Trade Secret Law Goes Global - And Federal.

Federal Circuit Approves ITC's Sweeping Power to Block Imports Based on Trade Secret Misappropriation outside the U.S.

TianRui Group Co. Ltd., et al. v. International Trade Commission, Slip Op. 2010-1395 (Fed. Cir. Oct. 11, 2011) (Bryson, J., joined by Schall, J.) (Dissent by Moore, J.).

Earlier this month, the Federal Circuit issued an opinion with potentially far-reaching consequences for American companies' trade secret enforcement efforts. In TianRui Group Co. Ltd., et al. v. International Trade Commission, the court held that the International Trade Commission (ITC) can prevent the importation of products made by trade secret processes developed in the United States—even when the misappropriation took place exclusively abroad. In so ruling, the Federal Circuit has arguably given trade secret owners broader power than patent owners to protect intellectual property overseas provided they can meet the statutory domestic injury requirement.

THE UNDERLYING ITC ACTION

Complainant Amsted is an American company that uses a secret process to make cast steel railway wheels. Amsted licenses a different secret process to companies overseas, including companies in China. In 2005, defendant TianRui, a Chinese company, sought to license Amsted's process. When negotiations between the companies broke down, TianRui hired former employees of an Amsted licensee, also in China, to manufacture wheels using Amsted's confidential process in China. Amsted filed an action with the ITC to block TianRui's importation of these wheels into the United States. Finding that TianRui had misappropriated Amsted's trade secrets under Illinois trade secrets law (Amsted is an Illinois company, as was TianRui's American distribution partner), the ITC issued an exclusion order. The appeal to the Federal Circuit followed.

THE FEDERAL CIRCUIT DECISION

Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, gives the ITC authority to block importation to the U.S. of items violating U.S. patents, trademarks, or copyrights if a domestic industry protected by intellectual property laws exists or is in the process of being established. § 1337(a)(1)(B-E). But a lesser-used provision also gives the ITC authority over "[u]nfair methods of competition and unfair acts in the importation of articles . . . into the United States" provided that the effect of the conduct is to injure an industry in the United States. § 1337(a)(1)(A). The statute does not define unfair competition or acts...