Post-TianRui: A Survey Of Trade Secret Litigation And Extraterritoriality In The ITC

• Published date: 05 May 2022
• Subject Matter: Intellectual Property, International Law, Trade Secrets, International Trade & Investment
• Law Firm: Morrison & Foerster LLP
• Author: Mr Mark Whitaker and Nate Tan

1. Introduction

In 2011, the Federal Circuit in TianRui Grp. Co. v. Int'l Trade Comm'n affirmed the International Trade Commission's (ITC) authority to look to extraterritorial conduct of a respondent to determine whether that respondent misappropriated trade secrets under 19 U.S.C.A. ' 1337 ("Section 337"). In 2016, the Defend Trade Secrets Act (DTSA), which created a federal cause of action for trade secret misappropriation, was enacted. The law is clear that the ITC can find a violation of Section 337 based on misappropriation of trade secrets conducted abroad. The DTSA adds yet another avenue to assert such claims at the ITC.

This paper explores recent trends in trade secret misappropriation in the ITC and recommends best practices. Based on a survey of 16 recent ITC investigations with trade secret claims, a few trends appear. First, the ITC has consistently considered extraterritorial conduct as evidence of trade secret misappropriation under Section 337. Second, there is a growing acceptance of the DTSA as a basis for trade secret misappropriation claims in the ITC. Third, at least one Administrative Law Judge (ALJ) has interpreted TianRui to require rejecting comity arguments in motions to terminate. This gradual expansion of the ITC's jurisdiction, coupled with a general increase in trade secret investigations in the ITC, indicates that companies should be prepared to bring or respond to trade secret misappropriation claims in this forum.

2. Extraterritoriality in the ITC: TianRui Group Co. Ltd. v. International Trade Commission

The ITC is a federal agency that is empowered, under Section 337 of the Tariff Act of 1930, to determine, inter alia, whether there exists "[u]nfair methods of competition and unfair acts in the importation of articles . . . into the United States, or in the sale of such articles by the owner, importer, or consignee, the threat or effect of which is'

(i) to destroy or substantially injure an industry in the United States;

(ii) to prevent the establishment of such an industry; or

(iii) to restrain or monopolize trade and commerce in the United States."

19 U.S.C.A. ' 1337 (a)(1)(A). Trade secret misappropriation falls under this mandate.¹ Upon determination of a Section 337 violation, the ITC "shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States."² The most common remedy is a Limited Exclusion Order (LEO), which prohibits named respondents in an ITC investigation from importing offending articles into the United States. Rarely, the ITC also issues General Exclusion Orders (GEOs), which prohibit any party from importing offending articles. Partly because of such effective remedies, the ITC has become a popular venue for companies who seek to protect their market share in the United States.

Despite Section 337's focus on foreign articles being imported into the United States, it has been unclear until recently whether foreign conduct qualifies as evidence of an unfair method or an unfair act. The Federal Circuit answered this question in the affirmative in TianRui Grp. Co. v. Int'l Trade Comm'n, 661 F.3d 1322, 1326 (Fed. Cir. 2011). In 2008, ITC ALJ Charneski issued an Initial Determination that certain TianRui respondents³ misappropriated Complainant Amsted's trade secrets relating to the manufacture of railway wheels.⁴ The ALJ based this determination on TianRui's conduct in China.⁵ The TianRui respondents appealed to the Federal Circuit, arguing inter alia that the ITC could not look to extraterritorial conduct in determining violations of Section 337. A divided Federal Circuit rejected this argument, holding that Section 337's prohibition on unfair methods of competition and unfair acts in the importation of articles into the United States "include[s] conduct that takes place abroad."⁶

