The High Court has upheld an interim trade secrets injunction in the case of Celgard, LLC v Shenzhen Senior Technology Material Co Ltd [2020] EWHC 2072 (Ch).
The case involved a claim by the claimant company Celgard that the defendant company Senior, was producing competing products using its confidential information and trade secrets that it had acquired from Celgard’s former scientist Z, who had become Senior’s employee. Celgard was concerned that Senior would replace it as contracting party in an arrangement to supply a UK customer using Celgard’s know-how.
Celgard applied to the High Court for injunctive relief against Senior to restrain it from importing its battery separators (used in lithium-ion batteries to separate the anode and the cathode of the battery) into the UK or placing them on the UK market. Its claim was made under regulation 3(1) of the Trade Secrets (Enforcement, etc) Regulations 2018 SI 2018/597.
The High Court granted the injunction. It based its decision on whether there was a serious issue to be tried. In making its assessment, the court considered the factors in regulation 12 which provide that the claimant may be required by the court to provide evidence that a trade secret exists, the trade secret holder is making the application, and the alleged infringer has acquired the trade secret unlawfully, is unlawfully using or disclosing the trade secret, or is about to unlawfully use or disclose the trade secret.
Celgard raised three key issues when seeking to establish that there was a serious issue to be tried. The first was that there was evidence that Senior had attempted to hide Z’s employment from Celgard. Senior argued that they had done so because Celgard had a reputation as an aggressive litigator but the court was not convinced by this.
The court agreed with Celgard’s second argument that Celgard’s product range increased and improved after Z had moved to Senior.
Celgard;s third argument was that Senior improved the quality and range of products by the misuse of Celgard’s trade secrets. Evidence was limited at that point in the proceedings, but the fact that the Celgard and Senior products used a similar type of binder/glue meant that the court accepted the argument.
The court said that if the injunction were granted, Celgard would win the contract to supply to the UK customer. If it were not granted, Senior would win the contract because its prices were so much cheaper. This was fairly straight-forward to quantify and the parties’ positions were broadly equivalent.
However, it also said that Celgard might be subject to additional damage from being replaced as incumbent supplier to the UK customer and from the consequential price erosion caused by Senior. It would be very difficult to quantify this damage and so damages would not be an adequate remedy for Celgard.
As a result, the court granted the injunction against Senior.
