Wednesday, August 12, 2009, 8/12/2009 09:43:00 AM

Chinese Formally Accuse Rio Tinto Team of Stealing Trade Secrets: The Goose/Gander Story

By Todd

We recently blogged about the Rio Tinto and Chinese "trade secrets" story here:
You'll note the original theory China was going on was that its "state secrets" had been stolen. We haven't studied the difference between Chinese "state secrets" and Chinese "trade secrets" but not that there is logically some overlap due to the involvement of the state in competitive markets.

All of that said, The New York Times is reporting that China formally arrested an Australian citizen and three other employees of the British-Australian mining giant Rio Tinto early Wednesday on suspicion of commercial bribery and trade secrets infringement, ending a diplomatic standoff over whether employees of a foreign company had spied on China.

Prosecutors announced the decision six weeks after the four employees had been detained in Shanghai on allegations that they had violated China’s state secrets law by getting access to confidential documents that gave them an advantage in negotiating iron ore prices with Chinese steel mills.

Rio Tinto, one of the world’s biggest mining companies and one of China’s biggest iron ore suppliers, has strongly denied any wrongdoing in the case.

In a statement released Wednesday, the company’s chief executive, Sam Walsh, said: “Rio Tinto will strongly support its employees in defending these allegations. From all the information available to us, we continue to believe that our employees have acted properly and ethically in their business dealings in China.”

But legal experts say bribery is widespread in China. In the first half of this year alone, Beijing says 9,000 government officials were found guilty of graft, and about 24,000 officials were investigated.

However, legal experts also say that most high-level prosecutions here require approval from Beijing’s top leaders and that bribery and corruption cases are often brought to punish political opponents.

“It’s a good way to pick on someone who’s on the wrong side of the traffic,” said Mr. Huang, the lawyer at Jones Day.

The irony of China's zeal in the matter is that it contrasts with China's lethargy in recognizing the competitively-sensitive intellectual property rights of private companies that do business in China. Perhaps what's good for the goose is not always good for the gander.


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