A Santa Clara medical technology company claims in a newly filed lawsuit that its joint-venture partner in China looted its coffers and stole its trade secrets for use in a new company.
Lumenous Device Technologies, which makes products for medical stent manufacturers, set up the joint-venture company Jiangyin Peier Technology more than 20 years ago to serve customers in Asia and the Middle East, according to its lawsuit against the new company Jiangyin Zhongpei Technology and four of that firm’s executives.
Jiangyin Peier flourished, and Lumenous re-invested the profits to “build and grow the company,” the lawsuit said.
But a bureaucratic problem arose, the lawsuit claims. Although Lumenous owned a majority stake in Jiangyin Peier, a “registration defect” arose to complicate the ownership picture just as Jiangyin Peier was about to go public in the stock market.
The ensuing battle over the company would see Lumenous founder and co-owner Todd Dickson flying to China to assert control over Jiangyin Peier at a trade show and getting kicked out after police were called, according to the lawsuit.
After the registration defect became apparent, Dickson told Jiangyin Peier the initial public offering would have to be postponed until the “frustrating but ultimately solvable” glitch was fixed, the lawsuit alleged. But Shen Bin, the newly promoted general manager of Jiangyin Peier, “smelled blood in the water,” the lawsuit claimed.
“If Lumenous was removed from (Jiangyin Peier) ownership altogether, she stood to gain tremendously,” the lawsuit alleged.
With Lumenous out, Shen would nearly triple her ownership stake in Jiangyin Peier to 29%, and other senior members of her alleged cabal at the company — referred to in the lawsuit as the “Shen Enterprise” — would stand to gain a “huge share” of profits, the lawsuit claimed.
“Emboldened by the windfall she and her co-conspirators could receive by simply stealing Lumenous’s rightful property, Defendant Shen and her enterprise sprang into criminal action,” the lawsuit alleged.
Jiangyin Zhongpei Technology and Shen could not be reached for comment. It was unclear whether they had legal representation for the case, filed Friday in U.S. District Court in San Jose.
In January last year, Shen emailed Dickson while he was in Santa Clara to tell him she and her management group planned to set up their own new company, and that Lumenous — which owned 69% of Jiangyin Peier — could have a maximum 27% equity stake, the lawsuit claimed. In a conference call, Shen and the others made clear to Dickson that “if Lumenous refused, the Shen Enterprise would simply steal Lumenous’s investment,” the lawsuit alleged.
In May 2022, Dickson, who chaired Jiangyin Peier’s board, traveled to China to hand-deliver to Shen the board’s resolution firing her and re-installing him as general manager, according to the lawsuit.
Shen and her team rebelled, the lawsuit claimed, with managers deeming the resolution invalid and Shen claiming the registration error meant she owned Jiangyin Peier, the lawsuit alleged.
As the dispute continued, Shen and the executives transferred more than $12 million from Jiangyin Peier’s bank accounts to accounts they controlled, the lawsuit alleged.
In their “hostile and illegal takeover,” the purported Shen Enterprise ran the company using Lumenous’s trade secrets, diverting revenues to entities they controlled, and sending representatives to trade shows in New York City; Tokyo, Japan; and Shanghai and Suzhou, China, where they showcased products designed using the Santa Clara firm’s secrets, the lawsuit claimed.
The day before the MedTec China Expo in Suzhou in June last year, Shen and her team and Dickson and his crew both sought to set up a Jiangyin Peier booth, and Shen sent 20 local employees to block her rivals, the lawsuit alleged. “Police arrived, and by intimidating the Expo management, the Shen Enterprise’s team managed to have Dickson kicked out of the exposition,” the lawsuit claimed.
In September of this year, a Chinese court ruled Dickson owned Jiangyin Peier, according to the lawsuit. Shen and her team “moved rapidly to relocate the physical assets it stole to a new facility, and to repackage the trade secrets it stole” into the new company Jiangyin Zhongpei, the lawsuit alleged.
To this day, Shen and her team, through Jiangyin Zhongpei, continue to use Lumenous’s intellectual property to “line the Shen Enterprise’s pockets,” the lawsuit claimed.
Lumenous is seeking unspecified damages, and return of allegedly ill-gotten gains and trade secrets. Legal experts say judgments in U.S. courts against Chinese companies and individuals can be difficult to enforce.