International Labor & Employment Law Committee Newsletter

Issue: September 2013

Editor: Tim Darby | Africa and Middle East Editor: Karen Seigel | Asia and Oceania Editor: Ute Krudewagen | Canada Editor: Gilles Touchette | European Editor: Paul Callaghan | Latin America Editor: Juan Carlos Varela | Law Student Editor: Irene Lehne, Earle Mack School of Law at Drexel University | USA: Trent Sutton


First Ever Preliminary Injunction and Asset Preservation Orders in Trade Secrets Case Issued by Court

Andreas Lauffs and Jonathan Isaacs, Baker & McKenzie China

A preliminary injunction order and an asset preservation order were issued against a former employee of the Chinese subsidiary of a U.S.-based pharmaceutical company on July 31, 2013, by the Shanghai No. 1 Intermediate People's Court, before a trial on the merits of the case. This is the first such order issued in China. The injunction order restrained the former employee from disclosing, using, or allowing others to use certain documents containing trade secrets that he downloaded from the company's database without authorization. In addition, the court also issued an asset preservation order to freeze the ex-employee's real property and bank account pending the trial.

This is a landmark case as, according to Chinese media, it is the first case anywhere in China where a party successfully obtained a preliminary injunction and asset preservation order in a trade secrets dispute since the newly amended PRC Civil Procedure Law took effect on January 1, 2013. The amended Civil Procedure Law specifically allows for preliminary injunctions and asset preservation relief in all civil cases. In the past, such remedies were only specifically allowed in patent, trademark and copyright infringement cases, and prior to the amendment, in trade secrets cases companies would have to wait until they actually suffered harm before they even had a basis for bringing a claim, and then would have to wait for final judgment (which could be up to one year or more later if all appeals were exhausted) before obtaining any relief. This case thus sets a milestone for trade secrets protection (or breach of confidentiality) cases. It remains to be seen whether the courts will enforce the same measures in a non-compete case.

In this landmark case, the former employee admitted he downloaded valuable, highly confidential information to his personal USB drive and personal computer. The downloading of such information was not justified by work-related needs, and violated his confidentiality agreement and the company policies. He later refused to cooperate with the company to delete such information from his personal device and computer. The company terminated his employment, and filed a civil action against him. The court agreed with the company's argument that there was a threat of irreparable damage to the company in the event of an unauthorized disclosure or misuse of the alleged trade secrets, and that preliminary injunction and asset preservation remedies were therefore warranted.

Evidence Obtained from Employee's Work Email in Accord with Company Policy but without Employee Permission Violates Employee Privacy and Is Not Admissible, Court Rules

Andreas Lauffs and Jonathan Isaacs, Baker & McKenzie China

Evidence taken from an employee's work email was not admissible as evidence, the Guangdong Foshan Intermediate People's Court has ruled, affirming a lower court ruling in a termination case that the termination was unlawful.

In this case, the company conducted an investigation of the employee by checking the employee's work email without informing him and without asking his permission for access to his emails. The employee had signed a Code of Ethics, which included a provision stating that "all the communication data and information you send or receive using the company's facilities or property during employment are company property, rather than personal communication" and "the company reserves the right to monitor all communications, including the use of Internet." Based on this policy, the company argued that the emails were the company's property, not the employee's private emails.

After the investigation, the company alleged that the employee had seriously violated the company's rules and regulations, as the investigation indicated that the employee had disclosed the company's business secrets to another company via email and the employee had sent pornographic images to colleagues through email, which the company defined as harassment. As a result, the company terminated its employment relationship with the employee. Later, the employee claimed that he was illegally terminated and should be reinstated. The employee also claimed that the company should give an apology to him and rehabilitate his reputation. The trial court ruled that the termination was unlawful but dismissed the apology and reputation rehabilitation claims. The Foshan Intermediate Court affirmed the judgment on appeal.

The court opined, and the intermediate court affirmed, that every citizen is entitled to freedom of correspondence and this right cannot be deprived without due process regardless of the employee's signing of the company Code of Ethics. Although the email address had the company's name at the end and it was sent through the work email system, the company still was ruled to have violated the employee's privacy, as this email account could only be logged into with a password set by the employee and was personally used by the employee. Therefore, the company had violated the employee's rights by checking the employee's email without his permission, and the evidence obtained in this way could not be admitted as evidence.


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