Industry Alert: Record High Compensation in IP Infringement Case

After a six-year legal battle, Geely's lawsuit against WM Motor for trade secret infringement has finally come to a close. Recently, the Intellectual Property Court of the Supreme People's Court concluded the appeal case between Geely and WM Motor, which was triggered by a large number of employees "jumping ship," involving the infringement of new energy vehicle chassis technology secrets. The court regarded it as an organized and planned large-scale poaching of new energy vehicle technology talent and resources by improper means, and ultimately ruled that WM Motor should compensate Geely for economic losses and reasonable expenses for rights protection totaling approximately 640 million yuan. This amount has set a new record for the compensation amount in intellectual property rights infringement lawsuits in China.

Currently, WM Motor has entered the bankruptcy liquidation process. After the audit, WM Motor's book asset total is 3.988 billion yuan, but the debt is as high as 20.367 billion yuan. Therefore, the possibility of Geely receiving a compensation of 640 million yuan is not great. However, for Geely, winning this lawsuit that lasted for 6 years and cost more than 13 million yuan is more about protecting intellectual property rights and original technology. Li Shufu, the chairman of Geely Holding Group, has mentioned on many occasions the significance of original technology and independent innovation for the development and growth of a company. At the 2024 China Automobile Chongqing Forum held not long ago, Li Shufu said, "What China lacks today is not car-making enterprises, but an innovative automotive parts ecosystem, original automotive safety software and hardware technology companies, competitive industrial software suppliers, and car companies with original capabilities."

From the author's point of view, the Geely v. WM Motor case has symbolic significance. It is not only a dispute between two companies but also an important breakthrough for China in the protection of intellectual property rights. On the one hand, it reflects the national level's high attention to the protection of scientific and technological innovation and its determination to protect the intellectual property rights of enterprises and maintain their legal rights and interests. Geely's victory will also form a strong deterrent to plagiarism and plagiarism in the domestic automotive industry and even all industries to a certain extent, while boosting the confidence of enterprises in independent innovation. On the other hand, the case has made a lot of new attempts in judicial judgment, providing a basis for the trial of subsequent related cases. The Supreme People's Court clearly pointed out that the case made pioneering explorations in the specific methods, content, and scope of bearing civil liability for stopping the infringement of trade secrets, as well as the delay performance of non-monetary performance obligations such as refusing to perform the obligation to stop infringement and its payment standard.

Previously, there have been no shortage of intellectual property rights infringement cases in the automotive industry, especially cases involving the plagiarism or "reference" of automotive appearance design. However, in actual operations, enterprises face many challenges when protecting their own intellectual property rights, including difficulties in providing evidence, high cost of rights protection, long litigation cycle, and the rapid development of technology may lead to existing laws not fully covering new intellectual property issues. The lawsuit between Geely and WM Motor is a typical case, from the first lawsuit to the final judgment, it took as long as 6 years. Similarly, the "patent war" between Ningde Times and AVIC Lithium Battery, which started in 2021, has not yet been concluded.

In addition, in many past intellectual property rights infringement cases, even if the plaintiff wins the lawsuit, the compensation amount that the defendant needs to pay is relatively low, generally only tens of thousands or hundreds of thousands of yuan, and tens or hundreds of millions of yuan is considered high. At an industry closed-door meeting held recently, a senior executive of a foreign company's China region mentioned that the company has encountered similar problems, with the loss assessment reaching tens of millions of yuan, but even if it wins the lawsuit, the other party only needs to compensate for a few hundred thousand yuan, and it has not played a truly protective role for intellectual property rights. To encourage industry and enterprise innovation, it is key to increase the cost of illegal activities and eliminate the mentality of illegal actors taking risks. The huge compensation awarded to WM Motor is undoubtedly an example for the industry. It is worth mentioning that the first instance of the case ruled that WM Motor should compensate Geely for economic losses of 5 million yuan and reasonable expenses for rights protection of 2 million yuan, and the Supreme People's Court on the second instance believed that it was applicable to apply double punitive compensation, thus greatly increasing WM Motor's compensation amount to 640 million yuan. Of course, this is also related to WM Motor's initial large-scale poaching of nearly 40 senior managers and technical personnel from Geely, and applying for patents for the obtained related technologies.

Nowadays, independent innovation is increasingly becoming an important standard for measuring a company's core competitiveness. Companies that do not have their own innovation capabilities and only rely on plagiarism and "reference" can only be "ephemeral." For example, Zhongtai, which became famous for "shanzhai" the appearance of well-known brand models, was eventually abandoned by the market.

Intellectual property rights are the intangible assets of an enterprise, and protecting intellectual property rights is to protect innovation and talent. The automotive industry is a pillar industry of our country's national economy. In the field of automobiles, intellectual property rights involve technology innovation, design, brand, and other aspects, and protecting intellectual property rights is of great significance to the long-term development of enterprises. Under the intensification of industry "involution" and frequent talent mobility, it is necessary to pay more attention to the protection of intellectual property rights and trade secrets, and to create a fair competitive market environment. The author believes that the final judgment of the Geely v. WM Motor case will prompt more enterprises to pay attention to the issue of intellectual property rights protection, strengthen independent innovation capabilities, and promote the automotive industry to move towards a new stage of high-quality development.

At present, China's intellectual property rights protection system has basically formed and is becoming more and more perfect, but it still needs to be further strengthened in the law enforcement link. The final judgment of Geely v. WM Motor is a progress, which provides a solid legal protection for the innovative achievements of enterprises. The author hopes that in the future, a legal environment respecting intellectual property rights will continue to be created in the whole society, and the cognition of the public and enterprises will be improved. China's automotive industry has gone through the germination period of imitation, digestion, and re-innovation, and has begun to enter a critical period of leapfrog development. Only independent innovation can make Chinese car companies win respect, create value, and go global.