In trade secret litigation, a successful defense often ends with a judgment dismissing the plaintiff’s claims after lengthy proceedings. But sometimes, the most effective outcome is achieved before the trial even begins—when the plaintiff recognizes that its case is unlikely to succeed and chooses to withdraw.

Chang Tsi & Partners recently represented a multinational food company in a trade secret infringement dispute. After the team submitted an Answer, completed evidence exchange and presented detailed evidentiary challenges, the plaintiff withdrew all of its claims before the scheduled trial.

The case was resolved without prolonged litigation or a judicial appraisal. The client incurred no liability, and the production and sale of its product continued without interruption.

Background

The client, a well-known food company, had previously engaged the plaintiff as a contract manufacturing partner. After one of the client’s new products became commercially successful, the plaintiff alleged that a product formula it had provided during the early stages of their cooperation constituted a trade secret and had been improperly used in the client’s product development.

The plaintiff sought an injunction prohibiting the client from using the disputed formula, as well as damages.

On the surface, the plaintiff appeared to have constructed a coherent chain of evidence: the formula had been provided at the beginning of the parties’ cooperation; the parties later entered into an agreement containing confidentiality provisions; a further written agreement prohibited continued use of the formula after the cooperation ended; and the client subsequently launched its new product.

For a fast-moving consumer goods company, however, the most significant risk was not only the potential damages claim, but also the requested injunction. If granted, it could have forced the client to discontinue a successful product, disrupt production and substantially affect its supply chain.

Key Challenges

1. The Client Had Clearly Received the Formula
The client had in fact received formula-related documents from the plaintiff during their business relationship. This fact could not realistically be disputed. Accordingly, the defense could not simply focus on whether the client had accessed the information. The team instead addressed the more fundamental issues underlying the plaintiff’s alleged trade secret rights and the legal requirements for establishing infringement.

2. Establishing the Relevant Formula for Comparison
Food formulas may contain dozens of ingredients and precise ratios. Determining what information actually constitutes the alleged “secret points,” what should serve as the basis for comparison, and whether a judicial appraisal is necessary can easily turn a dispute into a lengthy technical battle.

Defense Strategy

After carefully reviewing the complaint and supporting evidence, the Chang Tsi team led by Partner Michael Fu promptly developed a multi-layered defense strategy and worked closely with the client to collect and preserve relevant evidence.

1. Identifying the Formula: Which Version Was the Plaintiff Actually Claiming?

Rather than immediately debating whether the client’s formula was similar to the plaintiff’s, the team first addressed a more fundamental question: What exactly was the formula over which the plaintiff claimed rights?

The team compared three sets of information submitted or relied upon by the plaintiff: the “secret points” identified during the litigation, the electronic document that the plaintiff acknowledged as the original record of the formula, and the legally required labeling of the plaintiff’s own commercially sold product. The comparison revealed material inconsistencies among all three versions. The formulation identified as the alleged trade secret differed materially from the ratios contained in the original electronic document and could not be reconciled with the ingredients disclosed on the plaintiff’s own product label.

In other words, the plaintiff’s own materials did not provide a consistent definition of the alleged trade secret.

The team relied on established Supreme People’s Court case law to argue that where alleged “secret points” are formulated only after litigation begins and lack a fixed pre-litigation carrier, they may fail to establish the content and ownership of the claimed trade secret. Once the claimed subject matter itself becomes uncertain, there is no reliable basis for conducting an identity or similarity comparison—and consequently no proper basis for initiating a judicial appraisal.

2. A Point-by-Point Public-Domain Analysis

The second line of defense focused on the alleged secrecy of the formula. Chang Tsi conducted extensive searches of patent publications, professional literature and publicly available online materials dating back to the early 2000s. The team created a detailed chart mapping each ingredient and ratio identified by the plaintiff to specific publicly available sources.

Some publications demonstrated that certain parameters fell within a range of freely available choices, while others disclosed specific values corresponding directly to the alleged secret points. Multiple parameters also showed a high degree of consistency with publicly available information.

This analysis shifted the evidentiary burden back to the plaintiff: What, specifically, distinguished its formula from information already available to the public? The plaintiff was unable to provide a satisfactory answer.

3. Challenging the Alleged Confidentiality Measures

The team also examined whether the plaintiff had taken adequate measures to protect the information as a trade secret. Drawing on Supreme People’s Court case law, Chang Tsi emphasized that confidentiality measures must be sufficiently specific and must correspond to the alleged trade secret and its tangible or electronic carrier. In this case, the disputed information had been sent externally by the plaintiff in an unencrypted, unmarked document. At the time of disclosure, there was no confidentiality agreement between the parties specifically covering the information.

A confidentiality agreement entered into subsequently could not retroactively establish protection for information that had already been disclosed. Nor could broad contractual language substitute for specific confidentiality measures directed at the information in question. Similarly, the plaintiff’s internal employee policies could not impose confidentiality obligations on an external contractual counterparty.

4. Turning the Plaintiff’s Own Contracts into Evidence for the Defense

A further breakthrough came from a detailed review of several hundred pages of contractual documents submitted by the plaintiff itself. The Chang Tsi team identified key provisions that materially undermined the plaintiff’s position. The intellectual property provisions expressly provided that intellectual property rights in certain portions of the formula claimed by the plaintiff had been exclusively and permanently assigned to the client, with the relevant provisions remaining effective after termination of the parties’ cooperation. The confidentiality provisions also expressly excluded publicly available information and independently developed information from their scope.

At the same time, the team arranged for notarization and preservation of the client’s complete R&D records and implemented appropriate confidentiality measures for evidentiary submissions, ensuring that the client’s own formulas and R&D information would not be unnecessarily disclosed during the proceedings. This created a closed-loop defense covering both substantive arguments and the protection of the client’s own confidential information.

Outcome and Practical Takeaways

After Chang Tsi submitted the statement of defense, supporting evidence and evidentiary opinions, the plaintiff applied to the court to withdraw all of its claims. The client achieved its objectives at minimal time and commercial cost. Its products remained in production and on the market throughout the dispute, and no damages were paid. The case highlights three practical lessons for companies facing similar trade secret claims:

First, define and fix the alleged trade secret before discussing similarity. The first question should be: What exactly is the information being claimed as the trade secret? Companies should examine whether the alleged secret points were objectively fixed before litigation and whether the different versions of the claimed information are internally consistent. Without a clearly defined subject matter, meaningful comparison or technical appraisal may not be possible.

Second, confidentiality measures cannot simply be added after the fact. The effectiveness of confidentiality measures depends not on the length of a contract, but on whether the recipient could reasonably identify the information as confidential. Subsequent agreements, generic confidentiality clauses and internal policies may not cure inadequate protection at the time of disclosure. Encryption, clear markings and targeted confidentiality arrangements should therefore be established before sensitive information is shared externally.

Third, examine the opposing party’s evidence carefully. Contracts submitted by an opponent may contain provisions on ownership, licensing, assignment or exclusions that directly contradict its litigation position. The same principle applies when companies negotiate their own commercial agreements: provisions that appear routine at the time of contracting may become decisive evidence years later.

Perhaps the broader lesson lies in the way the case was resolved. The best defense is sometimes one that persuades the opposing party to step away before trial. A well-prepared defense and rigorous evidentiary challenge are not merely defensive tools; they can also demonstrate the weaknesses of a claim clearly enough to encourage a rational withdrawal before litigation becomes more costly.