ITC’s Expansive Reach over Trade Secrets Developed and Misappropriated Abroad

Orrick - Trade Secrets Group

Orrick - Trade Secrets Group

Trade secret protections are a powerful tool for companies seeking to police international theft of their intellectual property.

The United States International Trade Commission (“ITC”) recently re-affirmed this, when Administrative Law Judge Shaw issued a final initial determination in Inv. No. 337-TA-1145 affirming that the ITC has broad subject matter jurisdiction over trade secrets both developed and misappropriated abroad. ALJ Shaw rejected Respondents’ argument that the ITC’s jurisdiction does not “reach alleged misappropriation of a Korean company’s Korean trade secrets based on activity solely in Korea by another Korean company.” In response, the Complainants argued that the act of importation alone is sufficient to confer jurisdiction and that it was irrelevant whether the asserted trade secrets at issue are United States-based intellectual property rights.  The Commission agreed with Complainants, finding that the ITC had subject matter jurisdiction based on importation alone.  In so finding, the Commission interpreted the Federal Circuit’s decision in Tian Rui to impose no limitations regarding trade secrets needing to be developed or owned in the United States, and instead, the jurisdictional inquiry is solely focused on the act of importation.

This latest opinion is an extension of prior cases addressing similar issues.  In TianRui, the Federal Circuit addressed “whether section 337 applies to imported goods produced through the exploitation of trade secrets in which the act of misappropriation occurs abroad.” The Federal Circuit did not specifically address the factual situation where all elements of the cause action occur abroad, i.e., where the complainant develops the trade secrets abroad, confidentiality obligations related to the trade secrets are entered abroad, and the misappropriation occurs wholly abroad.  The TSW has reported extensively on TianRui.

Later, the Supreme Court cemented the ITC’s broad extraterritorial jurisdiction when it denied a petition for certiorari from Sino Legend Chemical Co., Ltd.  In Sino, the ITC barred products developed in China by Chinese employees working for Chinese companies and with misappropriation occurring entirely in China. The Chinese government’s attention to this exclusion order underscored its importance. China went so far as to file an amicus brief in the Supreme Court—the first ever such brief to be filed according to Sino Legend—and strongly criticized what it characterized as the ITC’s “expansion” of the Federal Circuit’s TianRui decision “to bar products from entering the United States for conduct that not only occurred completely within China’s borders by Chinese citizens working at Chinese companies, but also conduct that was adjudicated in China to have been lawful.”  The TSW blog has reported extensively on Sino Legend as well.

Thus, the Commission’s decision in 337-TA-1145 continues to solidify the ITC’s expansive jurisdiction over extraterritorial misappropriation.

This decision is notable because it permits the ITC broader jurisdiction over trade secret actions than is currently available to litigants under the Defend Trade Secret Act. District courts are generally in agreement that Section 1837 applies to the DSTA to limit jurisdiction over extraterritorial misappropriation, requiring that there be “an act in furtherance of the offense [that] was committed in the United States.” 18 U.S.C. § 1837(2).  Although even minimal acts can tie the misappropriation to the United States—there must be some connection.  District courts have dismissed cases where there was no domestic connection to the misappropriation beyond injury.

This decision is also notable because it post-dates Congress’ enactment of the DTSA, but the Commission did not apply the DTSA as the legal standard.  This is likely because allegations of misappropriation pre-dated the effective date of the DTSA.  In a footnote, the Federal Circuit in TianRui suggested that if a federal statute limited the extraterritorial reach of trade secret law, the outcome may have been different:

Our conclusion that section 337 authorized the Commission’s actions in this case is not inconsistent with court decisions that have accorded a narrow construction to the extraterritorial application of U.S. patent law… The import of those decisions is that the Commission’s broad and flexible authority to exclude from entry articles produced using “unfair methods of competition” cannot be used to circumvent express congressional limitations on the scope of substantive U.S. patent law. Because there is no parallel federal civil statute regulating trade secret protection, there is no statutory basis for limiting the Commission’s flexible authority under section 337(a)(1)(A) with respect to trade secret misappropriation.

With the passage of the DTSA and district courts’ interpretation that there must be some tie to the United States, the Federal Circuit could have a basis to impose similar limitations on the ITC’s jurisdiction in the future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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