Judge Grants Preliminary Injunction in Biosimilar Trade Secret Case

This month, US District Judge William Alsup granted biologic developer Genentech some relief in its civil case against biosimilar developer JHL.

The case revolves around the alleged theft of trade secrets related to Genentech’s brand-name biologics Rituxan (rituximab), Herceptin (trastuzumab), Avastin (bevacizumab), and Pulmozyme (dornase alfa) by JHL, a Taiwan-based company that has a high-profile partnership with Sanofi for the rituximab biosimilar.

In 2016, Genentech received anonymous information that Xanthe Lam, a principal scientist at Genentech, was consulting for a competitor, and both internal and FBI investigations found evidence of her involvement with JHL’s biosimilar development work.

According to court documents, as early as 2013, Xanthe Lam’s husband, Allen Lam, was hired by JHL to consult on its biosimilars, and Xanthe began to secretly download confidential Genentech documents—including technical reports, stabilities studies, and testing protocols—onto her Genentech company laptop. The documents state that Xanthe Lam assisted Allen Lam in his consulting work, then later also went to work directly for JHL while still employed by Genentech. They also reveal that Xanthe Lam allowed James Quach, another former Genentech employee, to use her Genentech login credentials to download hundreds of documents related to manufacturing and protocols onto his personal USB drive.

Genentech refrained from filing suits against the Lams, Quach, and John Chan (a JHL employee to whom Xanthe Lam had distributed confidential materials) while the FBI conducted its own investigation. In 2017, the FBI executed a search warrant for the Lam home, and in 2018, the indictment against the Lams, Quach, and Chan was unsealed. On the same day, Genentech filed its civil action against JHL employees, the Lams, Quach, and Chan. Also in 2018, Genentech moved for relief, while the defendants moved to dismiss the case pending resolution of the criminal case.

In his order, Alsup writes that, “based on the totality of the foregoing allegations, JHL’s attempt to deny involvement with the alleged misappropriation strains credulity,” and denied JHL’s motion to dismiss on the basis of a lack of jurisdiction over the Taiwan-based company.

He did, however, write that Genentech failed to adequately show an agreement between Chan and JHL to steal trade secrets, and granted Chan’s motion to dismiss. The defendants’ motions to dismiss claims related to civil conspiracy, interference with contractual relations, and breach of duty of loyalty, and violations of computer fraud laws were also granted.

Alsup also writes that Genentech had established that it is probable that at least some of the information acquired by JHL constituted trade secrets, though Genentech had overreached in a request for provisional relief. The injunction he ultimately granted, which will become effective after Genentech posts a bond of $50 million, blocks JHL from providing (to Sanofi or any other partner) Genentech’s secrets, or offering to sell any products that benefit from the use of Genentech’s documents. It also directs JHL to return Genentech’s documents, account for all individuals or entities who may have received Genentech’s information, account for how Genentech’s secrets were used by JHL, and log all communications during which the defendants mentioned Genentech’s secrets.

Notably, the order allows JHL to continue to work toward regulatory approval of the biosimilars.

Alsop declined to stay the civil case, but did block Genentech from deposing the defendants while the criminal case proceeds.

In a statement to The Center for Biosimilars^®, a Genentech representative says that, while it was unable to comment further because of both the ongoing criminal investigation and the civil case, Genentech is “very pleased with the court's preliminary injunction decision in Genentech’s favor. As detailed in that decision, the court has found that JHL likely did acquire and/or use some of Genentech’s trade secrets.” The representative adds that “we will continue to pursue all necessary legal actions to halt any further dissemination and illegal use of our misappropriated intellectual property.”

Also in a statement to The Center for Biosimilars^®, a representative of JHL said that it was “pleased that the Court’s decision will allow us to remain focused on driving our business forward and delivering high-quality and affordable biosimilar medicines to patients in need. We continue to believe that a full examination of Genentech’s claims will demonstrate that they are without merit, and we will continue to defend ourselves vigorously.”