Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 1 of 8
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MASSACHUSETTS
`
`
`Lunan Pharmaceutical Group Co. Ltd.,
`
` Plaintiff,
`v.
`
`Long Zhao,
`
`
`Defendant.
`
`
`
`
`Civil Action No.:
`
`JURY TRIAL DEMANDED
`
`
`
`
`
`
`I.
`
`COMPLAINT
`
`Plaintiff Lunan Pharmaceutical Group Co. Ltd. (hereinafter “Lunan Pharmaceutical” or
`
`“Lunan”), by and through its undersigned attorneys, for its Complaint against Defendant
`
`Long Zhao allege and state as follows:
`
`II.
`
`PARTIES
`
`1.
`
`Plaintiff Lunan Pharmaceutical is a Chinese pharmaceutical company that
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`maintains its principal place of business at No. 209, Hongqi Road, Linyi City, Shandong Province,
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`China. Plaintiff carries out medical research and is involved in the production and sale of
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`pharmaceutical products in China.
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`2. Defendant Long Zhao (hereinafter “Ms. Zhao”) is an individual who resides in
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`Massachusetts at 61 Maple St., Apt. D, Canton, Massachusetts 02021, USA.
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`III.
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`JURISDICTION AND VENUE
`
`3.
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`This court has jurisdiction over the subject matter of this Complaint pursuant to
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`28 U.S.C. §1331, as two of Plaintiff’s claims arise under federal statutes, the Defend Trade Secrets
`
`Act of 2016 (18 U.S.C. § 1836 et seq.) and the Computer Fraud and Abuse Act (18 U.S.C. § 1030
`
`et seq.). This Court also has supplemental jurisdiction over state and common law claims under
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`28 U.S.C. § 1367(a).
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`OMC\4848-4966-4218.v5-4/19/21
`
`
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MASSACHUSETTS
`
`
`Lunan Pharmaceutical Group Co. Ltd.,
`
` Plaintiff,
`v.
`
`Long Zhao,
`
`
`Defendant.
`
`
`
`
`Civil Action No.:
`
`JURY TRIAL DEMANDED
`
`
`
`
`
`
`I.
`
`COMPLAINT
`
`Plaintiff Lunan Pharmaceutical Group Co. Ltd. (hereinafter “Lunan Pharmaceutical” or
`
`“Lunan”), by and through its undersigned attorneys, for its Complaint against Defendant
`
`Long Zhao allege and state as follows:
`
`II.
`
`PARTIES
`
`1.
`
`Plaintiff Lunan Pharmaceutical is a Chinese pharmaceutical company that
`
`maintains its principal place of business at No. 209, Hongqi Road, Linyi City, Shandong Province,
`
`China. Plaintiff carries out medical research and is involved in the production and sale of
`
`pharmaceutical products in China.
`
`2. Defendant Long Zhao (hereinafter “Ms. Zhao”) is an individual who resides in
`
`Massachusetts at 61 Maple St., Apt. D, Canton, Massachusetts 02021, USA.
`
`III.
`
`JURISDICTION AND VENUE
`
`3.
`
`This court has jurisdiction over the subject matter of this Complaint pursuant to
`
`28 U.S.C. §1331, as two of Plaintiff’s claims arise under federal statutes, the Defend Trade Secrets
`
`Act of 2016 (18 U.S.C. § 1836 et seq.) and the Computer Fraud and Abuse Act (18 U.S.C. § 1030
`
`et seq.). This Court also has supplemental jurisdiction over state and common law claims under
`
`28 U.S.C. § 1367(a).
`
`OMC\4848-4966-4218.v5-4/19/21
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 2 of 8
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`4.
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`This Court has personal jurisdiction over Long Zhao because she resides in the
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`Commonwealth of Massachusetts, transacts business there, and committed tortious acts in
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`Massachusetts.
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`5. Venue is proper in this Court under 28 U.S.C. §§ 1391(b) and 1391(c) because
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`Long Zhao resides in this District and a substantial part of the events giving rise to Plaintiff’s
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`claims occurred in this District.
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`IV.
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`FACTS APPLICABLE TO ALL COUNTS
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`6.
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`Zhiquan Zhao was the Chairman of Board and CEO of Lunan until his death in
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`November 2014. Defendant Zhao is his daughter.
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`7.
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`In 2017, Defendant Long Zhao brought a declaratory judgment claim against Lunan
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`in the Eastern Caribbean Supreme Court in the High Court of Justice Virgin Islands,
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`Commercial Division (hereinafter “BVI Litigation”), claiming that she is beneficially entitled to
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`21 million shares of the common stock of Lunan Pharmaceutical, amounting to a 25.7% interest
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`in the company.
