On 22 January 2026, the High Court adjudicated1 on the issues of whether former employees misused their former employer’s confidential and proprietary information in setting up and operating rival businesses, and whether one of them was negligent in issuing reports containing incorrect data to the former employer’s customers, and hence liable to compensate the employer.
Background
This case concerns a Hong Kong biotechnology company (the Plaintiff) specialising in molecular diagnostic laboratory services, particularly prenatal testing. Its primary revenue source was its non-invasive prenatal test (Y-Test) used to determine foetal gender with high accuracy. The Plaintiff also provides tests for genetic disorders, specifically alpha-thalassemia and beta-thalassemia.
In mid-2012, several key staff members left the Plaintiff to join a number of newly formed rival companies. Within two months, their new business launched their own version of the prenatal gender test, in direct competition with the Plaintiff. The Plaintiff sued all of the former employees, related individuals and the newly established rival companies.
The Plaintiff alleged that it was impossible for the former employees to independently develop and validate such a complex test in such a short timeframe without misusing its proprietary information, which is what the defendants had asserted.
There were two primary claims before the court:
- The confidential information claim (Main Claim): The Plaintiff alleged that its former employees used proprietary genetic markers and primer sequences to launch the Y-Test in 2012.
- The negligence claim: The Plaintiff alleged that one of them had breached their implied duty to exercise reasonable care and skill in performing their work, in causing incorrect reports to be issued to the Plaintiff’s customers.
The court’s findings on the two claims
The Main Claim
The court rejected the defendants’ assertion that they had independently developed their own tests in just two months. In reaching this conclusion, the court found it “extremely odd” and “highly unlikely” that the second defendant kept no contemporaneous research records or literature sources to support the genuineness of their work, specifically that an alleged copyist’s use of “odd or unusual detail found in the original work is often a tell-tale of copying”.2
Further, given the defendants’ access to the Plaintiff’s trade secrets and the suspicious speed of their launch, the court inferred that they had misused its confidential information. Hence, the court found that some of the relevant defendants, including the rival entities, were liable for misusing the Plaintiff’s confidential information or acting in concert to do so.
The negligence claim
This claim concerned two clinical testing incidents handled by the third defendant:
- Alpha-Test incident: The third defendant approved a report stating a foetus was “normal” when it was actually homozygous for alpha-thalassemia. The court found this was an “obvious mistake” and a clear breach of their duty of care as a Medical Laboratory Technologist, requiring no additional expert evidence to prove negligence.
- Beta-Test incident: The third defendant was accused of missing a mutation in a beta-thalassemia test. The court ruled that because this mistake involved highly technical interpretation and was not “obvious”, the Plaintiff’s failure to provide expert evidence on the standard of care for a Medical Laboratory Technologist in this specific context meant the claim could not be proven.
The court found the third defendant had breached their implied duty to exercise reasonable care and skill in performing their work in relation to the Alpha-Test incident, and they were liable to the Plaintiff for damages to be assessed.
Key takeaways
In intellectual property and trade secret disputes, a lack of documented research and development can, in appropriate cases, lead the court to draw adverse inferences, especially if a product is launched with suspicious speed after an employee’s departure.
Liability for trade secret misuse can extend beyond those who physically stole the data to those who acted in concert to further a common design to use that information for a competing business.
Employees employed in specialised fields do owe their employer an implied duty to exercise reasonable care and skill in performing their work. Where their conduct falls below such standard, they can be liable towards their employer for their negligent mistakes when such mistakes are “obvious”.
Acknowledgements to Temporary Legal Assistant Angie Te for research and contribution to this article.
For further information, please contact:
Richard Keady, Partner, Dentons
richard.keady@dentons.com
- Diagcor Bioscience Incorporated Ltd v Chan Wai Hon Billy [2026] HKCFI 488↩
- Vestergaard Frandsen A/S v Bestnet Europe Ltd [2011] EWCA Civ 424, §20↩
