Edited by Ming Liu (Ms.) and Hui Wang 

In a recent ruling, a Chinese company named Luxi Chemical is ruled to pay a huge compensation of 749 million RMB for violation of confidentiality agreement with foreign companies. Luxi Chemical recognized the ruling but claimed that it did not infringe any intellectual property, and the compensation is due to the signing of a strict confidentiality agreement in an international bidding negotiation.

Reported from https://www.cnstock.com/ that on August 9, 2021, Luxi Chemical issued an announcement that it recently received a "Civil Ruling" from the Liaocheng Intermediate People’s Court. The Ruling recognized the arbitration ruling made by the Arbitration Institution of Stockholm Chamber of Commerce in Sweden on November 7, 2017 that Luxi Chemical had violated the "Non-Use and Confidentiality Agreement of Low-Voltage Carbonyl Synthesis Technology" signed by Luxi Chemical, Johnson Matthey and David Technology Co., Ltd. ("David") and Dow Global Technology Co., Ltd. ("Dow").

Lei Zhang, the vice general manager of Luxi Chemical, responded to this Ruling that Luxi Chemical respected the civil ruling and will fulfill its obligation to pay the compensation, but Luxi Chemical did not infringe intellectual property rights of the other party. Violation of the confidentiality agreement is only due to insufficient international cooperation experience in the early years, and such lesson will be learned in the future.

The civil ruling of the Liaocheng Intermediate People's Court means that the arbitration ruling made by the Arbitration Institution of Stockholm Chamber of Commerce in Sweden has the same legal effect as the effective judgment made by the People's Court of the People's Republic of China, and it will enter the execution stage thereafter. According to the arbitration ruling, Luxi Chemical should compensate about RMB 749 million.

Regarding the reason for the huge compensation, Lei Zhang analyzed that Luxi Chemical had signed the "Non-Use and Confidentiality Agreement of Low-Voltage Carbonyl Synthesis Technology" during business negotiations with David and Dow in 2010. The scope of confidential information stipulated in the agreement is very broad, and it is stipulated that if the information legally obtained by Luxi Chemical from the public domain or a third party contains confidential information content, Luxi Chemical must obtain written consent of David and Dow before using or disclosing such information, otherwise it will be deemed to violate of the confidentiality agreement. However, Luxi Chemical was not clear of the scope of confidential information and it actually received little information during and after the business negotiation.

Lei Zhang particularly emphasized that Luxi Chemical attaches great importance to the protection of intellectual property rights when communicating with its partners. Regarding the issue involved in this arbitration, Luxi Chemical has no intellectual property rights infringement issues.