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`8. While the BVI litigation was pending, Defendant Zhao solicited, abetted, and
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`conspired with an unknown employee of Lunan who gained unauthorized access to Lunan’s
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`computer and database to unlawfully retrieve highly proprietary and confidential information.
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`9.
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`In March 2019, Defendant Zhao, without authorization, secretly gained access to
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`Lunan’s database with the aid of the unknown employee whom she directed to retrieve Lunan’s
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`confidential financial documents without its knowledge or consent.
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`10. Defendant Zhao further instructed the unknown Lunan employee as follows:
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`“Send me anything regarding the foreign shares. And all the board resolutions.”
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 3 of 8
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`11. The trade secret files and confidential information include Lunan and its
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`subsidiaries’ financial data, voucher entries, screenshots of their accounting vouchers, their ledger
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`journals, their three-column account, their accounting ledgers, their accounting data, confidential
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`salary information of their employees, and other confidential information.
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`12. Plaintiff has at all relevant times taken reasonable measures to protect its trade
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`secrets and confidential information.
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`13. Among other measures, Lunan requires its employees to sign confidentiality
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`agreements.
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`14. By signing the confidentiality agreements, employees acknowledge as follows:
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`The confidential information involved in this agreement refers to non-patented
`technology and technical information that is not known to the public, that can
`bring economic benefits to the enterprise. It is practical and has been taken by
`the company to take confidential measures, such as technical secrets, trade
`secrets, etc. … trade secrets, including but not limited to: customer lists, sales
`plans, procurement materials, pricing policies, financial information, purchase
`channels, and other confidential information and materials.
`
`15. Lunan also routinely requires employees with access to confidential or proprietary
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`information to execute non-disclosure agreements.
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`16. Lunan also implements robust computer network security measures and allows only
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`company-authorized persons to access confidential information stored in company computers.
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`Additionally, Lunan prohibits employees from storing confidential information on any public
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`portion of the company network, forwarding confidential information by email without proper
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`labeling and authorization, or forwarding confidential information from work email accounts to
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`personal email accounts.
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 4 of 8
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`17. The unknown employee exploited by Defendant Zhao did not have permission or
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`authorization from Plaintiff to take screenshots of its confidential files in its database or to transfer
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`those files to her or anyone outside the company.
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`18. After Lunan learned of Zhao’s misappropriation in December 2020, it launched a
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`company-wide investigation to identify the perpetrator.
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`19.
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`In the meantime, when Zhao was asked to identify the perpetrator during her
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`cross-examination of the BVI litigation, she identified a false name – an “IT” person with a last
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`name of “Yung.”
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`20. Upon investigation, Plaintiff confirmed that there is no person with the last name
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`“Yung” currently working at Lunan, and it has to date been unable to determine the perpetrator’s
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`identity.
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`
`
`COUNT I – Violation of the Defend Trade Secrets Act of 2016
`18 U.S.C. § 1836 et seq.
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`21. The allegations contained in the above paragraphs are hereby incorporated by
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`reference as if fully set forth herein.
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`22. Plaintiff is the owner of trade secrets that Defendant Zhao misappropriated and is,
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`on information and belief, now using the trade secrets. These trade secrets are used in, and intended
`
`for use in, interstate or foreign commerce.
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`23. The unknown Lunan employee with whom Defendant conspired was under a
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`contractual obligation not to use or disclose its confidential or proprietary information, including
`
`its trade secrets.
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`24. Lunan takes extensive measures to protect and maintain the secrecy of its trade
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`secrets and confidential and proprietary information. These protections included requiring its
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`employees and contractors to sign confidentiality and non-disclosure agreements, prohibiting
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 5 of 8
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`removal of any materials containing confidential, proprietary information from its premises except
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`in the pursuit of Lunan’s business, limiting access to its offices, encrypting forms of electronic
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`storage, and limiting access to its computer systems through a variety of security mechanisms,
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`such as requiring a password.
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`25. Lunan has expended significant resources to compile its trade secrets and other
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`confidential and proprietary information, which derive independent economic value from not
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`being publicly available. They are potentially highly valuable to Lunan and to any person or entity
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`that wants to gain a competitive advantage against Lunan in the pharmaceutical industry.
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`26. As a direct and proximate result of Zhao’s misappropriation of Lunan’s trade
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`secrets and other confidential and proprietary information, Lunan has suffered and will continue
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`to suffer irreparable harm and other damages, including but not limited to loss of value of its trade
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`secrets. Lunan is therefore entitled to injunctive relief, monetary damages for its actual losses and
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`for unjust enrichment.
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`COUNT II: Misappropriation of Trade Secrets, Massachusetts General Law
`Ch. 93, § 42 through § 42G
`
`
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`27. The allegations contained in the above paragraphs are hereby incorporated by
`
`reference.
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`28. Lunan took reasonable measures to protect and maintain the secrecy of its trade
`
`secrets and confidential and proprietary information.
