Relevance of trade secret ownership for misappropriation: I-Mab Biopharma v. Inhibrx Inc.

In I-Mab Biopharma v. Inhibrx, Inc., a trade secret misappropriation case, a federal jury in Delaware sided with the defendants, Inhibrx and its co-founder Brendan Eckelman, on all counts. The jury found no existence of a trade secret, no trade secret misappropriation, and no damages or reasonable royalties owed. The jury’s verdict came after the court had denied the defendants’ motion for summary judgment for lack of standing based on ownership of the alleged trade secret.

Case background

The dispute between I-Mab, Inhibrx, and Eckelman stems from a confidential arbitration between I-Mab and third party Tracon Pharmaceuticals, where Eckelman was engaged as an expert by Tracon.

The arbitration between I-Mab and Tracon resulted from a dispute over a collaboration agreement. The arbitration was governed by a confidentiality order expressly prohibiting the disclosure of confidential information to an expert or consultant who is an employee of a competitor to the parties. Tracon engaged Eckelman as an expert to review and analyze antibodies developed under the collaboration agreement. As a condition of his engagement, Eckelman signed an undertaking and agreed to be bound by the terms of the confidentiality order.

In December 2021, I-Mab discovered that Eckelman had been engaged as an expert by Tracon and had received documents containing I-Mab’s confidential information. I-Mab soon discovered that Eckelman was the chief scientific officer and co-founder of Inhibrx, a company I-Mab considered to be a direct competitor. In January 2022, I-Mab put Tracon on notice that it improperly provided I-Mab’s trade secrets to Eckelman and Inhibrx. Two months later, in March 2022, I-Mab filed a trade secret misappropriation complaint against Inhibrx. I-Mab claimed that Eckelman and Inhibrix misappropriated I-Mab’s confidential and proprietary data related to research and development of antibody drugs. I-Mab further alleged that upon learning of Eckelman’s employment with Inhibrx, it took immediate measures to protect its trade secrets while diligently pursuing its legal claims.

In April 2024, during the pendency of this trade secret misappropriation case, I-Mab transferred ownership of the trade secrets to a related Shanghai-based I-Mab entity.

Ownership of a trade secret is only required when a misappropriation action commences

On June 21, 2024, Inhibrx moved for summary judgment challenging I-Mab’s standing. According to Inhibrx, a party must own the trade secret at issue during the entire pendency of the litigation to maintain an action under the federal Defend Trade Secrets Act (DTSA). Inhibrx contended that summary judgment was appropriate because I-Mab, the Maryland-based named plaintiff, no longer owned the trade secrets, as ownership of the confidential information was transferred to the Shanghai-based I-Mab entity.

The court disagreed, however, finding that the DTSA, at 18 USC § 1836(b)(1), provides that “[a]n owner of a trade secret” may bring a civil action for misappropriation and there “bring a civil action” means “to commence” an action. The Maryland-based I-Mab plaintiff was the owner of the trade secrets when it brought the claims in March 2022 and therefore met the statutory ownership requirement. This holding was consistent with a 2009 opinion from the California Court of Appeals finding that ownership of a trade secret is only required when a trade secret misappropriation action commences. The Delaware court disagreed with Inhibrx’s position that “current ownership” was required to maintain a trade secret misappropriation claim. The court even looked to general principles of property, trademark, patent, and copyright law and found no support for the proposition.

I-Mab underscores the importance of timing in transferring ownership of trade secrets

Litigants are encouraged to keep this ruling in mind before commencing any trade secret misappropriation actions. While ownership may change during the course of a lawsuit, the owner of the trade secret must be a party to the lawsuit at its outset. One reason I-Mab survived this summary judgment motion was because I-Mab delayed the ownership transfer of the trade secrets until after it had commenced its misappropriation action.

To find out more about the implications of this ruling or this case, please contact any of the authors or your usual DLA Piper relationship attorney.