The Long Arm of Section 337: International Trade Law as a Global Business Remedy

• DOI: http://doi.org/10.1111/ablj.12053
• Author: Stephen Kim Park,Marisa Anne Pagnattaro
• Published date: 01 December 2015
• Date: 01 December 2015

The Long Arm of Section 337:

International Trade Law as a Global

Business Remedy

Marisa Anne Pagnattaro* and Stephen Kim Park**

INTRODUCTION

American companies are using international trade law as part of a

broad-based legal strategy to protect their global commercial and invest-

ment interests. Among the most important interests are trade secrets,

which encompass a broad spectrum of information (or “know-how”)

that companies use to conduct their business.

1

The protection of trade

secrets is of critical importance to American companies in their global

*Josiah Meigs Professor of Legal Studies, Terry College of Business, University of Georgia.

The author gratefully acknowledges funding from a Terry-Sanford research grant from

the University of Georgia for this research project.

**Assistant Professor of Business Law, University of Connecticut School of Business.

†Certain portions of this article are drawn from Marisa Anne Pagnattaro & Stephen Kim

Park, Employee Misappropriation: Using Section 337 to Combat Trade Secret Theft,in MANAGING

THE LEGAL NEXUS BETWEEN INTELLECTUAL PROPERTY AND EMPLOYEES:DOMESTIC AND GLOBAL

CONTEXTS (Lynda J. Oswald & Marisa Anne Pagnattaro eds., 2015).

1

Trade secrets are def‌ined in various federal statutes and state laws. See David Orozco,

Amending the Economic Espionage Act to Require the Disclosure of National Security-Related

Technology Thefts,62C

ATH.U.L.REV. 877, 884–89 (2013). The Economic Espionage Act

(EEA) def‌ines trade secrets as including “all forms and types of f‌inancial, business, scien-

tif‌ic, technical, economic, or engineering information... if (A) the owner thereof has taken

reasonable measures to keep such information secret; and (B) the information derives

independent economic value, actual or potential, from not being generally known to, and

not being readily ascertainable through proper means by, the public.” 18 U.S.C. § 1839(3)

(2012) (internal quotation marks omitted).

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Volume 52, Issue 4, 621–671, Winter 2015

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operations.

2

For American companies, the potential loss of trade secrets

poses a substantial threat to their global operations and assets.

3

The

theft of trade secrets, which is often committed by current or former

employees of a company, includes theft for the economic benef‌it of an

individual or organization as well as economic espionage (including

cyber espionage) on behalf of a foreign government.

4

American compa-

nies incur hundreds of billions of dollars annually in estimated losses

worldwide due to intellectual property (or IP) theft, among which

includes the misappropriation of trade secrets.

5

A large share of those

losses is incurred in China,

6

where American companies have reported

2

Although it is diff‌icult to quantify the value of intangible intellectual property assets such

as trade secrets, they can represent as much as eighty-f‌ive percent of a corporation’s value.

PRICEWATERHOUSECOOPERS,REDEFINING INTELLECTUAL PROPERTY VALUE:THE CASE OF CHINA 2

(2005), available at http://www.pwc.com/en_us/us/technology-innovation-center/assets/ipr-

web_x.pdf.

3

See WENDY S. LAZAR &GARY R. SINISCALCO,RESTRICTIVE COVENANTS AND TRADE SECRETS IN

EMPLOYMENT LAW:ANINTERNATIONAL SURVEY, at xiii (2010).

4

See COMMISSION ON THE THEFT OF AMERICAN INTELLECTUAL PROPERTY,THE IP COMMISSION

REPORT 41 (2013), available at http://www.ipcommission.org/report/IP_Commission_Report_

052213.pdf (def‌ining and comparing economic espionage and theft of trade secrets under

the EEA).

5

Id.at1.

