Litigation Trends: Preventing IP theft in medtech manufacturing

As part of the 2024-25 Budget Announcement, the Government revealed its plans to establish Hong Kong as an international life and health technology centre. Accordingly, Hong Kong has been active in bolstering its IP regime, which ranked 12th globally in “intellectual property rights” under the 2023 World Competitiveness Yearbook.

As Hong Kong forges ahead with its plans to become a global technology hub, we expect to see an upward trend in life sciences, healthcare and pharma intellectual property (IP) litigation. This has certainly been the trend in China where the life sciences sector is currently undergoing a period of profound growth, particularly in pharmaceuticals and medical devices.

In life sciences, healthcare and pharma cases, it is observed that claims for infringement are most often brought by IP owners against companies who manufacture and/or supply the alleged infringing product to the market. To this end, where China is one of the world’s largest medtech and medical device manufacturing hubs, the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap.597), which gives effect to the Arrangement of Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region, is a useful piece of legislation as it applies to IP judgments.

Remedies for IP infringement

A successful claimant in an IP infringement action can seek an order from the Hong Kong Court, for an injunction, declaration of infringement, disclosure of any infringing use made of relevant information, destruction / delivery up of any infringing materials, and damages or an account of profits.

When it comes to damages, in most IP infringement cases, the plaintiff has to make an election for either assessment of damages or account of profits (Emagist Entertainment Ltd v Nether Games (Hong Kong) Ltd [2022] HKEC 1155). Although the judge in Emagist confirmed that “assessment of damages can never be an exact science”, the general approach is that damages for (patent) infringement are usually available from the date of publication of the infringed patent or the first date of infringement if later, and are often assessed by considering lost profits or royalties.

Whilst patent infringement and trade secret misappropriation are not currently criminal offences in Hong Kong, there is a growing trend worldwide towards the criminalisation of trade secret infringement. For instance, last month a Chinese national and former software engineer at Google was charged with stealing artificial intelligence trade secrets from his employer while secretly working with two companies in China. He was arrested on four courts of federal trade secret theft, each punishable by up to 10 years in prison.

Commentary and key takeaways

With technological innovation now at the forefront of the life sciences industry, medtech companies should ensure that they take the following steps to prevent theft of their IP by staff, manufacturers and third parties:

• Ensure that legal advice is taken to determine all aspects of proprietary information that require protection. For example, the invention of a medical device may require patent protection of the invention itself, whereas details of the manufacturing process may be subject to separate protection as a trade secret.
• Ensure robust confidentiality provisions in employment agreements and commercial contracts including the use of non-disclosure agreements, as well as clauses to prevent business partners from working with competitors in relation to the same or similar products;
• Conduct regular due diligence on commercial and third-party partners; and
• Encourage and educate employees at all levels of the organisation to be vigilant in monitoring infringement of the company’s IP and/or ensure that there are robust reporting and whistleblowing policies and procedures in place for the confidential reporting of potential IP infringing activities.