount Delayed Performance Fine to Be Paid on Daily Basis

 

To ensure the enforceability of the ruling, the second-instance ruling specified the standards for delayed or late performance penalties regarding non-monetary obligations: a daily fine of RMB 1 million for refusing to stop manufacture and sales; a fine of RMB 1 million per item for unauthorized disposal of patents; a daily fine of RMB 100,000 for failing to destroy carriers on time or notify relevant entities. These detailed enforcement rules and extremely high penalty standards greatly enhanced the deterrent effect of the ruling, directly prompting WM Motor to voluntarily perform all the non-monetary obligations before August 2024.

 

IV. Damages Calculation: Quantification of Financing Valuation and R&D Costs Savings

 

WM Motor argued that its products have consistently been in a state of loss, attempting to evade compensation based on profit. In this case, SPC constructed a logic for awarding the damages amounting to RMB 640 million through a scientific financial model.

 

1. Reference to Profit Margins of Representative Companies in the Same Industry

 

Although WM Motor argued that it did not make profits, the court held that infringing gains include not only book profits but also costs saved. The court referred to the gross profit margins of 10.6%-17.9% of representative companies during the same period in the market. Considering that WM Motor saved hundreds of millions in R&D investment by mass poaching, the court ultimately reasonably set the sales profit margin at 20%.

 

2.Weight Allocation of Technical Contribution

 

The court adopted the logic of the relevant asset appraisal report: the chassis accounts for 40% of the entire vehicle's weight, and the profit-sharing rate of the entire vehicle technology is 25%, so the profit contribution rate of the chassis technology is 10% (=25% × 40%). Considering that the technical secrets involved are core technology of the chassis, it was ultimately determined that its contribution rate to the sales profit of the entire vehicle is 8%.
 

When specifically calculating damages, SPC used the following formula:
 

Damages = Sales volume × Average price × 20% (profit rate) × 8% (contribution rate of the technical secret)

 

3. Standards Applied for Punitive Damages

 

As WM Motor's infringement lasted for a long time, SPC calculated the final damages in separate periods, that is, before and after the implementation of the amended Anti-Unfair Competition Law in April 2019. The court found that WM Motor acted with obvious intent to infringe and engaged in severe acts such as large-scale employees poaching and malicious disclosure of secrets to apply for patent, for infringements. However, only compensatory damages were calculated for acts before the law amendment. Two-fold punitive damages (with a cap of five-fold) were applied only to the infringing gains after the law amendment (approximately 204 million), which pushed the total compensation to RMB 640 million. During the litigation, Geely pointed out that WM leveraged models containing infringing technology to obtain over RMB ten billion in financing and saved about 400 million in R&D investment, and these figures indirectly support the commercial logic of the awarded compensation of RMB 640 million.

 

V. Significance of Guiding Case No. 273

 

This case, selected by SPC as a guiding case in 2026, with its significance going far beyond the case itself, marks an important milestone in the history of intellectual property adjudication in China.

 

1. Establishing Presumption Rule under Large-scale Talent Mobility

 

With the acceleration of talent mobility in the high-tech industry, infringement through recruiting people with technological know-how has become increasingly common. Enterprises may recruit talent by legitimate means, but must never use this as a cover to "relocate" others’ technological achievements wholesale. The presumption logic established in Guiding Case No. 273 has effectively addressed the longstanding problem of “difficulty in providing evidence and proof” for rights holders, creating a standard model for judicial authorities to handle similar disputes in high-tech fields like new energy and artificial intelligence.

 

2. Realizing the Leap from Compensatory Relief to Comprehensive Deterrence

 

This case, by specifying concrete measures to stop infringement, breaks the previous deadlock of “emphasizing compensation while neglecting enforcement”. Guiding Case No. 273 elaborately sets out a system for stopping infringement and imposing high delayed performance penalties or fines, demonstrating how judicial authorities can achieve the goal of 'no litigation' through detailed rulings, providing strong guidance for enforcement. Therefore, enterprises must realize that once infringement occurs, they face not only huge fines but also potentially devastating consequences such as prohibition of selling core products, destruction of R&D materials, and even the inability to dispose of patent rights.

 

3. Safeguarding Market Economy and Defining Competition Red Lines

 

This case clearly sends a signal or message to the market: intellectual property protection in China has entered an era of stringent, high-level protection. It warns enterprises that any act of appropriating achievements of others through unlawful means will face legal consequences that could wipe out their entire assets, thereby guiding capital and technology back to the path of independent research and development.

 

VI. Revelations: Only Compliance Leads to Long-Term Success

 

1. Establish and improve corporate compliance systems: Businesses should not hope to reap without sowing. With this case serving as the best compliance education lesson, they should implement strict background checks and anti-plagiarism early warning mechanisms for recruiting employees to avoid legal risks caused by the key personnel recruitment.

 

2. Intellectual property protection is a systematic project: Geely's victory stemmed from marking secret levels on carriers, setting access records in the staff management system, and signing strict confidentiality agreements. This reminds all innovators that the value of intellectual property must be protected through meticulous internal systems.

 

3. Honest litigation is the last line of defense for enterprises: WM Motor, after evaluating evidence in the second instance, abandoned false defense claims and received a discretionary reduction in the multiplier for punitive damages. This indicates that businesses adhering to the principles of honesty in litigation not only comply with the legal requirements but also gain practical benefits in sentencing and damage awards.

 

The release of Guiding Case No. 273 not only resolves the long-standing dispute between Geely and WM Motor but also solidifies a comprehensive legal framework for the protection of technical secrets. This landmark ruling serves as a clear directive to all market players: in the pursuit of high-quality development, a steadfast commitment to intellectual property rights and corporate integrity is the only viable path to sustainable growth and long-term success.

 

 

 

Author:

 

 

Mr. Richard Yong Wang

 

Mr. Wang received his bachelor's degree in 1991 from the department of computer science of East China Normal University and his master's degree from the Institute of Computing Technology of the Chinese Academy of Sciences in 1994. In 2005, he received degree of master of laws from Renmin University of China. Mr. Wang joined Panawell in January 2007.

 

In the past years, Mr. Wang has handled thousands of patent applications for both domestic and foreign clients, and he has extensive experiences in application drafting, responding to office actions, patent reexamination and invalidation proceeding, patent administrative litigation, infringement litigation, software registration and integrated circuit layout design registration. As a very experienced patent attorney and attorney-at-law, Mr. Wang also participated in many patent litigation cases on behalf of a number of multinational companies as leading attorney. Mr. Wang's practices include computer hardware, computer software, communication technology, semiconductor devices and manufacturing process, automatic control, household electrical appliances, and etc.