6

See id. at 3 (reporting that China’s share of IP theft constitutes between f‌ifty and eighty

percent worldwide). See also Doug Palmer, U.S. Seeks to Tackle Trade-Secret Theft by China,

Others,R

EUTERS (Feb. 20, 2013, 10:52 AM), http://www.reuters.com/article/2013/02/21/us-

usa-trade-secrets-idUSBRE91J0T220130221 (noting that Chinese cyber espionage consti-

tuted a large share of losses sustained by American companies in 2012 due to theft of

trade secrets); Siobahn Gorman & Jared A. Favole, U.S. Ups Ante for Spying on Firms, WALL

ST. J., Feb. 21, 2013, at A1 (noting various responses by the U.S. government and Ameri-

can companies to Chinese trade secret theft). The magnitude of the threat posed by trade

secret theft in China is evident in several recent high-prof‌ile cases involving American

companies and their former employees. See Karen Gullo, California Man Guilty of Stealing

DuPont Trade Secrets, BLOOMBERG BUSINESS, (Mar. 5, 2014, 5:29 PM), http://www.bloomberg.

com/news/articles/2014-03-05/california-man-guilty-of-stealing-dupont-trade-secrets (report-

ing on the prosecution of former employees of DuPont for selling trade secrets to a Chi-

nese competitor); Andreas Lauffs & Jonathan Isaacs, First Ever Preliminary Injunction and

Asset Preservation Orders in Trade Secrets Case Issued by Court, ABA INT’LLAB.&EMP.L.COM-

MITTEE NEWSL (Sept. 2013), http://www.americanbar.org/content/newsletter/groups/labor_

law/int_newsletter/2013/sept2013/china9-13.html (reporting on the issuance of preliminary

injunction and asset preservation orders by a Chinese court against a former employee of

a U.S.-based pharmaceutical company who improperly downloaded documents containing

trade secrets from the company’s database).

622 Vol. 52 / American Business Law Journal

$1.1 billion in annual losses due to intellectual property theft.

7

The

expansion of global supply chains and the growth of cross-border joint

ventures and foreign aff‌iliate and supplier relationships provide more

opportunities for employees to misappropriate trade secrets. Concur-

rently, the increasing mobility of workers,

8

portability of information,

9

and changing social mores,

10

coupled with ineffective enforcement of

intellectual property rights,

11

make it more diff‌icult for American com-

panies to monitor, deter, and combat such behavior.

This article focuses on the use of Section 337 of the Tariff Act of 1930

(Section 337) to combat offshore misappropriation of trade secrets. Sec-

tion 337 is a trade remedy statute that provides companies with a private

right of action to enjoin the importation and sale of goods in the United

States that have been produced in violation of their intellectual property

rights.

12

While Section 337 has been accessible to American companies

for over eighty years, it has only recently been employed as a powerful

tool to combat foreign trade secret theft. Marked by the 2011 decision of

the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”)

in TianRui Group Co. Ltd. v. International Trade Commission,

13

American

companies have successfully used Section 337 to combat the misappropri-

ation of trade secrets committed overseas. In light of the paucity of legal

7

U.S. INT’LTRADE COMM’N,CHINA:EFFECTS OF INTELLECTUAL PROPERTY INFRINGEMENT AND INDIG-

ENOUS INNOVATION POLICIES ON THE U.S. ECONOMY,PUBLICATION 4226 3–10 (2011), availabl e at

http://www.usitc.gov/publications/332/pub4226.pdf (disclosing estimated reported losses for

2009).

8

David S. Almeling, Seven Reasons Why Trade Secrets are Increasingly Important,27BERKELEY

TECH. L.J. 1091, 1101 (2012) (noting that workers are very unlikely to spend their career

at the same employer).

9

Id. at 1103 (noting how employees routinely save work on portable devices, check e-mail

from nonwork locations, and work from remote locations).

10

Id. (noting how “an evolving perception of secrecy” may make it more diff‌icult for

employers to impress upon their employees the value of keeping proprietary material

secret).

11

In China alone, ineffective enforcement of intellectual property rights is a concern for

nearly eighty percent of American companies. AMCHAM CHINA,CHINA BUSINESS CLIMATE

SURVEY REPORT 4 (2015), available at http://www.amchamchina.org/policy-advocacy/business-

climate-survey.

12

19 U.S.C. § 1337 (2012).

13

661 F.3d 1322 (Fed. Cir. 2011).

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