BYD Co, China's largest maker of rechargeable batteries, said it is being sued in Shenzhen by a unit and an affiliate of Foxconn International Holdings Ltd over business secrets.

Shenzhen Futaihong Precision Industry Co and Hong Fu Jin Precision Industry (Shenzhen) Co began legal action seeking five million yuan (US$655,000) in damages at the Intermediate People's Court in the southern Chinese city of Shenzhen in June 2006, BYD said in a statement to the Hong Kong Stock Exchange yesterday. BYD said it is accused of "misappropriation of commercial secrets."

The Shenzhen lawsuit is "immaterial to the group in terms of potential impact on the operation," given that the case involves a claim of only five million yuan, BYD said, without explaining why it delayed announcing the suit. The legal action is "ongoing," it said.

BYD shares fell 8.9 percent to HK$40.50 (US$5.18) at the close in Hong Kong yesterday, the biggest decline since May 7. The stock resumed trading after a one-day suspension on Wednesday, pending the announcement of the lawsuit. Foxconn shares rose 2.6 percent to HK$21.85.

Shenzhen Futaihong is a unit of Foxconn, and Hong Fu Jin is a unit of Hon Hai Precision Industry Co. Taiwan-listed Hon Hai is the parent company of Hong Kong-listed Foxconn.

Foxconn said on Tuesday that Shenzhen Futaihong and Hong Fu Jin "issued proceedings" in Hong Kong's High Court against BYD, alleging confidential information was obtained from former employees.

BYD wasn't served with a writ related to the Hong Kong court action, yesterday's statement said. The Hong Kong and Shenzhen court actions may be "generated from the same incident," it said.

"The group has not infringed the commercial secrets of the Foxconn related companies," the statement said. BYD will "vigorously defend" the possible Hong Kong legal action, it said.

Foxconn is the world's largest contract-manufacturer of mobile phones.