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IBM accused of stealing trade secrets from Chinese joint venture

Beijing Neu Cloud Oriental System Technology Co — a joint venture established to sell IBM server products in China — sued IBM Corp and its Chinese subsidiary in Manhattan federal court on Friday for allegedly stealing its trade secrets.

Neu Cloud said in the complaint that IBM gave confidential customer information from their partnership to a rival joint venture it later formed with another Chinese company.

Armonk, N.Y.-based IBM didn’t immediately respond to a request for comment, nor did Neu Cloud attorneys Gary Hnath and Bryan Nese of Mayer Brown.

The complaint said IBM China — which Neu Cloud alleged was being directed by IBM Corp — and its Beijing-based distributor Beijing TeamSun Technology Co., a “leading integrated information technology service provider in China,” formed Neu Cloud in 2014 to “further open up the Chinese market” for hardware and software based on IBM’s Power Systems servers. Their agreement allegedly made Neu Cloud “completely reliant” on IBM for its supply and gave IBM “substantial control” of its operation.

Neu Cloud said it submitted bid requests to IBM under their agreement that included confidential customer information, and that IBM agreed to keep it confidential.

According to the complaint, IBM established a separate joint venture with another Chinese company, INSPUR Co, in 2017 to also develop and market Power Systems products.

The complaint said that IBM later “refused to sell the server products to Neu Cloud except through the new joint venture, and induced its own employees with knowledge of Neu Cloud’s confidential customer lists to join this new joint venture and share that confidential information.”

Neu Cloud said that it has lost market share and sales opportunities based on IBM’s actions. It sued IBM for allegedly misappropriating its trade secrets under U.S. law, seeking money damages and an injunction blocking IBM from misusing its secrets.

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; Shen Wang, Hao Tan, and Chen Li of Arch & Lake. Reuters

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