§ 6.05 Theft of Trade Secrets Before the International Trade Commission (ITC)

• Jurisdiction: United States
• Publication year: 2020

§ 6.05 Theft of Trade Secrets Before the International Trade Commission (ITC)

Victims of thefts of trade secrets should be aware that a decision by the United States Federal Circuit Court of Appeals (CAFC) in TianRui Group Company Ltd. v. International Trade Commission'³⁹⁸ confirmed a potential basis for civil recovery for U.S. companies whose manufacturing processes are misappropriated overseas. Under Section 337 of the Tariff Act of 1930, the International Trade Commission (ITC) is authorized to exclude imports when it finds "[u]nfair methods of competition and unfair acts in the importation of [those] articles."³⁹⁹ In TianRui Group, a U.S. company (Amstead) complained that TianRui Group had obtained its trade secret process for the manufacture of cast steel railway wheels from former employees of an Amstead Chinese licensee, who went to work for TianRui in China. The employees were privy to Amstead's trade secrets and were subject to an agreement not to disclose any confidential information. Amstead alleged in the ITC that TiranRui Group used the trade secrets in a manufacturing process for cast steel railway wheels and imported the wheels into the U.S. The ITC administrative law judge first rejected TianRui Group's attempt to terminate the proceedings on the ground that Congress did not intend for Section 337 to be applied extraterritorially.⁴⁰⁰ Then after a ten-day hearing, the judge found that TianRui Group had misappropriated over 100 trade secrets belonging to Amstead.⁴⁰¹

On appeal, the CAFC held that a product manufactured outside the United States with the assistance of a stolen trade secret owned by a U.S.-based company can be barred from importation into the United States under Section 337, even if the theft of the trade secret occurred entirely outside of the U.S. Of particular note, the court rejected TianRui Group's assertion that the ITC's ruling would cause improper interference with domestic Chinese law. The court pointed out that the ITC's ruling only relates to the importation of articles into the U.S. and the ITC's "activities have not hindered TianRui's ability to sell its wheels in China or any other country."⁴⁰² The court then concluded:

"the question in this case is whether the disclosure of protected information in breach of that duty is beyond the reach of section 337 simply because the breach itself took place outside the United States. To answer that question in the affirmative would invite evasion of section 337 and...