Company Pays For Taking Short Cuts to Start New Business
A New Jersey state court judge has allowed a $10 million jury verdict to stand in favor of biotech firm GenScript USA in its trade secret and employee piracy claims against competitor, Genewiz, Inc. In October 2014, the jury had entered a multi-million dollar verdict in GenScript’s favor following a six-week trial. The jury found former GenScript employee Ping “Mark” Yang had misappropriated GenScript’s trade secrets and helped Genewiz solicit more than 20 GenScript employees to join him at Genewiz to help launch Genewiz’s gene synthesis business. On February 20, 2015, Superior Court Judge Arthur Bergman denied Genewiz’s post-trial motions that sought to set aside the jury verdict. While the verdict may be appealed, this case presents a cautionary tale for companies seeking to expand capabilities by hiring individuals who possess trade secrets or other confidential and proprietary information.
In the litigation, GenScript claimed that Yang engaged in a number of unfair competitive activities that allowed Genewiz to gain entry into the gene synthesis business despite not possessing the requisite technology or employees with the necessary skills and training. In 2002, GenScript became one of the first companies in the United States to perform gene synthesis. Through the investment of significant funding and research to develop new technologies, GenScript managed to become a leader in the gene synthesis market in the United States.
GenScript alleged that in February of 2009, Genewitz offered Yang the position of general manager at its Beijing laboratory and promised him a bonus tied to the establishment of a gene synthesis business by March of the following year. According to GenScript, at the time, Genewiz was not performing gene synthesis and lacked the technology and skilled employees to do so. GenScript alleged that Yang remained with the company for six weeks after accepting the job at Genewiz and used this time to collect confidential company information concerning GenScript’s gene synthesis business. Genewiz also solicited over 20 GenScript employees who then proceeded to work for its new gene synthesis business. As a result, GenScript alleged Genewiz was able to begin offering gene synthesis services within less than one year of Yang leaving GenScript.
The verdict against Genewiz highlights the dangers facing companies that fail to properly assess the risks of hiring from a competitor when developing new lines of business, products or services. While Genewiz was able to bring its gene synthesis business into existence in a relatively short period of time, the company ended up with significant exposure through a lengthy litigation and costly jury verdict.