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Taiwan Manufacturer Wants Chinese Rights

Hon Hai Precision Industry claims Chinese courts have delayed prosecution against a rival Chinese competitor for allegedly stealing its commercial secrets.

TAIPEI, Taiwan (AP) -- Like other Taiwanese companies, giant electronics manufacturer Hon Hai Precision Industry Co. appears to have a big advantage in the China market -- its principals all speak Chinese and share an intuitive sense for the country's often bewildering business culture.

But last week the company took out half-page ads in major Taiwanese newspapers to complain about delays in a Chinese court over the prosecution of a Chinese competitor for allegedly stealing its commercial secrets.

The row was a stark reminder that even for the most sophisticated Taiwanese companies -- in this case one employing 500,000 Chinese workers -- doing business on the mainland is not quite as simple as it seems.

That's bad news for newly installed President Ma Ying-jeou, who sees closer economic ties with China as providing a big boost to the island's economy, particularly after the Beijing-averse economic policies of his predecessor.

Ma certainly does not favor unity with the mainland -- the two sides split amid civil war in 1949 -- but he's strongly in favor of reducing restrictions on Taiwanese investment there, promoting Chinese investment on Taiwan, and opening up the island to new waves of Chinese tourists.

The significance of Hon Hai's China problems is that they could make his program harder to sell among members of Taiwan's powerful business community -- including those who either now have investments in China, or those considering jumping in soon.

Recent increases in the cost of doing business on the mainland are likely to have the biggest negative influence on investment plans for Taiwanese businesses, so Hon Hai may not be a make-or-break precedent for them.

But the company's huge China exposure means that its experiences won't be ignored either, particularly given the considerable respect in which it is held in the local business community.

Spokesman Edmund Ding says Hon Hai's China problems center around concerns that BYD Company Limited, a Chinese electronics maker based in the southern Chinese city of Shenzhen, is systematically looting its trade secrets.

The purpose of BYD's actions, say Taiwanese media, is to give the Chinese firm a leg up against Hon Hai in winning big parts orders from international mobile phone powerhouse Nokia.

Hon Hai's China saga began in 2006, when it sued BYD for infringing on its trade secrets after two former China-based Hon Hai employees allegedly took secret Hon Hai information with them when they went to work for BYD.

The employees have since been convicted in a Chinese court on infringement charges.

But according to Hon Hai, that may be only the tip of the iceberg.

Ding says that 400 Hon Hai employees have moved to BYD over the past 4-5 years, and many are suspected of providing the company with proprietary Hon Hai information.

To protect its interests, Ding says, Hon Hai is suing BYD in Hong Kong. In parallel, he says, Chinese prosecutors have opened a criminal investigation against BYD in Shenzhen.

But Hon Hai fears that the cards may be stacked against it -- at least in Shenzhen.

BYD's head is a member of the city's powerful People's Congress, "with the power to remove members of the judiciary," its recent newspaper ad said

"This results in a certain degree of unwillingness among local judicial and police members to deal with the case," the ad concluded.

BYD did not comment to the AP on the Shenzhen proceedings. In a filing with the Hong Kong stock exchange on the two former Hon Hai employees convicted of providing it with Hon Hai trade secrets, it characterized them as isolated individuals whose actions did not reflect on BYD as a corporate entity.

Despite its China problems, Ding remains confident that a positive resolution will be found, largely because China's senior leaders are committed to protecting the interests of Taiwanese businesses on the mainland.

"We believe justice will eventually prevail," he said.

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