Trade Secret Litigation Injunction Rulings in China

1(By You Yunting) According to media reports (note: the link is in Chinese), Eli Lilly and Company and Eli Lilly (China) sued an employee named Huang in the Shanghai No.1 Intermediate People’s Court. That court recently issued the first trade secret litigation injunction in China’s history, and ruled a litigation preservation that prohibited Huang from disclosing, using, or allowing any third party to use 21 documents that were protected as trade secrets by the plaintiff.

Inductions to the Case:

The plaintiff, Eli Lilly and Company, the world’s tenth largest pharmaceutical company, has a history of more than 130 years. Eli Lilly (China) is a research institute and branch of Eli Lilly and Company. In May 2012, Huang signed an employment contract and a non-disclosure agreement with Eli Lilly (China), agreeing that Huang had an obligation of confidentiality to the plaintiff during Huang’s tenure, and to never disclose to any other person or organization any trade secrets gained during his time at the research institute, including employment information, proprietary information, and any information related to the plaintiff’s sales and marketing strategies.

In January 2013, Huang, without plaintiff’s prior authorization, downloaded the company’s confidential files from the plaintiff’s server. Afterwards, Huang refused to remove the information and offered to resign. Subsequently, the plaintiff sued Huang, requesting the court to order Huang to immediately stop infringing on plaintiff’s trade secrets, and to provide indemnity in the amount of RMB 20 million for the plaintiff’s losses and reasonable expenses used to stop Huang’s infringement. At the same time, the plaintiff applied for litigation preservation, assuming the court would prohibit Huang from disclosing, using or allowing any third party to use 21 documents that were protected as trade secrets by plaintiff, and provide RMB 100,000 vouchers. The Shanghai No.1 People’s Court, upon its review, held that the plaintiff’s application was in conformance with Chinese laws and regulations, and made thus order according to Article 100 of the Civil Procedural Law.

Lawyers’ Comments:

I. This litigation preservation behind the court’s decision relied on the Civil Procedure Law. For intellectual property infringement, China’s Supreme People’s Court may also set a temporary injunction on judicial interpretations of the Patent Law, Trademark Law and Copyright Law; we have previously provided posts discussing related systems in other areas of intellectual property law, such as patent preliminary injunction, copyright injunction and litigation injunction. With regard to trade secrets, however, no particular injunction is set on judicial interpretations of the Anti Fair Competition Law. So, the court utilized litigation preservation and the injunction system as regulated in the Civil Procedure Law to settle this case. Due to the emergency conditions and RMB 100,000 vouchers provided by plaintiff, this case was found to be in conformity with Article 100 of the Civil Procedure Law:

Paragraph 1: In the event that the judgment in the case may become impossible to enforce or such judgment may cause damage to a party because of the conduct of the other party to the case or because of any other relevant reasons, the people’s court may, upon the request of said party, order the preservation of property belonging to the other party, or for specific performance or an injunction; in the absence of such a request, the people’s court may, where it deems necessary, also order property preservation measures.

Paragraph 2: When a people’s court adopts any preservation measure, it may order the applicant to provide a guarantee; where a party refuses to provide such guarantees, the court shall reject the application.

Paragraph 3: When a people’s court receives an application for preservation in an emergency, it shall issue a decision within 48 hours after the receipt of the application; if the court allows the application, such measures shall come into force immediately.

II. Detailed requirements of trade secret injunction: Upon said time, when a people’s court receives an application for preservation, it shall decide within 48 hours after the receipt of the application whether such order for preservation will be granted. In effect, if the court allows the application, the preservation measures shall come into force immediately, and the court’s decision cannot be appealed. With regard to warranty protection offered by the applicant, if an application is made wrongfully and the respondent incurs any loss, the vouchers shall be used to compensate the respondent for any losses incurred as a result of the preservation of property.

III. The court will consider specific factors before ruling an injunction. Based on our experience, when the court approves the utilization of an injunction, it shall take following factors into consideration:

(a) Whether the condition is urgent; whether the court would miss the best time to stop infringement if a trade secret injunction is not granted?Whether the loss incurred to the plaintiff is incalculable.

(b) Whether the plaintiff would win in the case; the judge’s initial inspection of security is also very important in ruling an injunction. If the court believes the plaintiff’s possibility of winning is low, based on an analysis of available evidence and its experience, the judge will reject the application, or order the applicant to provide a guarantee, so as to protect the applicant from abuse.

Lawyer Contacts

You Yunting86-21-52134918

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