A US-based company has obtained an interim injunction against a Chinese company to prevent the import and marketing of goods in the UK that are alleged to have been made as a result of the misuse of trade secrets. This is one of the first cases where the High Court has considered the Trade Secrets (Enforcement, etc.) Regulations 2018.
What are Trade Secrets?
Trade secrets can protect confidential business information, such as customer lists, algorithms or recipes. Under the Trade Secrets Regulations, a trade secret means information which is secret, has commercial value because it is secret and has been subject to 'reasonable steps' to keep it secret.
Celgard, LLC (‘Celgard’), is a US-based company that develops and manufactures battery separators. It was claimed that Shenzhen Senior Technology Material Co Ltd (‘Senior’), a Chinese company that also makes battery separators, had acquired Celgard’s trade secrets through one of Celgard’s former employees, Dr Zhang. It was alleged that Senior had used Celgard’s confidential information and trade secrets to manufacture goods in China which it planned to import and market in the UK.
Celgard had a particular concern that, if Senior was allowed to enter the UK market with the infringing goods, it would be able to sell them for an ‘unfeasibly low price’, thus undercutting Celgard and jeopardising a key contract with a UK manufacturer of lithium-ion batteries.
Whilst the facts involved multiple jurisdictions, the judge concluded that the UK Court was the appropriate forum to hear the case. The immediate wrong was the misuse by marketing in England and the damage suffered would be by Celgard's consequential failure to win the UK customer's business.
In determining whether to grant the interim injunction, the judge considered the elements of the American Cyanamid case, namely:
- was there a serious issue to be tried?
- would damages be an adequate remedy for either party? and
- where did the balance of convenience lie?
The Court was satisfied that Celgard had adduced sufficient evidence to establish that there was a serious issue to be tried that its trade secrets had been used in Senior’s development and manufacture of battery operators since Dr Zhang’s employment. Much attention was paid to the facts of the case, including that Senior admitted asking Dr Zhang to use a false name during his employment with Senior. There was also evidence that Senior’s product lines and market share expanded significantly following Dr Zhang's arrival.
The judge determined that damages would not be an effective remedy for Celgard. It was held that without the injunction Celgard would suffer unquantifiable damage from loss of business and loss of opportunity if Senior were able to undercut Celgrad’s prices and secure a contract with the UK customer. There was also a risk of irreversible price erosion which could not be compensated in damages.
Taking all the circumstances into account, the judge found that the balance of convenience was in favour of granting the interim injunction pending a full trial.
Businesses should always keep in mind the need to take reasonable steps to keep confidential information secret through implementing appropriate policies and restrictions. When things go wrong, this case is a good example of the UK Court’s willingness to accept jurisdiction and grant interim relief in appropriate cases. This is one of the first cases where the High Court has considered the Trade Secrets Regulations. The Regulations sit alongside the existing common law regime for confidential information and will remain in force after Brexit. It will be interesting to see if the final judgment raises issues which distinguish the statutory protection offered by the Regulations from the protection already offered under common law.