A recent case from the Sixth Circuit Court of Appeals illustrates the difficulties companies face when trade secret disputes cross international borders.
The case involved Shu An, a former employee of Stolle Machinery Company. LLC. Stolle makes and services machines for producing food and beverage cans, and is the largest of the four firms that dominate the world market for such machinery. It has customers around the world, including in China.
An, a native of China, came to the US in 1990 to study for a graduate degree in engineering in Ohio. He later went to work as a project engineer for Stolle and signed an employment agreement in which he agreed not to use or disclose the company’s trade secrets and other confidential information.
In his job, An had access to trade secret design drawings and other information. In 2002, he asked for leave to go to China to care for his sick father. In 2003, after failing to return or contact Stolle, he was fired.
In 2003, Stolle’s representative in China learned that An was approaching existing and potential Stolle customers and offering to sell them can-making equipment identical to Stolle’s for 40% less than Stolle’s prices.
In 2004, An started a competitor company, Suzhou SLAC Precision Equipment. Stolle learned that An had drawings that were virtually identical to some of Stolle’s.
However, Stolle did not bring suit against An at that time. The then-president of Stolle testified at his deposition,
How do you secure drawings from a Chinese nationalist who is hiding in China? I don’t know. That was the question I have. If he was an American living in the U.S., I probably would have done something more. That’s my point. But I didn’t know what to do when a Chinese person stole my drawings potentially. How do I go after him in Jiangsu, wherever he is hiding.
In 2009, Kenneth Fultz, Stolle’s director of sales, left the company and took a position with RAM Precision Industries, one of Stolle’s part suppliers.
Stolle learned that Fultz and An had jointly met with customers in China, and Stolle became concerned that Fultz was violating his non-compete and non-disclosure agreements with Stolle.
In 2006, SLAC sold a system to a pet food company in the US, and Stolle concluded that the cans produced by the system were identical to cans produced by its own machines.
In 2010, Stolle brought claims in Ohio federal court against Fultz, RAM, An, and An’s company for trade secret misappropriation, copyright infringement, deceptive trade practices, and tortious interference with business relationships, among other claims.
The court found that Stolle’s claims for trade secret misappropriation against An and his company were barred by the statute of limitations, because no reasonable jury could conclude that the four-year statute of limitations under Ohio trade secret law had begun to run against any later than 2003.
The district court also found that Stolle had presented no evidence of copyright infringement, and that Stolle’s other claims were preempted by the Ohio Uniform Trade Secrets Act. The court thus granted summary judgment for the defendants on everything but the copyright infringement claim.
The Sixth Circuit affirmed in all respects but one: the defendant company was not entitled to summary judgment on the trade secret claim because there was a genuine issue as to when the statute of limitations began to run against the company.
The court found that the statute of limitations did not begin to run against SLAC in 2003 because the company did not yet exist then. The court noted that there was a genuine issue of material fact as to whether Stolle should have discovered SLAC’s alleged trade secret misappropriation before 2006.
Don’t Wait to Sue
In this case, Stolle will have another chance to seek compensation for trade secret theft. But it would have been in a stronger position had it brought suit earlier, despite the difficulties in suing a defendant in another country.
Leech Tishman Intellectual Property partner, Danton Mak was born in Hong Kong and is fluent in both Mandarin and Cantonese. His insight, knowledge, experience, and contacts throughout the Far East have proven invaluable to clients with legal issues involving China.
To arrange a consultation with Attorney Mak or one of our other intellectual property attorneys, please contact our office at 626-796-4000.
The firm’s Intellectual Property Group is based in Pasadena, California with a team of highly-regarded legal professionals with prosecution and litigation expertise in the fields of patent, trademark, copyright, and trade secrets.
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Photo Attribution: “Empty tin can 2009-01-19″ by Sun Ladder. Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.