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BYD Can Pursue Foxconn Conspiracy Claims, Judge Says

Aug. 25 (Bloomberg) -- BYD Co., the Chinese car and battery maker, won court approval to pursue claims that Foxconn International Holdings Ltd. gathered false evidence and conspired to injure its business.

“I think this plea should be allowed to develop and be decided by the trial judge who would be able to hear all the evidence,” Hong Kong Judge Louis Chan said yesterday. Foxconn, the world’s largest contract maker of mobile phones, had argued that BYD’s claims were scandalous and frivolous.

BYD made the allegations after two Foxconn units sued three years ago claiming BYD recruited former employees and stole the companies’ trade secrets including operation manuals. In its countersuit, BYD accused its rival of unlawful interference with its business and conspiracy to injure. Shenzhen, China-based Foxconn planted documents and coerced a former employee to confess he had stolen secrets, according to BYD’s claims.

BYD claimed a security manager of one of Foxconn’s units illegally intimidated a former employee to make a false statement by accompanying her on a 20-hour train ride with four public security officers, according to yesterday’s 24-page ruling.

Foxconn will “follow through with the proceedings as we move along with the legal process,” Vincent Tong, a spokesman for the maker of phone components, said in a phone interview. He declined to comment on yesterday’s ruling.

Court Proceedings Continue

BYD will assert its claims and defend against the Foxconn units’ allegations as the court proceedings continue, according to Sandra Mak, a spokeswoman for BYD.

“However we hope that the matter can be concluded so that we can dedicate our entire effort to our business,” she said in a statement.

Hong Kong-listed Foxconn faces competition from BYD for orders of handset components from customers including Nokia Oyj. The company said BYD, China’s largest maker of rechargeable batteries, doubled its revenue from its handset business in 2005, 2006 and 2007 after obtaining Foxconn data.

Warren Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc. owns a 10 percent stake in BYD, which is also being investigated by China’s land ministry for illegally building factories on farmland.

Foxconn shares fell 1.6 percent to HK$5.63 at 11:07 a.m. in Hong Kong trading. BYD shares fell 1.3 percent to HK$44.05.

Three former Foxconn employees, including a former chief operating officer of one of the contract manufacturer’s units, had been previously convicted of infringing Foxconn’s business secrets in a separate proceeding in Shenzhen.

The case is HCA2114/2007, BYD Co. et al and Shenzhen Futaihong Precision Industry Co. et al in the Hong Kong Court of First Instance.

To contact the reporter on this story: Liza Lin in Hong Kong at llin15@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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