Review and Application of Behavioral Preservation in Trade Secret Infringement Litigations
——Eli Lilly and Company and Lilly (China) Research and Development Co., Ltd. v. Huang Mengwei
[Syllabus]
The revised Civil Procedure Law entering into force on January 1, 2013 stipulates the preliminary injunction, which helps the obligee of trade secret seek remedies in a timely and effective manner. Before entering an injunction, the court shall consider such factors as the substantial possibility of the plaintiff wining the case, the substantial danger of irreparable harm caused by denial of injunction, the possible harm to the plaintiff outweighing any potential harm to the defendant, and injunction’s non-infringement on public interests.
[Case No.] Shanghai No. 1 Intermediate People’s Court (2013) HYZMW(Z) CZ No. 119
[Cause of Action] Dispute over infringement upon technological secrets
[Collegial Panel Members] Tang Zhen Chen Yaoyao Chen Rongxiang
[Keywords] Infringement upon trade secrets, preliminary injunction
[Relevant Legal Provisions] Article 100 of the Civil Procedure Law of the People's Republic of China
[Basic Facts]
Claimant (Plaintiff): Eli Lilly and Company
Claimant (Plaintiff): Lilly (China) Research and Development Co., Ltd. (hereinafter referred to as “Lilly China”).
Respondent (Defendant): Huang Mengwei
On July 2, 2013, Eli Lilly and Company and Lilly China filed a lawsuit with Shanghai No. 1 Intermediate People’s Court (hereinafter referred to as “Shanghai No. 1 Intermediate Court”) against Huang Mengwei for infringing technological secret and applied to the court for behavioral preservation, requesting the court to order the Defendant not to disclose, use or allow others to use the 21 confidential documents stolen from the Claimants.
The Claimants alleged that the Respondent joined Lilly China in May 2012 as a chief chemistry researcher. Lilly China signed a Confidentiality Agreement with the Respondent and provided corresponding trainings. In January 2013, the Respondent downloaded 48 documents owned by the Claimants from the server of Lilly China (including 21 core confidential documents of the Plaintiffs) and stored such documents in the device owned by the Respondent without authorization. Upon negotiation, the Respondent signed a letter of consent in February 2013, admitting to the Claimants, “I downloaded thirty-three (33) confidential documents belonging to the company from the company’s server…”, and undertaking, “I allow the company or persons designated by the company to check the first-hand device not belonging to the company and the second-hand device not belonging to the company to determine that I did not forward, modify, use or print any company document. If the company or persons designated by the company find any document or information of the company in device not belonging to the company, I authorize the company or persons designated by the company to delete such document or information. …” After that, the Claimants repeatedly designated persons to contact the Respondent and required him to delete confidential commercial documents. The Claimants also designated persons to check and confirm whether the confidential commercial documents were deleted. However, the Respondent ignored the negotiations and efforts of the Claimants and refused to perform the obligations agreed in the letter of consent. As the Respondent seriously violated the rules and regulations of the company, the Claimants sent a letter to the Respondent on February 27, 2013, announcing the termination of their labor relation. The Claimants believed that the 21 core confidential commercial documents downloaded by the Respondent without authorization were trade secrets of the Claimants and the Respondent knew and admitted it in the letter of undertaking. The Respondent’s failure to fulfill his undertaking had exposed the Claimants’ trade secrets to the danger of leakage due to disclosure or use by the Respondent or use by others permitted by him, which would cause irreparable harm to the Claimants. Therefore, in accordance with law, the Claimants requested the court to order the Respondent not to disclose, use or allow others to use the 21 trade secret documents stolen from the Claimants. To support their application, the Claimants also provided the court with the names and content of the 21 trade secret documents involved, the Respondent’s letter of undertaking, the certificate of notarization, table of information devices allocated to employees, the termination notice of labor relation, the statistical statement of direct and indirect costs and other evidentiary materials. The Claimants also deposited RMB 100,000 with the court as security bond for the above application.
Holding
Shanghai No. 1 Intermediate Court ordered that the Respondent Huang Mengwei be prohibited from disclosing, using or allowing others to use the 21 documents claimed by Eli Lilly and Company and Lilly China Research and Development Co., Ltd. as protected trade secrets. As the Respondent Huang Mengwei did not apply for reconsideration within the time limit specified by the order, that order came into force.
