IBM defeats former Chinese partner's U.S. lawsuit over trade secrets

A man stands near an IBM logo at the Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS/Sergio Perez/File Photo GLOBAL BUSINESS WEEK AHEAD
  • Neu Cloud said IBM China took secrets about potential customers to new venture
  • Judge said information wasn't secret, case is time-barred

(Reuters) - International Business Machines Corp and IBM China persuaded a U.S. judge on Wednesday to dismiss a lawsuit claiming they stole trade secrets from a joint venture to sell IBM server products in China.

Beijing Neu Cloud Oriental System Technology Co's lawsuit failed for multiple reasons, Senior U.S. District Judge Alvin Hellerstein said, including because the customer information that IBM allegedly took to another joint venture was not secret.

Representatives for the companies did not immediately respond to requests for comment Thursday.

Neu Cloud was formed by IBM China and its Beijing-based distributor Beijing Teamsun Technology Co in 2014 to sell hardware and software related to IBM Power Systems servers, its 2021 lawsuit said. It said its requests for IBM to authorize sales discounts included trade secrets about potential customers.

According to the complaint, IBM formed a separate joint venture with another Chinese company in 2017 that induced former Neu Cloud employees to join and share its secrets.

But Hellerstein said Wednesday that Neu Cloud had failed to identify any protectable trade secrets.

"The identity of potential customers is available through public and independent sources," Hellerstein said. "It is implausible that Defendants would not be able to identify potential users of IBM technology without Plaintiff having identified some of them."

The companies' confidentiality agreement also specifically excluded information "retained in the memories of employees," Hellerstein said.

Hellerstein also said the case should be dismissed because the lawsuit was time-barred, none of the alleged violations happened in the U.S., and the court lacked jurisdiction over IBM China.

The case is Beijing Neu Cloud Oriental System Technology Co v. International Business Machines Corp, U.S. District Court for the Southern District of New York, No. 1:21-cv-07589.

For Neu Cloud: Gary Hnath, Bryan Nese and Clark Bakewell of Mayer Brown

For IBM: Kevin Reed and Rachel Epstein of Quinn Emanuel Urquhart & Sullivan

Read more:

IBM accused of stealing trade secrets from Chinese joint venture

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Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets. Reach him at blake.brittain@thomsonreuters.com