Key Points

  • The first preliminary injunction issued for a trade secret case in Shanghai is based on the amended Civil Procedure Law.
  • This injunction could be an important reference in practice in future to protect trade secrets.

Background

It is reported that Shanghai Municipal First Middle People’s Court has recently issued the first preliminary injunction in China according to the application of Eli Lilly and Company and Lilly (China) R&D Co., Ltd. (“Lilly”) in a trade secret case against one of former employees of Lilly (the “Employee”). Both Eli Lilly and Company and Lilly are the plaintiffs in this case, who have asserted that the Employee (i.e. the defendant) violated the company rules and breached the confidential agreement, whereby incurred the infringement to the trade secret of the plaintiffs.

According to the China Court report [www.chinacourt.org] dated 3 August 2013, Lilly and the Employee entered into a labor contract and a confidential agreement on 3 May 2011. Such agreements provide that the Employee has the confidential obligation on the confidential and proprietary information of the plaintiffs which the Employee obtains during the employment term. The Employee, however, downloaded confidential documents from the server of Lilly without the consent of the plaintiffs on 19 January 2013. Lilly terminated the employment contract with the Employee on 27 January 2013 after failure to request the Employee to delete the confidential documents. Accordingly, the plaintiffs instituted the legal action in the court against the Employee on 2 July 2013, requesting the Employee to compensate the loss and damage of the plaintiff (including attorney fees) the sum of RMB20 million. Meanwhile, the plaintiffs applied with the court to issue the injunction to prevent the Employee from copying, disclosing, using or licensing any third party to use the 21 documents which included trade secrets of the plaintiffs, and provided the security in the amount of RMB100,000 to the court for the application of the injunction. After reviewing the application materials, the court issued the injunction according to Article 100 of the Civil Procedure Law of the People’s Republic of China (the “Civil Procedure Law”).

Analysis

The legal basis for the preliminary injunction, Article 100 of the Civil Procedure Law, is newly added into the Civil Procedure Law, amended on 31 August 2012 and effective as of 1 January 2013. Article 100 of the Civil Procedure Law provides that if the judgment enforcement may become difficult or any other damage may be caused to a party because of the other party’s actions or for other reasons, the court may, upon application of the party,

(i) issue an order on preservation of the other party’s property

(ii) order conduct of certain action of the other party, or

(iii) prohibit the other party from certain action.

Whether preliminary injunction relief would be applicable in a trade secret case had been a widely discussed question for years before the injunction was issued by Shanghai Municipal First Middle People’s Court. The patent, trademark and copyright laws of the PRC all have specific provisions on the application of the preliminary injunction. There is no express legislation specifically providing that the preliminary injunction is applicable for trade secret cases. Although the amended Civil Procedure Law includes the concept of injunctive relief for general civil lawsuits, there was some uncertainty whether such injunctive relief is applicable for trade secret cases from the practice perspective until the injunction for the above case was officially issued by the court in Shanghai.

Conclusion

Although China is not a case law country, commentaries believe that the above case may be an important reference for similar cases in the future. The application preliminary injunctive relief in trade secret cases will play a significant role for protecting trade secret and improving the enforceability of judgments and arbitration awards in China.