In a lawsuit filed in California, U.S. battery manufacturer Celgard, a subsidiary of Polypore International, has sued Shenzhen Senior Technology Material Co., Ltd. (Senior) for patent infringement and for misappropriating Celgard's trade secrets and confidential information.
The suit has a bit of a spy novel twist in that Celgard alleges in its complaint that one of its senior scientists left the company in October 2016 and moved to China to join Senior, after which he changed his name to cover up his identity. This scientist is alleged to be the source through which Senior acquired Celgard’s intellectual property.
The technology in question involves ceramic-coated separators in lithium-ion batteries. Coated separators provide greater thermal stability than non-coated versions. Increasing thermal stability prevents the separators from shrinking at higher temperatures, which can cause a short in the cell. This high-temperature stability is particularly important for batteries used in electric vehicles (EVs). So critical are these coated separators in lithium-ion batteries for EVs that GM has filed patent applications for its own version of coated separators.
“The kind of information alleged to be stolen from Celgard goes far beyond what one could extract from a published patent,” explained Michael D. Ross, an intellectual property attorney in Chicago, and who is not involved in the lawsuit. “This information would have allowed Senior to avoid the hundreds of millions of dollars in R&D spending Celgard incurred.”
If Senior had the former Celgard chemist working on site, as the lawsuit alleges, he could have provided additional information to help Senior troubleshoot and fill in gaps that weren't obvious from the patent, according to Ross. The lawsuit also alleges that this shortcut by Senior allowed the company to heavily discount its prices and made it nearly impossible for Celgard to compete.
The lawsuit makes reference to another successful lawsuit Celgard filed against Targray back in May for patent infringement on the same battery separator technology. That lawsuit was settled this month. This latest lawsuit notes that Targray is a distributor for Senior.
This latest lawsuit is different from Celgard’s previous lawsuits in that Celgard has cited the U.S. 2016 Defend Trade Secrets Act (DTSA). Prior to the DTSA, if a trade secret was misappropriated, the owner’s only option was to file in state court, or ask the U.S. federal government to file an action under the 1996 Economic Espionage Act. There was no federal trade secret law that allowed a private civil cause of action.
The federal government recognized the need for private companies to take action in federal court, according to Ross. Ross added that the DTSA now allows a private party to sue in federal court, and gives the plaintiffs the ability to recover attorney’s fees, receive an injunction, and recover enhanced damages.
“Under DTSA, individuals can face a fine of up to $5,000,000 and 15 years in prison,” said Ross. “Companies can face [a fine amounting to] the greater of $10,000,000 or three times the value of the stolen trade secret.”
Ross added that there’s no limit on damages in a civil DTSA case. At this point, it’s hard for Celgard to make a specific damage demand since the parties still need to go through discovery.
Regardless of which company wins the lawsuit, the story serves as a cautionary tale for technology companies. Ross added: “This case should serve as a wakeup call. Companies need to start paying more attention to protecting their trade secrets.”