Eli Lilly v. Huang: Shanghai Court issues interlocutory injunction against breach of trade secret.

21 August 2013

Christine Yiu, Yijun Ge

In Eli Lily v. Huang, the Shanghai No.1 Intermediate Court recently issued the first interlocutory injunction order in a trade secret action based on Article 100 under the new PRC Civil Procedure Law.

Eli Lilly v. Huang

This trade secret dispute involves Eli Lilly and Company, the US pharmaceutical corporation, its Chinese subsidiary (together “Eli Lilly”), and a former chief chemistry researcher of that subsidiary. Huang was employed on 3 May 2012, upon which he signed a confidentiality agreement undertaking various confidentiality obligations to the employer. On 19 January 2013, Huang downloaded 21 confidential documents from the company server without authorization. Despite Eli Lilly’s repeated requests, Huang declined to delete any of those documents but elected to resign. Eli Lilly discharged Huang on 27 January 2013, and later sought redress in the court by bringing a trade secret misappropriation action under the Anti-Unfair Competition Law against Huang, seeking injunctive relief and damages in the amount of RMB 20,000,000.

The Shanghai No.1 Intermediate Court granted an interlocutory injunction under the new PRC Civil Procedure Law

On 2 August 2013, the Shanghai No. 1 Intermediate Court issued an interlocutory injunction order prohibiting Huang from disclosing, using or allowing others to use the alleged trade secret contained in the 21 confidential documents Huang downloaded from Eli Lilly’s server and had refused to delete. Eli Lilly deposited RMB 100,000 with the Court as security bond for the order. In granting the interlocutory injunction to prevent further disclosure of trade secrets, the court applied Article 100 of the new PRC Civil Procedure Law, which came into effect on 1 January 2013. The new Civil Procedure Law codifies provisions for interim measures that have been available under the PRC Patent Law, Trademark Law and Copyright Law.

Afterthoughts

In line with those previous legislations, the new Civil Procedure Law provides a clear basis for seeking an interlocutory injunction in trade secret cases, and thus affords aggrieved trade secret holders the same level of protection compared to other IPR holders.

While the case provides confidence to trade secret holders in enforcing their rights in China, it is important not to lose focus even after an interlocutory injunction order is obtained. Continual monitoring on the part of the employer remains vital to prevent any new or further disclosure by the ex-employee. Non-compliance with court orders has always been a problematic area in the Chinese legal system, as a breach of court order is rarely punished with heavy fine or imprisonment unless the breach is shown to be repeating and serious. A disgruntled ex-employee may not act sensibly, and judges may be sympathetic to a person who has recently lost his job.

For further information please contact:

Christine Yiu
Partner
D: +86 21 2312 1218
christine.yiu@twobirds.com

Yijun Ge
Associate
D: +86 21 2312 1258
yijun.ge@twobirds.com 

This update gives general information only as at the date of first publication and is not intended to give a comprehensive analysis. It should not be used as a substitute for legal or other professional advice, which should be obtained in specific circumstances.