IBM accused of stealing trade secrets from Chinese joint venture

The IBM logo is visible on a computer. REUTERS / Lucy Nicholson / File photo

  • Neu Cloud has agreed to use IBM servers in the products
  • IBM allegedly stole customer information to use with a new business

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(Reuters) – Beijing Neu Cloud Oriental System Technology Co – a joint venture formed 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 provided confidential information about their partnership’s customers to a rival joint venture that it later formed with another Chinese company.

IBM, based in Armonk, NY, did not 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 – of which Neu Cloud claimed to be run by IBM Corp – and its Beijing-based distributor Beijing TeamSun Technology Co., a “leading provider of integrated IT services 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 would have made Neu Cloud “completely dependent” on IBM for its supply and would have given it “substantial control” over its functioning.

Neu Cloud said it had submitted RFQs to IBM as part of their deal that included confidential customer information, and that IBM had 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 stated that IBM subsequently “refused to sell the server products to Neu Cloud except through the new joint venture, and prompted its own employees with knowledge of Neu Cloud’s confidential customer lists to join this new joint venture and share this confidential information “.

Neu Cloud said it lost market share and selling opportunities based on IBM shares. He sued IBM for allegedly misappropriating its trade secrets under US law, seeking damages and an injunction preventing IBM from misusing its secrets.

The case is Beijing Neu Cloud Oriental System Technology Co v. International Business Machines Corp, United States 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 from Arch & Lake.

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