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Techtronic Product Development Ltd And Another v Fauteux, Denis Gaston

Judgment Cited authorities 13 Cited in Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date20 February 2024
Neutral Citation[2024] HKCFI 518
Subject MatterCivil Action
Judgement NumberHCA1235/2023
Year2024
HCA1235/2023 TECHTRONIC PRODUCT DEVELOPMENT LTD AND ANOTHER v. FAUTEUX, DENIS GASTON

HCA 1235/2023

[2024] HKCFI 518

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1235 OF 2023

________________________

BETWEEN

TECHTRONIC PRODUCT DEVELOPMENT LIMITED 1st Plaintiff
TECHTRONIC CORDLESS GP 2nd Plaintiff
and
FAUTEUX, DENIS GASTON Defendant

________________________

Before: Deputy High Court Judge MK Liu in Chambers (Open to Public)
Date of Hearing: 8 February 2024
Date of Decision: 20 February 2024

________________________

D E C I S I O N

________________________

1. There are two contentious matters before me:

(1) the 1st and the 2nd plaintiffs’ (“P1” and “P2” respectively, and “Ps” collectively) summons dated 8 December 2023 (“the Leave Summons”) seeking leave to use certain materials and information disclosed by the defendant (“D”) pursuant to the Order made by me dated 11 August 2023 (“the Aug 2023 Order”) and the Order made by DHCJ Phoebe Man dated 19 October 2023 (“the Oct 2023 Order”) for the purposes of (a) lodging reports and/or criminal complaints to the relevant authorities in Hong Kong and/or in Mainland China (“the Mainland”) and/or facilitating criminal investigations or proceedings in Hong Kong and/or in the Mainland, against D and/or parties as advised by Ps’ legal advisors, including those listed in Annex 2 to the summons (“the Intended Mainland Defendants”, who are all in the Mainland), and (b) civil proceedings against D and the Intended Mainland Defendants; and

(2) costs of Ps’ inter partes injunction summonses dated 7 August 2023 (“the 1st Injunction Summons”) and 13 October 2023 (“the 2nd Injunction Summons”) respectively, whereby Ps sought to restrain D from using or disclosing certain items, and sought delivery up of the same.

2. In the hearing before me, Ps are represented by Mr Alexander Stock SC, leading Ms Sheena Wong. D is represented by Mr John Hui, together with Mr Alex Yeung.

BACKGROUND

3. P1 and P2 are part of the Techtronic Industries Co Ltd (“TTI”) group of companies (“TTI Group”), which is in the industry of manufacturing and supply of power tools, products and equipment.

4. TTI is a listed company in Hong Kong.

5. TTI Group is in the industry of producing lithium-ion battery powered tools. Lithium-ion battery is a type of rechargeable battery, which is the predominant battery type used in power tools, portable consumer electronics and electric vehicles.

6. P1 is a Hong Kong company engaged in research and development (“R&D”) activities.

7. P2 is a general partnership formed in Nevada, USA, which serves as the global trading principal of the TTI Group and holds certain intellectual property rights for the TTI Group.

8. D is a scientist and engineer. He first joined the TTI Group as the Director of Engineering in charge of the Battery Group in Techtronic Industries (Dongguan) Co Ltd on 23 April 2007. He joined P1 as a Vice President in charge of Engineering and Portable Power System on 1 January 2011. He was appointed as the Chief Technical Officer in charge of Advanced Energy Solutions (“AES”) of P1 on 1 January 2017. On 9 April 2017, P1 and D entered into an employment contract (“the Employment Contract”). According to Ps, the employment ended on 14 August 2023. Ps’ case is that on that date, D was summarily dismissed for gross misconduct and serious breach of duties.

9. According to Ps:

(1) In around 2017, D was tasked with (a) building the cells R&D team for TTI Group from scratch, and in particular (b) developing “tables cells”. “Tabless cell” technology is an advanced technology, which is different from traditional “tabbed cells”.

(2) Since 2017, D led a team to engage in a wide range of R&D works, including: developing TTI Group’s own cells; building a cell pilot production line in Dongguan; designing development strategies and products; conducting research on cell design and cell recipes (electrolytes, anodes and cathodes); negotiating prices with material / equipment suppliers and building strategic alliance with supplier partners; and designing pilot and mass production lines. The team is of a substantial size: as of 2023, there are around 160 staff members in the AES Team in the Mainland alone and a team being built in Vietnam (where D also worked).

(3) Each step of the R&D process undertaken by D’s team involves highly technical and confidential information, as well as secret processes and trade secrets which are carefully guarded by the TTI Group.

