Eli Lilly Prevailed in Pretrial Injunction for Trade Secret Case

Feynman Z. LIANG | Aug 19, 2016

Recently, Eli Lilly successfully obtained pretrial injunction from Shanghai IP Court in a trade secret case against its former employee for trade secret infringement. In the injunction, the court barred the defendant from disclosing, using or allowing others to use 28 trade secret document of the plaintiff.

The case started as a typical trade secret case: the defendant with the name of Mr. W is the former employee of Eli Lilly & Company (hereafter referred as “Eli Lilly”). When Mr. W quitted his job, he copied the trade secret documents to his personal storage device.

On 17 Nov 2015, Eli Lilly filed a complaint before Shanghai IP Court against Mr. W on the ground of trade secret infringement and pleaded the court to order that: 1. the defendant shall stop the infringement immediately, that is, the defendant shall delete permanently 28 secret documents and shall not disclose, use or allow others to use the secret; 2. The defendant shall pay the damages of CNY 30 million (USD 4.3 million). Together with the complaint, Eli Lilly filed a petition for a pretrial injunction (behavior preservation) before the court, pleading the court to order that Mr. W shall not disclose, use or allow others to use the document.

In the decision issued by the court, the court held that, the plaintiff had provided preliminary evidence proving the document at issue constituted trade secret document. Furthermore, the defendant basically agreed the assertion that documents at issue were trade secret documents and he admitted that he has transferred the documents to his personal storage device. The court therefore decided to grant the petition of pretrial injunction and ordered that the defendant shall not disclose, use or allow others to use the documents.

In China, trade secret is regulated by Anti-Unfair Competition Law of the P. R. China which is a national law.

According to Article 10 of the law,
Managers shall not use the following methods to infringe upon trade secret:
1. to steal, coerce, or use any other unfair method to obtain the other's business secrets; 2. to disclose, use or permit others to use the business secrets mentioned in Section 1 of this Article.
3. to violate the contract or the requirement to publish, use or permit others to use the business secrets, which were maintained as secrets by the legal owner of the business secrecy.
…

In considering whether to grant the petition of pretrial injunction, there are a few elements to be considered below:
1. Balance between likelihood of plaintiff’s prevailing in the litigation and irreparable harm. Likelihood of plaintiff’s prevailing in the case is the prioritized element in the consideration of granting a pretrial injunction. If the likelihood of winning the case is not high, granting of the injunction may harm the interest of the defendant because injunction may pose substantial influence to the defendant. On the other hand, if the likelihood of winning the case is high, it should be consider whether failure in granting the injunction will lead to irreparable harm to the plaintiff.

Unlike other IP right, whether the information at issue constitutes trade secret is hard to be determined without substantive examination in trial. Therefore, theoretically speaking, likelihood of wining the case cannot be established before trial. However, trade secret differs from other IP right in that, once it is disclosed to public, the information will lose its commercial value and it will lead to irreparable harm to the legal owner. Even if the plaintiff prevails in the trial later, due to that fact that the secret may have been disclosed, the judgment is hard to execute or the judgment may have become meaningless for the plaintiff. Therefore, for pretrial injunction in trade secret case, if plaintiff proves the establishment of trade secret at the first place, and the information has not been disclosed, taking other elements into consideration, it is necessary to issue a pretrial injunction to avoid irreparable harm to the plaintiff.

According to Article 10 of Anti-Unfair Competition Law of the P. R. China
…
"trade secret", in this Article, means the utilized technical information and business information which is unknown by the public, which may create business interests or profit for its legal owners, and also is maintained secrecy by its legal owners.

As required by the law above, in order to establish trade secret, the information at issues should fulfill the following three conditions, namely,
a. the information shall be “unknown by the public”;
b. the information shall be able to “create business interests or profit for its legal owner”; and c. the information is maintained secrecy by its legal owners.

In this case, Eli Lilly has provided preliminary evidence from three aspects above to prove that the documents at issues are trade secret document. Evidences submitted by Eli Lilly include confidential agreement entered by Mr. W, proving that “the information is maintained secrecy by its legal owners.” Eli Lilly also submitted evidence showing that it has taken physically measure to keep the information confidential. What’s more, the defendant, Mr. W, in his response, among the 28 documents, only disagreed that Document #10 constituted trade secret. That means, for other the other 27 documents, Mr. W agree that these documents are trade secret documents. Mr. W also admitted that he has copied the secret information to his personal storage device. The court believes issuing injunction is significant for the execution of judgment of the case.

2. Balance between the interests of plaintiff and the defendant. A majority of trade secret cases involve employer and employee. It can be anticipated that, once injunction is issued, it may affect the livelihood of the former employee as defendant. Therefore, balance between the interests of plaintiff and the defendant should be carefully considered. In this case, if the injunction is issued, namely, barring Mr. W from disclosing, using or allowing others to use the document, it will not substantially affect the livelihood of Mr. W. What’s more, Eli Lilly had provided a bond of CNY 500,000 (USD 70,100), providing guarantee on the protection of Mr. W’s interest.

3. Balance between private interest and public interest. The information at issue is related to document in the R&D stage and not pharmaceutical product in the market, therefore, disclosure of the secret information is unrelated to public interest. On the other hand, disclosure of secret information will be harmful to the interest of the plaintiff. Thus, a pretrial injunction is considered to be reasonable in this case in protection of the interest of the plaintiff.