Dave Bohrer’s recent post Extending US Trade Secret Law to Reach IP Theft in China discusses what to do when your company’s Chinese joint venture makes off with your trade secrets in China. The post suggests it may be possible to bring an action in US court extending either federal or state trade secret law extraterritorially to reach the misconduct in China.
In response to Dave’s post, I suggest that there is another, complementary alternative to a US-based civil action: bring a complaint asserting trade secret theft and unfair competition to the U.S. International Trade Commission (“ITC”) under Section 337 of the Tariff Act.
The ITC, despite its name, is a U.S. federal agency that operates as U.S. district court with a twist – extraterritorial reach to address unfair acts that take place entirely oversees, and in rem jurisdiction over Chinese respondents based on the importation of goods into the United States. The ITC cannot award damages but it can close the borders to goods from Chinese entities that steal trade secrets, effectively a national injunction. Your aggrieved U.S. client at least won’t find itself competing with its own purloined knowhow in the U.S. market. ITC cases are fast (18 months or less, soup to nuts) and furious (offering remedies with teeth that not only exclude unfairly traded goods, but which can bind U.S. distributors and retailers with cease and desist orders).
The ITC came into its own as a forum for litigating trade secrets with the TianRui case in 2008. In that case, employees from a Chinese-U.S. railway equipment joint venture departed and started a new Chinese company, using the stolen trade secrets. Soon the U.S. partner was facing U.S. imports of Chinese railways using the stolen technology. The ITC found, and the Federal Circuit affirmed, that the Commission had authority under Section 337 of the Tariff Act to apply U.S. trade secret law to bad actors and unfair acts that took place entirely in China. The Federal Circuit expressly held that “section 337 applies to imported goods produced through the exploitation of trade secrets in which the act of misappropriation occurs abroad.” In reaching this decision, the Federal Circuit effectively treated the Uniform Trade Secrets Act as federal common law and found the Commission’s determination to comply with basic trade secret principles. ITC findings of fact and law in “unfair acts” cases are preclusive and bind the district court, giving Complainants the option of a rapid one-two punch of an ITC exclusion order sealing the U.S. border from infringing goods, and then the possibility of walking into the district court for damages without relitigating the merits of the case.
Of particular note is the ITC’s determination in TianRui that “[t]he presumption against extraterritoriality does not govern this case.” In other words, a trade secret complaint investigated by the ITC avoids entirely what my colleague described in his earlier post as one of the more significant legal hurdles to extending US trade secret law to reach extraterritorial conduct.