(4) In respect of D’s specific task of developing TTI Group’s own cells, this was a highly technical and complicated matter, given that cell technology is in itself a very advanced technology, with not many companies around the world that have the requisite capability to manufacture quality cells. The material composition of anodes, cathodes and electrolytes is extremely difficult (if not impossible) to reverse engineer, meaning that their recipes are regarded as trade secrets.

10. Ps’ case is as follows:

(1) During the course of D’s employment with P1 and within the TTI Group, D: (a) had routine access to a huge amount of proprietary information and trade secrets belonging to Ps and TTI Group; (b) occupied senior positions within TTI Group, and (c) was involved in almost all aspects of TTI cells development. Such proprietary information is the fruit of vast amounts of investment made by Ps.

(2) By an email dated 1 April 2023, D gave written notice to P1’s senior management, indicating that he would like to “retire” and resign. Pursuant to Clause 5 of the Employment Contract, D’s contractual notice period would have run until 30 September 2023 (but for P1’s summary dismissal of D on 14 August 2023).

(3) On or around 6 July 2023, D had a phone call with Nate Easter, Executive Vice President of the TTI Group. In this phone call, Nate Easter tried to persuade D to stay with P1, but was unsuccessful. D then revealed that (a) he attended a “ground-breaking ceremony” of a company called “Reliance” on 6 July 2023; (b) he was planning to help the Chinese lithium-ion battery industry to “become dominant”; and (c) he was interested in the business of one “Maggie Chen”, and would assist when she is ready to drive the technology. This was further reflected in D’s email to Nate Easter dated 6 July 2023 stating that he was planning to “help the Chinese lithium ion industry to become dominant”. As at 6 July 2023, Ps were not yet fully aware of the scale or severity of D’s apparent misconduct.

(4) On or around 14 July 2023, Ps became aware of various news reports confirming that on 6 July 2023, when D was still an employee of P1, he had indeed attended and was one of the core participants hosting a “ground-breaking ceremony” (“Ground-Breaking Ceremony”) of Reliance (Jiangsu Ruien New Energy Technology Co Ltd) (“Reliance”) for a factory construction project in Changzhou, China.

(5) Ps then commenced an internal investigation, which uncovered evidence of extremely serious wrongdoing and breaches by D. Ps’ investigations as at early August 2023 led to the following broad discoveries.

(a) Unauthorised downloading of over 1,940 documents from TTI system whilst attending the Ground-Breaking Ceremony:

(i) Reliance is a company in the Mainland engaged in, inter alia, developing and manufacturing lithium-ion batteries, and was or would be a direct competitor of P1 and the TTI Group, providing the same or substantially similar services in the same territories.

(ii) On or around 20 July 2023, Ps discovered that on 6 July 2023, D covertly mass downloaded Ps’ highly confidential information and valuable trade secrets (ie the proprietary information) to a removable device, without prior consent or authorisation of P1. Such information was downloaded mostly from the local drive of the company laptop (reference no. NB1199) (“Laptop”) entrusted by P1 to D during and for the purpose of his employment, and some from TTI Group’s “One Drive” online cloud system (with a copy to the local drive of the Laptop).

(iii) As at 4 August 2023, Ps had identified 1,946 documents which had been downloaded by D in the aforesaid manner, as recorded in a log (“Log”) generated by TTI Group’s computer system.

(iv) The documents downloaded by D included a number of patents, which had been assigned by P1 to P2, who remains the current assignee and was thus joined as a party to these proceedings.

(b) Steps to solicit TTI employees to join Reliance in breach of the Employment Contract:

(i) The downloaded documents also included HR related files, such as CVs, bonus and remuneration data of Ps’ former/existing employees, organization charts, and HR policies. The evidence suggested that D was taking steps in connection with soliciting former or existing employees of P1 to join a business in direct competition with Ps/TTI Group. This view was fortified by the following facts.

(ii) Ps discovered that Kaiser Wang Kai (“Kaiser Wang”) and Huang Qing Quan (“QQ Huang”) had both participated in a team-building activity of Reliance on or around 14 July 2023. Both Kaiser Wang and QQ Huang were in P1’s AES team led by D, before their employments terminated on or around 7 June 2023.

(iii) On 5 July 2023, Kenny Wang Xi Qing (“Kenny Wang”) of TTI Group tendered his resignation. Kenny Wang had been hired by, and reported directly to, D. Although Kenny Wang stated in his resignation notice that he intended to return to the US, Kenny Wang in fact joined Reliance after his resignation.

(iv) That Kaiser Wang, QQ Huang and Kenny Wang did all join Reliance was confirmed by D himself in [25] of his 1st Affirmation filed in these proceedings.

(c) Setting up company to work with Reliance and misuse / wrongful divulgence of Ps’ proprietary information and trade secrets. Since December...

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