In a recent order, a judge in the Western District of North Carolina held that even though Plaintiff filed for a preliminary injunction in the United States, it may also arbitrate the dispute in Switzerland. This highlights that even with an arbitration agreement in place, trade secret litigation can occur on multiple fronts.
In 2013, Polpharma,[1] a manufacturing company, engaged Kartha,[2] a pharmaceutical consultant, to help expand into new markets. The parties’ consulting agreement included an arbitration clause that required any disputes be arbitrated in Switzerland. Over the course of its relationship with Polpharma, Kartha was privy to proprietary information, including technical specifications of a drug’s active ingredient. Kartha allegedly began using this proprietary information to manufacture a competitor drug beginning sometime in 2019.[3] After becoming aware of Kartha’s competitor drug, Polpharma terminated its relationship with Kartha. The subject litigation followed.
Per its consultancy agreement, Polpharma had an obligation to arbitrate this dispute in Switzerland; however, it first chose to pursue an injunction against Kartha’s use or disclosure of its trade secrets in the United States. To thread this needle, Polpharma’s complaint expressly stated that “[t]he parties have agreed to arbitration, and Polpharma files this lawsuit to seek an injunction in aid of such arbitration.” While Polpharma sought injunctive relief against Kartha in March 2021, it did not initiate arbitration in Switzerland until May. As a result, Kartha argued that Polpharma “waived the right to arbitration.” The Court disagreed.
The Court found that the parties “clearly” included an arbitration clause in their agreement, and that Polpharma’s request for injunctive relief was an “interim measure that does not serve to waive [its] right to arbitration.” The Court continued that Polpharma “merely” sought to “preserve the status quo and prevent irreparable injury pending resolution” of the dispute via arbitration. The Court concluded the parties’ arbitration agreement was “binding” and that Polpharma did not waive its right to arbitration by first seeking a preliminary injunction.
This ruling is an important reminder that plaintiffs may have the ability to pursue injunctive relief in court as well as arbitration proceedings for trade secrets disputes. Accordingly, companies should not overlook the possibility of district court litigation just because there is an applicable arbitration agreement.
The case is Rubicon Research Private Limited v. Kartha Pharmaceuticals Inc. et al., No. 3:21-cv-00129 (W. D. N. C.)
[1] Zaklady Farmaceutyczne Polpharma S.A., the largest pharmaceutical company in Poland and a pharmaceutical ingredients manufacturer for Rubicon Research Private Limited.
[2] Kartha Pharmaceuticals, Inc., a pharmaceutical consultancy located in North Carolina.
[3] Kartha’s competitor drug was approved by the FDA in March 2021.