Lunan Pharmaceutical Alleges Individual ‘Exploited’ Employee to Unlawfully Share Trade Secrets

A Chinese pharmaceutical company is suing the daughter of a former company executive in the District of Massachusetts over allegations that the individual recruited a Lunan employee to share confidential trade secrets with the defendant, per a Wednesday complaint.

Zhiquan Zhao was Lunan Pharmaceutical Group Co. Ltd.’s board chair and CEO until he died in November 2014; the defendant, his daughter, claimed in 2017 that she was entitled to 21 million shares of Lunan’s common stock — equaling about a quarter share of the drug company, according to the complaint. 

The plaintiff claimed that, while asserting this purported entitlement in litigation that took place in the British Virgin Islands, the defendant “solicited, abetted, and conspired with an unknown employee of Lunan who gained unauthorized access to Lunan’s computer and database to unlawfully retrieve highly proprietary and confidential information” in March 2019. Among the proprietary information that the defendant allegedly obtained included financial and accounting data and employee salary information, the complaint claimed.

Lunan said it only allows certain employees to access its confidential and proprietary information, and they must execute nondisclosure agreements. According to Lunan, the “unknown employee exploited by Defendant Zhao” was not authorized to share the files in question. According to purported screenshots of the misappropriated documents, the complaint said, the files came from the back end of Lunan’s server, to which only “a handful” of people have access. Lunan alleged that the unknown employee transmitted images of the documents to the defendant through messaging platform Wechat to contravene Lunan’s computer security system.

“As a direct and proximate result of Zhao’s misappropriation of Lunan’s trade secrets and other confidential and proprietary information, Lunan has suffered and will continue to suffer irreparable harm and other damages, including but not limited to loss of value of its trade secrets,” Lunan argued.

Lunan brought the suit under the Defend Trade Secrets Act and Computer Fraud and Abuse Act, along with state trade secrets statutes, hoping to recover injunctive relief, consequential and punitive damages, attorneys’ fees, and other equitable relief.

Cetrulo LLP and Obermayer Rebmann Maxwell & Hippel LLP represent Lunan.