High Court prevents importation of goods said to infringe trade secrets

07/08/20

After an inter partes hearing, Trower J has granted an injunction to trial preventing the importation into the UK of battery separators manufactured in China, which are said to infringe trade secrets owned by a US corporation. He also held that England was the proper forum for the dispute.

Battery separators are critical to the performance, product life and safety of lithium-ion batteries. They allow ions to flow between electrodes, but prevent those electrodes coming into contact, which can cause a cell to short-circuit and overheat. 

The applicant, Celgard, LLC (based in the USA) contends that the respondent, Shenzhen Senior Technology Material Co Ltd (based in China) is producing battery separators using trade secrets stolen from Celgard. Senior hired one of Celgard’s senior scientists, Dr Xiaomin (Steven) Zhang. When Dr Zhang moved to Senior, it asked him to use a false name (“Bin Wang”) to conceal the fact of his new employment from Celgard.

Celgard believed that it was on the point of concluding a contract with a major UK customer when it discovered that Senior was planning to supply its own product for evaluation by that customer. Celgard’s case is that Senior's products are made using its trade secrets, and that because they are much cheaper than Celgard’s, and given other features of the market, if Senior won the contract it could lead to long-term price erosion that could not be compensated in damages.

Celgard first raised its concerns directly with Senior, asking it to undertake not to ship its product to the UK pending an inter partes hearing of Celgard’s injunction application. Senior replied that such an application would be “premature”, and asked for that response to be put before the Court in any ex parte hearing. Meanwhile, Senior arranged for its product to be express delivered to the UK customer. Delivery to the customer in fact took place during the hearing of Celgard's ex parte application, which was attended by Senior’s representatives on a watching brief. The Court (Mann J), which granted the injunction sought pending an effective inter partes hearing, was not told that delivery was in fact in train. Nor did Senior inform Celgard or the Court of that fact in an inter partes directions hearing before Falk J two weeks later, when it made undertakings that continued the substance of the injunction. In the event the UK customer voluntarily delivered up Senior’s product to Celgard pending the effective hearing. At that hearing, Trower J held that Senior’s conduct had been “wholly misleading”.

Celgard’s case is that the importation into the UK of battery separators manufactured using its trade secrets amounts to a breach of confidence in equity and/or reg.3(1) of the Trade Secrets (Enforcement, etc.) Regulations 2018, which (together with equitable principles) implement the EU Trade Secrets Directive (2016/943) in English law. Trower J’s judgment addresses, among other things, the proper law of such a claim (accepting Celgard’s argument that applying the Rome II Regulation, its claim is governed by English law, rather than, as Senior contended, the law of China, where the goods were manufactured), and its pleading requirements (rejecting Senior’s argument that Celgard’s draft Particulars of Claim did not provide sufficient particulars of the confidential information sought to be protected, or its alleged misuse). Trower J also conducted a detailed analysis of how far damages would be an adequate remedy to each party for the purposes of assessing whether an injunction should be granted, taking account of the complex counterfactuals involved.

The judgment is here.