Many businesses spend years developing and refining their technical know-how and trade secrets, in order to boost their commercial value and stand apart from the rest of the market.
Given the substantial amount of time and resource that businesses expend on developing their trade secrets, it will come as no surprise to find that businesses are willing to go to great lengths to protect this information. This is especially true for pioneers in new and emerging markets who can gain significant advantages through being first to market.
The case of Shenzhen Senior Technology Material Co Ltd (Senior) v Celgard LLC (Celgard) provides an example of how the law can offer protection to a business’s trade secrets.
A ‘trade secret’ is defined in the Trade Secrets (Enforcement etc) Regulations 2018 as information which is a secret; or has commercial value because it is secret; and has been subject to reasonable steps to keep it secret.
Both Senior and Celgard are manufacturers of battery separators which are regularly used in electric vehicles. These battery separators are critical to the performance of batteries as they prevent the circuits from overheating. Celgard supply their battery separators to manufacturers in the UK.
Dr Zhang was employed by Celgard as an Engineer and as such had access to their trade secrets, in particular those concerning the production of its battery separators.
When Dr Zhang left his employment with Celgard, it was under the impression that he was to join a company in California, but it later transpired that he had in fact joined Senior in China under a false name.
In the meantime, Celgard was in the midst of negotiations to supply its battery separators to a UK manufacturer. However, when nearing agreement, it was discovered that the UK manufacturer may be reviewing another potential supply for battery separators with Senior.
Senior did not supply to the UK market prior to these proceedings, and it was Celgard’s view that Senior could only supply to the UK using Celgard’s trade secrets, which would undercut its price and cause Celgard to lose its substantial customer. Celgard therefore applied for an interim injunction against Senior in the High Court in London.
The Court’s decision
An injunction was ordered against Senior in May 2020 that restricted them from making, offering or putting on the market, importing, exporting or storing the battery separators in the UK. It was later discovered that Senior had already delivered a shipment of battery separators to the UK customer, however no damage was suffered by Celgard as the shipment was delivered to Celgard’s solicitors where it remains.
Senior attempted to appeal the injunction by arguing that the court had erred on three points:
- That Celgard did not particularise the trade secrets that it alleged were breached;
- That English law was not the applicable law in this case; and
- England was not the proper forum to try the claim.
The court disagreed with Senior’s arguments and upheld the interim injunction.
The injunction will only remain in place until the final hearing reaches a decision. The final hearing will decide whether Dr Zhang has disclosed Celgard’s trade secrets in breach of the Trade Secrets (Enforcement etc.) Regulations 2018 or whether the information used is his own technical know-how which will not amount to Celgard’s trade secrets.
This case serves as an important reminder for businesses to ensure that their definitions of trade secrets and confidential information are robust within their non-disclosure agreements and employment contracts, particularly those seeking to take advantage of emerging markets.
By David Summerhayes and Nuala Schweppe
David Summerhayes is Director of Legal Services for Northern Gas and Power. He has extensive knowledge in commercial law, having represented multinational corporations, FTSE 100 companies, and fast-growing SMEs, occupying senior positions at global and national law firms, including Partner with Sintons LLP.