Samenvatting Strategic IP
management Class 1:
Introduction & IP Strategies
Case Foxconn vs BYD(A): Commercial
espionage or learning by hiring?
This text describes the profound conflict between Foxconn and BYD, two major players in the
electronics industry, and analyzes the line between exclusive talent recruitment ("learning-
by-hiring") and illegal corporate espionage. A detailed summary and explanation of the key
points follows.
1. The Key Players and Their Background
Foxconn (part of Hon Hai Precision Industry): Foxconn was the world's largest
contract manufacturer of mobile phones, with major customers such as Nokia and
Motorola. Led by the disciplined Terry Guo, the company employed a military-style
management style and strict cost control.
BYD Company Limited: Originally a rechargeable battery manufacturer, founded by
Wang Chuanfu, BYD diversified into the mobile phone market (EMS) in 2003 and later
into the automotive industry.
2. BYD's Strategy: "Learn by Hiring" To quickly master the complex logistics and technical
aspects of mobile production, BYD launched an aggressive strategy of hiring staff from
various sources, including Foxconn.
Recruitment: BYD even established a dedicated recruitment office to attract Foxconn
employees.
Speed: Thanks to this strategy, BYD secured orders from global customers like Nokia
and Motorola within two years, a process that had taken Foxconn five years.
Critical Transfers: Key executives like Liu Xianjun, who had been groomed by Foxconn
for top positions for seven years, transferred to BYD.
, 3. The Cause: The 2006 Data Breach
In May 2006, Foxconn discovered a serious leak of trade secrets.
The Incident: A Foxconn employee (Wang Wei) continuously sent electronic files (42
confidential documents about production processes) for ten hours to a former
colleague (Zhang Jian) who was now working at BYD.
Evidence: During raids at BYD, large amounts of non-public Foxconn information were
found, including documents with Foxconn letterhead and signatures of their
department heads.
Systematic Theft: Foxconn concluded from its own investigation that this was not a
malicious incident, but a systematic attempt by BYD to steal trade secrets.
4. Legal Battles and Procedures
In June 2006, Foxconn initiated a civil dispute in Shenzhen, resulting in millions in damages.
Slow Progress: The follow-up was slow, according to Foxconn, due to the local police's
lack of experience with complex intellectual property (IP) cases.
BYD's defense: BYD claimed that the information produced through Foxconn came
from public sources.
Sentence: In April 2007, employee Wang Wei was sentenced to nine months for
stealing trade secrets. Foxconn subsequently considered criminally prosecuting BYD
as a company to send a warning.
5. Views on Innovation and Intellectual Property
The text highlights the fundamental difference in how both companies view IP:
Wang Chuanfu's 5% rule: The BYD founder said that only 5% of a new product comes
from internal research; the rest comes from public sources (60%), consisting of
samples (30%) and raw materials (5%).
"Small" vs. "Great" Wisdom: Wang spoke of "small wisdom" (avoiding patent
infringement by making minor changes, such as to a car's appearance) and "great
wisdom" (knowing what to repeat).
Examples: BYD was previously sued by Sony (batteries) and criticized by Toyota
(because the BYD F3 looked very similar to the Corolla), but often managed to avoid
legal defeat by successfully challenging patents held by others.
management Class 1:
Introduction & IP Strategies
Case Foxconn vs BYD(A): Commercial
espionage or learning by hiring?
This text describes the profound conflict between Foxconn and BYD, two major players in the
electronics industry, and analyzes the line between exclusive talent recruitment ("learning-
by-hiring") and illegal corporate espionage. A detailed summary and explanation of the key
points follows.
1. The Key Players and Their Background
Foxconn (part of Hon Hai Precision Industry): Foxconn was the world's largest
contract manufacturer of mobile phones, with major customers such as Nokia and
Motorola. Led by the disciplined Terry Guo, the company employed a military-style
management style and strict cost control.
BYD Company Limited: Originally a rechargeable battery manufacturer, founded by
Wang Chuanfu, BYD diversified into the mobile phone market (EMS) in 2003 and later
into the automotive industry.
2. BYD's Strategy: "Learn by Hiring" To quickly master the complex logistics and technical
aspects of mobile production, BYD launched an aggressive strategy of hiring staff from
various sources, including Foxconn.
Recruitment: BYD even established a dedicated recruitment office to attract Foxconn
employees.
Speed: Thanks to this strategy, BYD secured orders from global customers like Nokia
and Motorola within two years, a process that had taken Foxconn five years.
Critical Transfers: Key executives like Liu Xianjun, who had been groomed by Foxconn
for top positions for seven years, transferred to BYD.
, 3. The Cause: The 2006 Data Breach
In May 2006, Foxconn discovered a serious leak of trade secrets.
The Incident: A Foxconn employee (Wang Wei) continuously sent electronic files (42
confidential documents about production processes) for ten hours to a former
colleague (Zhang Jian) who was now working at BYD.
Evidence: During raids at BYD, large amounts of non-public Foxconn information were
found, including documents with Foxconn letterhead and signatures of their
department heads.
Systematic Theft: Foxconn concluded from its own investigation that this was not a
malicious incident, but a systematic attempt by BYD to steal trade secrets.
4. Legal Battles and Procedures
In June 2006, Foxconn initiated a civil dispute in Shenzhen, resulting in millions in damages.
Slow Progress: The follow-up was slow, according to Foxconn, due to the local police's
lack of experience with complex intellectual property (IP) cases.
BYD's defense: BYD claimed that the information produced through Foxconn came
from public sources.
Sentence: In April 2007, employee Wang Wei was sentenced to nine months for
stealing trade secrets. Foxconn subsequently considered criminally prosecuting BYD
as a company to send a warning.
5. Views on Innovation and Intellectual Property
The text highlights the fundamental difference in how both companies view IP:
Wang Chuanfu's 5% rule: The BYD founder said that only 5% of a new product comes
from internal research; the rest comes from public sources (60%), consisting of
samples (30%) and raw materials (5%).
"Small" vs. "Great" Wisdom: Wang spoke of "small wisdom" (avoiding patent
infringement by making minor changes, such as to a car's appearance) and "great
wisdom" (knowing what to repeat).
Examples: BYD was previously sued by Sony (batteries) and criticized by Toyota
(because the BYD F3 looked very similar to the Corolla), but often managed to avoid
legal defeat by successfully challenging patents held by others.
