Suit claims industrial espionage

A Durham company contends a former scientist stole trade secrets and funneled them to two Chinese companies that used the information in overseas patent applications for a cancer treatment.

A lawsuit filed by Serenex also expresses concern that other trade secrets may have been stolen.

And it raises the possibility that the "interference with Serenex's intellectual property" could impede the company's ability to negotiate deals with larger pharmaceutical companies. Such deals, the lawsuit says, are "a key ingredient for the success of a small drug development company like Serenex."

Serenex, which has 30 employees, is testing two experimental cancer drugs in humans. The company announced last month that it raised $26 million in venture capital financing. It has raised $81 million since it was founded in 2001.

Serenex's lawyer, Jonathan Sasser of Ellis & Winters, said his client is vigorously defending its crown jewels. "We want to make absolutely sure no one is going to be making any spurious claims that they have any rights" to Serenex's research, he said.

Corporate espionage is a serious, increasing problem for companies whose fortunes are tied up in their intellectual property, especially as more companies compete in a global market. The N.C. Technology Association sponsored a corporate security seminar last month that included a workshop where FBI agents talked about the security risks posed by insiders.

Serenex's lawsuit in Wake County Superior Court accuses Yunsheng Huang, a former contract chemist, of "international industrial espionage." Also named as defendants are two Chinese companies, Beijing Gylongli Sci. & Tech. Co. and GYLL Biomedtech; and Tongxiang Zhang, "a decorated member of the Chinese Communist Party" who runs the businesses.

The two companies list Huang's address in Apex as their U.S. office. Huang "holds himself out as their representative in America," Sasser said.

Huang, a naturalized U.S. citizen who was born in the People's Republic of China and now resides in Apex, was terminated from Serenex in February when the company discovered that he had stolen trade secrets, the lawsuit states.

Huang "categorically denies any wrongdoing," said Walter Schmidlin of Anderson, Jones & Gengo in Raleigh, Huang's attorney.

Serenex has offered no proof that Huang stole documents, he added. The lawsuit is "a weak, circumstantial case that they could probably make against 10 other people."

Schmidlin also denied that Huang was fired by the company in February. "He left on good terms," Schmidlin said. "He left when all the other contract chemists left. When he was sued, he was dumbfounded."

Schmidlin added, "If there is a leak of information, my client had nothing to do with it and would like to help them in their investigation."

Huang's contact with Zhang has been minimal, Schmidlin said. Huang merely "met with him a couple of times to promote a business idea [Huang] had, which is apparently not going to work," Schmidlin said.

Efforts to reach Huang were unsuccessful.

Patent application

In February, Serenex learned Zhang and others had filed a patent application for a cancer treatment with the World Intellectual Property Organization. The treatment included compounds identical to patented compounds that Serenex worked on during Huang's employment. Other compounds in the application are "nearly identical" to Serenex's. A similar patent application was filed in China.

The lawsuit contends also that "certain features of Mr. Zhang's patent applications read like unique fingerprints linking them to Mr. Huang's malfeasance. Any doubt that Mr. Huang was the source of the nonpublic information in Mr. Zhang's patent application is foreclosed by evidence identifying Mr. Huang as the United States representative and operator of Mr. Zhang's businesses."

Huang recently postponed a court-ordered deposition because of a family emergency involving his mother, and Sasser said he is worried that Huang has fled to China.

No way, Schmidlin said. Huang's "family is here. His kids go to school here. His wife is here. ... He has no reason to flee. He hasn't done anything."

But when asked about Huang's whereabouts, Schmidlin replied, "I haven't spoken to him recently. And he is currently out of contact."