Contract development and manufacturing organization (CDMO) Samsung Biologics has filed a preliminary injunction against competitor Lotte Biologics for stealing proprietary trade secrets. The injunction, filed in Seoul Central District Court on June 21, is the latest development in the intellectual property and employee poaching dispute between the companies. It follows a March 2023 indictment of a former Samsung Biologics employee for leaking trade secrets to Lotte.
Trade Secrets in the CDMO Industry
The biopharmaceuticals and CDMO industries are deeply rooted in knowledge-based innovation. As such, employees, particularly those in research and development, regulatory affairs, or strategic planning, have access to a wealth of trade secrets, such as proprietary methodologies, clinical trial data, research findings, and strategic plans.
When employee poaching occurs, there’s a risk that these employees could take that proprietary knowledge with them to the new company, intentionally or unintentionally, thus leading to leakage of trade secrets.
Injunctions are a primary means of protecting against this scenario. If a company believes its trade secrets have been stolen, it can file a complaint in court, which should identify the trade secret, provide evidence of misappropriation, and demonstrate that it’s taken reasonable steps to keep the information secret. In many cases, the plaintiff also requests a temporary restraining order to immediately prevent the defendant from disclosing or using the alleged trade secret.
If a preliminary injunction is granted, the defendant is prohibited from using or disclosing the trade secret while the lawsuit is ongoing. To grant a preliminary injunction, the court must be convinced of a few key factors: The plaintiff is likely to succeed on the merits of the trade secret claim, it will suffer irreparable harm without the injunction, the balance of equities tips in its favor, and an injunction is in the public interest.
In its earlier injunction, Samsung Biologics charged that four former employees were poached by Lotte and subsequently leaked proprietary information gained from their time at Samsung Biologics. The Incheon District Prosecutors’ Office indicted one 39-year-old Lotte Biologics employee on the charges, finding that the employee stole trade secrets from Samsung Biologics, including documents related to its standard operating procedures before moving to Lotte Biologics.
The Samsung Biologics and Lotte Dispute
The ongoing dispute between the two CDMOs dates back to May 2022, when Samsung Biologics filed an injunction for the infringement of trade secrets by three former employees hired by Lotte Biologics. In that case, the Incheon District Court granted the injunction, which prevented Lotte Biologics from utilizing leaked proprietary information from Samsung Biologics.
The June 2023 injunction marks the first time that Samsung Biologics has filed an injunction against Lotte as an organization rather than against individual employees. A closed-door meeting was held by the Seoul Central District Court in June, and it’s expected that the case hearing will be complete in August. Both companies declined to comment on the ongoing case.
One crucial underlying issue between the companies could be that the current Lotte Biologics CEO, Richard Lee, served as the head of Samsung Biologics’ drug product business before joining Lotte.
Biopharmaceutical Industry Development in South Korea
Lotte is a newcomer to the biopharmaceuticals industry, launching in 2022. Samsung Biologics, on the other hand, has now been in operation for over a decade and has grown to become the industry leader in manufacturing capacity.
Samsung Biologics has taken decisive steps to establish its presence as the largest CDMO in the country and one of the biggest in the world. It recently completed construction of its fourth manufacturing plant in Songdo. The plant is the largest of its kind in the world, with a total capacity of 240,000 liters. This brings Samsung Biologics’ total capacity at its Songdo headquarters to 604,000 liters, the most in any one location globally. The CDMO also recently announced it would invest 1.9 trillion Korean won ($1.44 billion) on a fifth plant as part of its construction of a second bio campus, with plans to break ground in the first half of 2023. The expected completion of the plant in 2025 is expected to bring Samsung Biologics’ capacity to 784,000 liters.
At the same time, Lotte has made its desire to expand its manufacturing capabilities in the region clear. Upon launching in 2022, it announced plans to build three plants in South Korea by 2034, with an expected total capacity of 360,000 liters. Recently, Lotte announced that its plants will be built in the Songdo, Incheon area where Samsung Biologics is headquartered. Lotte currently operates its CDMO services from a plant in Syracuse, New York, which it purchased from Bristol Myers Squibb for $160 million in January 2023.