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`29. Lunan held its trade secrets and confidential information in strict confidence and
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`confidentiality. As Lunan is a privately held company, Lunan does not publish or disclose its
`
`financial information to the public.
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`30. Defendant Zhao stole trade secrets from Lunan through improper means.
`
`On information and belief, Defendant Zhao knowingly received the benefits from the disclosure
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 6 of 8
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`and/or use of Lunan’s proprietary information for improper purposes. On information and belief,
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`if Defendant Zhao is not enjoined, she will continue to misappropriate and use Lunan’s trade
`
`secrets for her own benefit and to Lunan’s detriment.
`
`31. As a direct and proximate result of Defendant Zhao’s misappropriation of Lunan’s
`
`trade secrets and other confidential and proprietary information, Lunan has suffered and will
`
`continue to suffer irreparable harm and other damages, including but not limited to loss of value
`
`of its trade secrets. Lunan is therefore entitled to injunctive relief, monetary damages for its actual
`
`losses, and monetary damages for unjust enrichment where damages for its actual losses are not
`
`adequately addressed.
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`COUNT III: Violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030
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`
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`32. The allegations contained in the above paragraphs are hereby incorporated by
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`reference as if fully set forth herein.
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`33. Lunan maintains proprietary financial documents which contain closely guarded
`
`trade secrets in a protected computer. Normally the documents are encrypted in a format which is
`
`not readable outside of Lunan’s database.
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`34. Screenshots of the stolen proprietary financial documents also show that they were
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`retrieved through the back-end of Lunan’s database. Only a handful of persons have access to the
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`entire database and there are tight controls upon the ability of a user to export information from
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`the database.
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`35. Due to the restrictions on exporting information from the database, the majority of
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`the proprietary financial documents could not be transmitted directly from the unknown employee
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`to Defendant Zhao via email or any other electronic communication channels. Instead, the
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`unknown employee who aided Zhao took photos of the proprietary financial documents from a
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 7 of 8
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`computer screen and transmitted them to her indirectly via messages on Wechat (a popular Chinese
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`messaging and social network), thereby circumventing Lunan’s computer security mechanisms.
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`36. Defendant Zhao’s actions were deliberate, willful, malicious, and unauthorized.
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`37. The Computer Fraud and Abuse Act is codified at 18 U.S.C. §1030. The Act allows
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`“any person who suffers damage or loss by reason of a violation of this section may maintain a
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`civil action against the violator to obtain compensatory damages and injunctive relief or other
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`equitable relief.” §1030(g).
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`38.
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`In particular, Long Zhao has violated §1030(a)(2)(C); §1030(a)(4);
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`§1030(a)(5)(B)-(C).
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`39.
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`In addition to damages flowing from the disruption of its business activities,
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`Lunan has incurred damages in investigating Zhao’s acts of computer theft.
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`40. As a result of Defendant Zhao’s violations of the Computer Fraud and Abuse Act,
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`Plaintiff incurred costs exceeding $5,000. These costs include expenses to investigate Zhao’s
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`unauthorized access to Plaintiff’s computer system and costs of implementation of necessary
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`security enhancements to Plaintiff’s database following Zhao’s acts of computer theft.
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff requests that this Honorable Court grant judgment in its favor,
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`and award the Plaintiff the following relief against Defendant:
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`1. Injunctive Relief;
`2. Damages suffered by Plaintiff as a result of Defendant’s misconduct, including
`consequential damages;
`3. Punitive Damages;
`4. Attorney fees and costs;
`5. All applicable injunctive and equitable relief; and
`6. Any other relief the Court deems just and equitable.
`
`Plaintiff demands a jury trial on all counts so triable.
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`Case 1:21-cv-10667 Document 1 Filed 04/21/21 Page 8 of 8
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`Date: April 21, 2021
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`Respectfully submitted,
`Plaintiff,
`Lunan Pharmaceutical Group Co. Ltd.,
`By its counsel,
`
`
`
`/s/ Michael F. Sommerville
`Michael F. Sommerville
`BBO # 551175
`CETRULO LLP
`Two Seaport Lane, 10th Floor
`Boston, MA 02210
`(t) 617 217 5500 | (f) 617 217 5200
`msommerville@cetllp.com
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`/s/ Bruce C. Fox
`Bruce C. Fox, Esquire (pro hac vice to be filed)
`Pa. ID No. 42576
`Obermayer Rebmann Maxwell & Hippel LLP
`525 William Penn Pl, Ste. 1710
`Pittsburgh, PA 15219
`(t) 412-566-1500 ǀ (f) 412-281-1530
`bruce.fox@obermayer.com
`
`
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`
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`OMC\4848-4966-4218.v5-4/19/21
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`8
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`27042497v1
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