Hon Hai’s Defeat at Second Instance of Action against Two Former Employees

Hon Hai Precision Industry Co., Ltd. (“Hon Hai”) lost the case against the ex-empolyee Huang and Tsao at the Taiwan High Court. 

Starting his employment with Hon Hai in November 1999, Huang had been acting as a project manager of Hon Hai’s Network Interconnection Business Group before leaving Hon Hai, and Tsao had been working at Hon Hai as an engineer under the same Group since April 2007.  Both Huang and Tsao signed and agreed to a non-compete clause when they started their career at Hon Hai, which prohibited them from working in a competing business within 2 years after leaving Hon Hai.  However, after leaving Hon Hai, both Huang and Tsao took another job at other companies doing the business similar with that of Hon Hai, for which Hon Hai brought a lawsuit against Huang and Tsao for violation of trade secrets and demanded payment of default penalty from Huang and Tsao. 

In April 2013, Taiwan New Taipei District Court ruled against Hon Hai by the reasoning that Hon Hai, taking advantage of employer’s superiority, requested Huang and Tsao to agree upon the non-compete clause whose restriction was actually and overly broader than the reasonable scope for protection of Hon Hai’s interest and also violated public order and good moral, and therefore, the non-compete clause should be held void in accordance with subparagraph 3 of Article 247-1 and Article 72 of the Taiwan Civil Code.  Hon Hai disagreed with the judgment and appealed this case to the Taiwan High Court.

With Hon Hai’s appeal, Taiwan High Court rendered a judgment on February 25, 2014 to the effect that Huang and Tsao shall not, before March 3, 2014, be engaged in, run business of, or instigate any other person to do, in Taiwan, Hong Kong, or China, the manufacture or R&D of the product that is identical or similar to iPhone 5’s “Lightning Cable” by using the trade secrets with respect to iPhone 5’s “Lightning Cable” to which they had access during their employment with Hon Hai.  Hon Hai’s demand for Huang’s and Tsao’s payment of default penalty and other relevant demands are dismissed on the ground that Hon Hai failed to prove Huang’s and Tsao’s alleged act of divulging trade secrets.  (March 2014)
/CCS