[Reasoning]
As the first case where behavioral preservation was applied to a trade secret dispute under the new Civil Procedure Law (effective as of January 1, 2013), this case highlighted the practical efforts made by the people’s court in the new era to comply with societal needs, and strengthen the judicial protection of intellectual property according to law. During the trial, the court mainly considered the following factors:
I. Factors to be considered for behavioral preservation in trade secret infringement litigations
In trade secret infringement litigations, a preliminary injunction plays an important role in protecting the interests of the obligee in a timely and effective manner. However, as a special relief, preliminary injunctions can not only ensure the smooth enforcement of the upcoming effective judgment, but also enable its claimant to obtain, in advance, all or part of the interests of the final relief. Therefore, in judicial practice, the court shall not enter an injunction simply when there exist general possibilities of unauthorized disclosure or use. Before entering an injunction, the court shall usually consider such factors as the substantial possibility of the plaintiff wining the case, the substantial danger of irreparable harm caused by denial of injunction, the possible harm to the plaintiff outweighing any potential harm to the defendant, and injunction’s non-infringement on public interests. What makes this case special is that: 1) the Respondent Huang Mengwei had confirmed that he downloaded 33 confidential documents belonging to the company (including 21 documents claimed by the obligees for trade secret protection) in violation of rules and regulations of the company, and undertaken to authorize persons designated by the company to delete such documents. Therefore, it is obvious that the Respondent obtained by illegal means the confidential documents claimed by the obligees for trade secret protection. 2) A trade secret, once lost, is lost forever. The commercial documents involved were already under the control of the Respondent. Once disclosed by the Respondent, the content of such electronic documents may be known to competitors or enter the public domain and then lose its confidentiality, leaving the interest of the obligees irreparably harmed. 3) Based on the facts of this case, the Respondent, as a natural person in contrast with the obligees, would not be harmed if he was prohibited from disclosing, using or allowing others to use the commercial documents. In addition, the obligees deposited security bond to the court for any damage that might occur. Based on the above facts, the collegial panel granted a behavioral injunction against the Respondent and informed him of the time limit for applying for reconsideration to facilitate the exercise of his right of defense.
II. Key points to be considered for behavioral preservation in trade secret infringement litigations
As the first case for the application of behavioral preservation to trade secrete infringement litigation, this case had no precedent to follow with respect to the application of law. During the trial, the collegial panel mainly considered the following key points: 1) the consistency between the claims of the Plaintiffs and the application for injunction. When filing the lawsuit, the obligees requested the court to order the Respondent to stop infringing the trade secrets of the Plaintiffs, and specifically, to order the Respondent to delete and not disclose, use or allow others to use the 21 commercial documents involved. The collegial panel held that its review of the obligees’ injunction application shall be limited to their litigious claims without allowing additions, and shall conform to the means of trade secret infringement as set forth in Article 10 of the Anti-unfair Competition Law (Article 9 in the law as amended at the 30th Session of the Standing Committee of the 12th National People’s Congress held on November 4, 2017). Therefore, the Respondent was ordered “not to disclose, use or allow others to use the 21 documents involved”. 2) The relation between the preliminary injunction and the final judgment. When the trial was underway, it was pending whether the documents involved constituted trade secrets and belonged to the legal interests protected by the Anti-unfair Competition Law. As a temporary litigious measure, the injunction order shall be free from the danger of conflicting with the final judgment. Therefore, the order was worded as “the Respondent Huang Mengwei be prohibited from disclosing, using or allowing others to use the 21 documents claimed by Eli Lilly and Company and Lilly China Research and Development Co., Ltd. as protected trade secrets”, which means that the 21 documents involved were just documents claimed by the applicant to be protected as trade secrets, instead of information finally confirmed by the court to be protected as trade secrets upon review under law. 3) Balance between trial and enforcement. As the content of the 21 documents involved was not clear in the text of the order, the enforcement departments would lack specificity and feasibility during enforcement. Therefore, we appendixed a list of the names of the 21 documents involved to the text of the order. This suggested that although the Respondent downloaded 33 documents in violation of the rules and regulations of the company, he shall only be legally liable for disclosing, using or allowing others to use the 21 appendixed documents in violation of the order.
III. Enforcement models of behavioral preservation in trade secret infringement litigations
A behavioral injunction is about the court ordering a party to do or not to do a certain activity. Different from property preservation, a behavioral injunction is enforced against a person’s behavior, instead of a property per se. Due to a behavioral injunction’s special characteristics, its enforcement requires the party’s cooperation. Moreover, enforcement is more difficult when the injunction orders the party not to do something than doing something because a positive action by a party is perceivable from outside, and sometimes completable instantaneously while the prohibition of a party’s behavior depends on his conscientiousness, which is not objectively perceivable by the enforcement staff of the court, and makes the enforcement of court orders less certain. The collegial panel held that such negative injunctions mainly depend on deterrent force of effective legal instruments. Only by strengthening the deterrent force of effective legal instruments can the parties’ conscientious compliance with court orders be ensured. Therefore, after entering the judgment, the court not only serviced the legal instrument, but also summoned the Respondent to the court and informed him of the content of the order and the consequence of violating it. In fact, in case a party refuses to comply with effective court judgments or orders, the court may, in accordance with Article 111 of the Civil Procedure Law, fine or detain the party based on the severity of circumstances, and hold him criminally liable if crime is committed. It is fair to say that such warning has generated good legal effect. In the court, the Respondent undertook in writing that it was willing to comply with the court order and then represented in later submission to the court that it had destroyed the hard disks that stored the downloaded documents, and attached photos to corroborate such representations.
