If a Company in China Steals Your Trade Secrets, Do You Have to Litigate Your Lawsuit in China? Maybe…

The theft of trade secrets by foreign companies, especially those in China, from American companies is a hot topic among lawmakers and in the press. A recent opinion from the Fifth Circuit Court of Appeals dealt a blow to the ability of American companies to bring lawsuits in the United States for trade secret theft  in some circumstances, at least in the Fifth Circuit. The American companies that appear to be potentially susceptible to this ruling are those that have facilities in China or another country.

Innovation First International, Inc. (“Innovation”), an American toy manufacturer, filed suit in Dallas, Texas against Zuru, Inc. (“Zuru”), a British Virgin Islands toy manufacturer headquartered in China. It was alleged that a high level designer that worked at Innovation’s China facility resigned his position, stole trade secrets, began working for Zuru in China, and used the trade secrets to produce the same robotic toy fish for Zuru that was being manufactured by Innovation. Innovation discovered that Zuru was marketing the same robotic fish when both Innovation and Zuru participated in the Fall Toy Preview in Dallas, Texas in 2011.

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