Chang Cheng, the former head of Lenovo Mobile’s business in China and the current vice president of Xiaomi Group, has made new progress in the suspected breach of competition restriction obligations.
According to Chinese media, Lenovo Group that Lenovo has requested the arbitration tribunal to regularly return the amount of equity incentives, pay liquidated damages for violations of non-competition obligations, and continue to perform its obligations of non-competition.
Competitive business restrictions refer to employers and employees who are aware of their business secrets or other workers who have a significant impact on the business of their business, after terminating or dissolving their labor contracts, they shall not produce similar products, operate similar businesses, or have other competition within a certain period of time. The related employer shall hold the post, and shall not produce or operate the same kind of business that has a competitive relationship with the original employer. The time limit shall be agreed in advance by the parties, but shall not exceed two years.
According to Lenovo, since the signing of the restrictive agreement in 2017, within 24 months before Chang cheng left his job, Lenovo had paid Chang cheng a total of more than 5 million Yuan in equity consideration for competition restrictions. After Chang Cheng resigned, Lenovo also paid him financial compensation for competition restriction.
In this regard, Xiaomi has not yet publicly responded. Chang Cheng originally led the research and development of Lenovo desktop computers, notebook computers, and smartphones in Lenovo, and has many “fans”, which is recognized as a “big player” in the industry.
On December 31, 2019, Lenovo officially announced that Chang Cheng had resigned due to his own family matters. Three days later, Lei Jun announced that he would join Xiaomi regularly and will serve as the vice president of Xiaomi Group, responsible for mobile phone product planning.
At that time, many people had questions: Should such a big executive leave his job without signing a non-competition agreement? And began to “ridicule” the alliance’s idea of ”being too big.”
At that time, Lenovo said that the company and all senior executives have signed non-competition clauses. If there is a breach of contract, the company will seek a proper solution to the problem within the legal framework, and jointly create a talent flow space that respects the spirit of the contract.
In fact, not long afterward, in June 2020, Lenovo “sent to trouble” Chang Cheng and initiated arbitration on Chang Cheng’s violation of its obligation to restrict competition. After that, Chang Cheng denied that the signature on the agreement was signed by him.
This did not stump Lenovo. On September 17, Lenovo Group confirmed that the “Lenovo Restrictive Agreement” signed by Chang Cheng on July 24, 2017, was confirmed by the appraisal agency appointed by the arbitration tribunal.
Although neither Chang Cheng nor Xiaomi responded further, can Chang Cheng still stay at Xiaomi at this point? At present, the routine in business is as usual and it seems that it has not been affected.
Zhao Zhanzhu, deputy director of Beijing Zhilin Law Firm and a special researcher of the Intellectual Property Research Center of China University of Political Science and Law, told a reporter from Chinanews.com that whether he can stay at Xiaomi depends on whether the regular schedule violates the obligation of competition restrictions, and mainly depends on whether Xiaomi It falls within the scope of the non-competition agreement stipulated in the non-competition agreement.
“If the competition restriction agreement clearly states that Lenovo’s competitors include Xiaomi, Chang Cheng has clearly violated the agreement; if the agreement stipulates that employees cannot work with competitors after they leave, it depends on Xiaomi’s and whether there is a competitive relationship between Lenovo, at present, there is obviously competition.” Zhao Zhanzhan said.
Then who will pay out the amount of equity incentives and liquidated damages that Lenovo requires regular return? Zhao Zhanzhan stated that what Lenovo sued was Chang Cheng, and in principle, Chang Cheng should go out. But in reality, companies often “pay the bill.” In this case, it is likely that Xiaomi will pay the money.
If money can solve, the problem is not too complicated. But in fact, just giving the money is not enough either. In Lenovo’s latest statement, it requires Chang cheng to continue to perform its non-competition obligations.
In other words, given the money, Chang Cheng may still be unable to stay at Xiaomi.
Zhao analyzed that after the results of the arbitration came out if they refused to accept the proceedings, they could still litigate, and the litigation could still be the first and second instance. If all three procedures are completed, it usually takes more than one and a half years or even more than two years. “After Lenovo finally received the effective judgment, if the two-year limit of competition has not expired, then it can require Chang Cheng to continue to perform its non-competition obligations; if two years have passed, Lenovo cannot ask Chang Cheng to perform the restrictions.