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Sat, Jul 19, 2008 - Page 11 News List

Hon Hai criticizes delays in prosecution of PRC rival

AP , TAIPEI

Electronics manufacturer Hon Hai Precision Industry Co (鴻海精密) took out half-page ads in major domestic newspapers last week to complain about delays in a Chinese court over the prosecution of a Chinese competitor.

Hon Hai spokesman Edmund Ding (丁祈安) said the company suspects that BYD Co (比亞迪), a Chinese electronics maker based in Shenzhen, is systematically looting its trade secrets.

The purpose of BYD’s alleged actions, domestic media have reported, is to give the Chinese company a leg up against Hon Hai in winning big parts orders from international mobile phone powerhouse Nokia.

The row is a stark reminder that even for the most sophisticated Taiwanese companies — in this case one employing 500,000 Chinese workers — doing business in China is not as simple as it seems.

Cheng Jung-wen (鄭榮文), a senior official at the Taiwan Merchant Association in Shenzhen said the Hon Hai case reflected a tendency among some Chinese officials to favor local companies over outsiders in intellectual property rights disputes.

Cheng said intellectual property theft was a common problem suffered by Taiwanese businesses, but that Chinese officials seemed unwilling to help them address it.

“We have long given up the thought of asking Chinese authorities for help,” Cheng said. “The only way we can avoid damage is to develop new products all the time.”

Hon Hai’s saga began in 2006, when it sued BYD for infringing on its trade secrets after two former China-based Hon Hai employees allegedly took proprietary information with them when they went to work for BYD.

The employees have since been convicted in a Chinese court on infringement charges.

But Hon Hai said that may be only the tip of the iceberg.

Spokesman Ding said that 400 Hon Hai employees have moved to BYD over the past four to five years and many are suspected of providing the company with Hon Hai trade secrets.

Hon Hai is now suing BYD in Hong Kong, court papers show. In parallel, Ding says, Chinese prosecutors have opened a criminal investigation against BYD in Shenzhen — an assertion that the Shenzhen Public Security Bureau would not comment on.

But in any case, Hon Hai fears that the cards may be stacked against it — at least in Shenzhen.

BYD’s head is a member of the Shenzhen People’s Congress, “with the power to remove members of the judiciary,” Hon Hai’s recent newspaper ad said.

“This results in a certain degree of unwillingness among local judicial and police members to deal with the case,” it said.

But the company’s huge China exposure means that its experiences won’t be ignored either, particularly given the considerable respect in which it is held in the local business community.

Despite its China problems, Ding remains confident that a positive resolution to the Hon Hai matter will be found.

“We believe justice will eventually prevail,” he said.

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