By: Aaron Kim, ITMG Insider Threat Analyst
GeLab Cosmetics has sued Zhuhai Aobo Cosmetics Co., alleging that Zhuhai took advantage of a business relationship to develop a knockoff version of their nail gel. GeLab is described in the complaint as “a cosmetic company that develops, designs, manufactures, and markets innovative nail gel products.” Over the past four years, the plaintiff explains that they have put both time and resources into developing cutting-edge, distinguished products.
The plaintiff said they signed a purchase agreement with defendant Zhuhai in July of 2020. The agreement included several confidential clauses, effectively creating a “trial relationship” between the two parties in which the plaintiff would provide the defendant with color designs and related confidential information while the defendant would manufacture the nail gel product accordingly. Defendant Zhuhai became GeLab’s supplier through the purchase agreement, the complaint said. The agreement also detailed contractual terms that restricted the ways in which Zhuhai would be able to use and disclose information about the plaintiff’s product. Specifically, “Zhuhai promised not to use or permit anyone else to use GeLab’s proprietary work or information against GeLab’s interests, including by making a derivative product to compete with GeLab.”
The plaintiff asserts that instead of abiding by the contractual terms, the defendants used GeLab’s confidential and proprietary trade secrets to develop and market competing products. The complaint also notes that defendant Li sent his daughter to GeLab to work as an unpaid intern, where she had access to GeLab’s trade secret involving product manufacturing and their online marketing operation.
GeLab contends that “rather than designing their own products to compete fairly in the marketplace, Defendants instead misappropriated GeLab’s proprietary technologies, critical business strategies and sensitive sales statistics and other highly valuable confidential GeLab information.” The defendants then engaged in direct competition with the plaintiff by marketing products identical to GeLab’s on amazon.
Due to the defendant’s “brazen misappropriation and theft of trade secrets,” the complaint cites violations of the Defend Trade Secrets Act and the Illinois Trade Secrets Act, constructive fraud, fraudulent concealment, breach of the purchase agreement, breach of fiduciary duty, fraudulent misrepresentation and civil conspiracy.
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