Docket No. 2010-1395
BRYSON, SCHALL, MOORE
October 11, 2011
Subject matter: trade secret, ITC jurisdiction
Brief summary: ITC may investigate foreign activities to prove an element of a misappropriation claim under 19 U.S.C. § 1337.
TianRui appealed ITC determination that the importation of railway wheels manufactured using a process that was developed in the U.S., protected under U.S. trade secret law, and misappropriated in China was a violation of section 337 of the Tarriff Act of 1930, 19 U.S.C. § 1337 (“[u]nfair methods of competition [or] unfair acts in the importation of [those] articles”). The FC affirmed, finding the ITC “has authority to investigate and grant relief based in part on extraterritorial conduct insofar as it is necessary to protect domestic industries from injuries arising out of unfair competition in the domestic marketplace” (even where, as here, no U.S. manufacturer is currently practicing the protected process). Amsted licensed their trade secret process to several companies in China, but was not practicing the process in the U.S. TianRui unsuccessfully attempted to license the process and then hired several employees of Chinese licensees that had used the process and had signed confidentiality agreements. The ALJ determined TianRui had misappropriated 128 trade secrets. The FC held that section 337 misappropriation actions are held to a single federal standard and not the law of any particular state (e.g., Illinois where Amsted was based); there is no “presumption against extraterritoriality” regarding importation, using certain aspects of illegal immigration laws as a comparison; the “unfair activity” was “importation of goods into this country causing domestic injury”, and not “purely extraterritorial conduct” (the foreign conduct was only used to establish an element of Amsted’s claim); the legislative history revealed that Congress intended to permit the ITC to consider foreign conduct; there was no conflict between the misappropriation requirements of the TRIPS agreement to which China has acceded and U.S. trade secret law; and, the employees had signed confidentiality agreements (e.g., “conduct at issue in this case is not the result of the impo-sition of legal duties created by American law on persons for whom there was no basis to impose such duties”). It also explained that the ITC did not err in concluding “that the imported TianRui wheels could directly compete with wheels domestically produced by the trade secret owner”, which “is sufficiently related to the investigation to constitute an injury to an ‘industry’ within the meaning of section 337(a)(1)(A).” Thus, the ITC finding was affirmed. Judge Moore dissented because TianRui’s activities were “completely extraterritorial” and “there is no basis for the extraterritorial application of our laws to punish TianRui’s bad acts in China.”