Because Amsted's trade secret misappropriation claim was founded on Illinois trade secret law, Amsted argued that the ITC could apply state law in determining trade secret misappropriation.⁷ The Federal Circuit disagreed, holding instead that "a single federal standard, rather than the law of a particular state, should determine what constitutes a misappropriation of trade secrets sufficient to establish an 'unfair method of competition' under section 337."⁸ At the time TianRui was decided, no federal trade secret statute was in place. Yet the Federal Circuit declined to overturn the ITC's application of Illinois trade secret law, because, "[f]ortunately, trade secret law varies little from state to state and is generally governed by widely recognized authorities such as the Restatement of Unfair Competition and the Uniform Trade Secrets Act."⁹TianRui left open the question of how to apply trade secret law for states that have not adopted the Uniform Trade Secrets Act (UTSA).¹⁰ Such concerns were resolved, however, with the passage of the federal DTSA in 2016.

The DTSA created a federal cause of action for the misappropriation of a trade secret.¹¹ The DTSA is, for the most part, modeled after the UTSA.¹² This provided the "single federal standard" that the Federal Circuit required of trade secret misappropriation claims brought before the ITC, tacitly strengthening the holding of TianRui. The ITC has become an even more attractive venue for litigants seeking injunction-equivalents against companies who misappropriate trade secrets overseas.

3. Trends in Trade Secret Litigation at the ITC

The ITC has been and remains a popular venue for patent issues. Trade secret misappropriation claims have historically been, and to a large extent remain, a minority cause of action at the ITC.¹³ In 2013, Riley and Stroud noted that, since 1972, the ITC has instituted only 41 investigations involving trade secrets. Riley and Stroud noted that "[o]nly a handful did not settle before a hearing, even fewer made it to a final determination, and only a small subset of those substantially comment on the law of trade secret violations at the ITC."¹⁴ This averages to one investigation per year. In the decade following TianRui, the number of trade secret-related investigations at the ITC has increased by 80%.

Title (In the Matter of Certain):	Inv. No.	ALJ Assigned	Date of Institution
DC-DC Controllers and Products Containing the Same	698	Paul Luckern	01/05/2010*
Electric Fireplaces, Components Thereof, Manuals for Same, Certain Processes for Manufacturing or Relating to Same and Certain Products Containing Same	791/826	David Shaw	07/20/2011*; 1/19/2012
Rubber Resins and Processes for Manufacturing Same	849	Sandra Lord	6/26/2012
Paper Shredders, Certain Processes for Manufacturing or Relating to Same and Certain Products Containing Same and Certain Parts Thereof	863	Thomas Pender	1/25/2013
Robotic Toys and Components Thereof	869	Charles Bullock	2/11/2013
Opaque Polymers	883	Thomas Pender	6/21/2013
Crawler Cranes and Components	887	David Shaw	7/17/2013
Stainless Steel Products, Certain Processes for Manufacturing or Relating to Same, and Certain Products Containing Same	933	Theodore Essex	10/10/2014
Activity Tracking Devices, Systems, and Components Thereof	963	Sandra Lord	8/21/2015
Carbon and Alloy Steel Products	1002	Sandra Lord	6/2/2016
Amorphous Metal and Products Containing Same	1078	Thomas Pender	10/30/2017
Botulinum Toxin Products, Processes for Manufacturing or Relating to Same and Certain Products Containing Same	1145	David Shaw	3/6/2019
Bone Cements and Components Thereof	1153	Cameron Elliot	4/10/2019
Lithium Ion Batteries, Battery Cells, Battery Modules, Battery Packs, Components Thereof, and Production and Testing Systems and Processes Therefor	1159	Cameron Elliot	6/4/2019
Foodservice Equipment and Components Thereof	1166	Charles Bullock	7/3/2019
Bone Cements and Bone Cement Accessories	1175	Cameron Elliot	9/23/2019
Balanced Armature Devices, Products Containing Same, and Components Thereof	1186	Sandra Lord	11/29/2019
Certain Digital Imaging Devices and Products Containing the Same and Components Thereof	1231	Cameron Elliot	12/01/2020
...