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Ellis & Winters partner, Jon Sasser, wins $57.5M trade secrets case against Chinese businesses

Sep 4, 2008 | Raleigh, NC

A Wake County judge has awarded $57.5 million to a Durham drug development company that had accused a former employee of stealing trade secrets and passing them on to Chinese drug companies.

Superior Court Judge Donald Stephens had ruled in November that Serenex was the victim of corporate espionage carried out by Yunsheng Huang, a former Serenex chemist. On Tuesday, he held a hearing to determine the damages owed to Serenex.

Serenex alleged that Huang stole experimental cancer treatment formulations and delivered them to business partners in China. As the case unfolded in Wake County last year, Huang fled to the People’s Republic of China, according to court documents. Serenex also sued Tongxiang Zhang, a member of the Chinese Communist Party who runs the Chinese companies to which Huang delivered the Serenex trade secrets.

The corporate espionage case highlights a particular vulnerability of the Triangle’s research-and-development firms. The financial value of their research depends on secrecy. Serenex went to elaborate lengths to protect its trade secrets, including devising internal code names for proprietary chemical formulas to fool computer hackers.

The matter is so sensitive that Serenex’s lawyer, Jonathan D. Sasser, would not reveal how Huang managed to obtain the information. “Serenex’s intellectual property constitutes its most valuable asset,” Stephens wrote in his court order.

But it’s not clear that Serenex can collect the money since Huang, Zhang and the Chinese companies ignored the lawsuit after unsuccessfully asking the Wake County Superior Court to dismiss the case against them. Money judgments by American courts against foreign companies are notoriously difficult to collect.

When Stephens issued his ruling Tuesday, none of the defendants or their lawyers appeared in court. Huang’s lawyer withdrew from the case after Huang fled to China. Huang failed to appear for multiple depositions and transferred ownership of his Apex home and two cars to his wife shortly before leaving this country.

The Huang connection was discovered during an international patent search by a biopharmaceutical firm that was interested in buying Serenex, Sasser said.

The company found that a Chinese company that went by several names, including Beijing Gylongli Sci. & Tech. Co. and GYLL Biomedtech, had applied for a patent similar to Serenex’s secret product. Huang was listed on the Web site as their American representative.

A search of Huang’s computer hard drive revealed a draft of the Chinese patent application, based on Serenex’s formulas, Sasser said. Stealing corporate trade secrets is prohibited by the N.C. Trade Secrets Protection Act.

Sasser said he does not know whether the company will try to collect the $57.5 million. Officials at Serenex could not be reached for comment.

Serenex, founded in 2001, was acquired this year by Pfizer, the world’s largest drugmaker.

© 2008, The News & Observer Publishing Company : A subsidiary of The McClatchy Company