‘Order theft’: Rat that infringes trade secrets of company

The term “order theft” (literally “flying order”) means a salesperson, after securing an order in the name of his/her employer, arranges for a company he/she controls to execute the contract, thereby appropriating the commercial profit that rightly belongs to his/her employer. The principal perpetrators of “order theft” are company employees. The concealed nature of the infringement method, the ease with which the evidence can be destroyed, and the difficulty of defining the legal relationship are all problems existing in such cases.

The items and infringers involved in cases we have actually handled are numerous and the circumstances complex. We simplify a case’s circumstances as follows: Client Company A is a wholly foreign-owned enterprise. Its sales manager, Mr Zhu, after securing an order on Company A’s behalf, arranges for Company B and the end user to execute a contract to skim off the profit. Company B is a one-person entity, which the sales manager’s wife, Ms Zhang, established in Hong Kong. The husband and wife had long ago agreed to divorce and Mr Zhu had left with none of the family’s mutual property.

Only labour dispute? At the outset, some argued that the case was a labour dispute between the employer and the employee. However, if dealt with as a labour dispute, the case would be unfavourable to Company A because not only would the procedure be relatively long and the target of the suit be limited solely to the employee, but the measure of damages would also be relatively minimal.

Efar Zhou is an associate at MHP Law Firm