United States: Supreme Court May Consider ITC's Authority Over Trade Secret Matters

Last Updated: November 29 2016
Article by Trade Secrets Watch

Here at TSW, we continue to watch closely developments in the Sino Legend v. ITC case. In September, Sino Legend petitioned the Supreme Court for a writ of certiorari to review whether Section 337 of the Tariff Act of 1930 allows the ITC to adjudicate cases involving allegations of trade secret misappropriation occurring entirely in a foreign country. This week, we summarize the relevant law, background, and the legal basis of Sino Legend's petition.

Relevant Law

Section 337(a)(1)(A) prohibits "[u]nfair methods of competition and unfair acts in the importation of articles." If the ITC finds a violation of this section, it can order an exclusion of infringing articles from the United States. The Federal Circuit has construed this section to encompass claims of misappropriation of trade secrets.

Background Regarding the ITC's Investigation and Subsequent Appeal

SI sued Sino Legend for trade secret misappropriation in China, alleging that Sino Legend misappropriated trade secrets relating to the synthesizing of certain resins that are used to manufacture tires. The Chinese court ruled that Sino Legend had not misappropriated SI's trade secrets.

As reported by TSW here, SI then filed a complaint in the ITC. The Commission instituted an investigation in 2012. In response, Sino Legend argued that the complaint did not give rise to a Section 337(a)(1)(A) violation because that section does not apply to trade secret misappropriation that occurs entirely outside the United States. The presiding ALJ dismissed Sino Legend's arguments, noting that the Federal Circuit's TianRui decision stands for the proposition that the ITC can exclude imported products from the United States based on trade secret misappropriation that occurred outside of the United States. The ALJ accordingly found a violation of Section 337.

On review, the Commission did not address the ALJ's findings regarding the ITC's subject matter jurisdiction. Thus, Sino Legend appealed the ITC determination to the Federal Circuit, specifically arguing that the ALJ incorrectly relied on the TianRui decision in light of the more recent Supreme Court Kiobel decision. Sino Legend argued that Kiobel provides that a statute applies extraterritorially only if there is "clear indication of extraterritoriality" and that Section 337 include such a clear indication. As discussed here, the Federal Circuit affirmed the ITC's order with one word: "Affirmed."

Sino Legend's Petition

Sino Legend now brings one question to the Supreme Court: "Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States." In its petition, Sino Legend argues the following:

  1. The Federal Circuit got it wrong when it held in TianRui that "Section 337(a)(1)(A) permits the ITC to police the misappropriation of trade secrets even where that misappropriation occurs entirely abroad." Sino Legend argues that the majority applied the wrong legal standard when it held that a clear statement of congressional intent is not required when determining extraterritorial application. Sino Legend argues that "Congress must have 'affirmatively and unmistakably instructed' that a statute will apply to foreign conduct." Focusing on Judge Moore's dissent in TianRui, Sino Legend concludes that because nothing in the plain language of the statute indicates that Congress intended an extraterritorial application, the ITC did not have the authority to find a 337(a)(1)(A) violation.
  2. Where Congress has intended for laws to apply extraterritorially, it has said so expressly. Sino Legend gives as an example the Economic Espionage Act, which expressly indicates that it applies extraterritorially. That statute provides that "[t]his chapter also applies to conduct occurring outside the United States if" one of two conditions are met.
  3. Extraterritorial application of Section 337(a)(1)(A) gives ITC too much authority, or "extend[s] the trade secrets laws of the United States worldwide." Sino Legend argues that the "risk of international friction weighs strongly against extraterritorial application of Section 337(a)(1)(A)" because it allows the ITC to replace local laws and institutions worldwide. According to Sino Legend "[t]he Federal Circuit's expansion of the ITC's authority to prosecute the misappropriation of trade secrets is virtually unbounded."
  4. Extraterritorial application of Section 337(a)(1)(A) is a slippery slope in that there "is no reason why a similar theory could not be advanced based on any number of unfair" practices and "[s]uch an extraordinary expansion of U.S. law plainly impedes upon the sovereignty of other nations."

What's Next?

Now, we wait to see if the Supreme Court will grant certiorari over Sino Legend's petition. Based on Sino Legend's arguments outlined above, one important issue that the Supreme Court may choose to consider is one of comity. Right now, comity is discretionary and the ITC is not obligated to agree with foreign judgments. Because there is a Chinese Court decision ruling that Sino Legend did not misappropriate SI's trade secrets (later affirmed on appeal) that is drastically different from the ITC's finding of misappropriation, the Supreme Court may choose to scrutinize the issue of comity more closely than the Federal Circuit did in TianRui. In TianRiu, the Federal Circuit made clear that it did not detect any "conflict between the Commission's actions and Chinese law that would counsel denying relief based on extraterritorial acts of trade secret misappropriation relating to the importation of goods affecting a domestic industry." Here, the Supreme Court may analyze factors that courts should examine when deciding whether to defer to a foreign judgment. In doing so, it may create a framework under which the ITC must consider comity.

Furthermore, since the TianRui decision, the ITC has been a proper forum to investigate claims of extraterritorial misappropriation of trade secrets when the products resulting from that misappropriation are imported into the United States. The ITC forum has been especially great for companies that wished to combat trade secret theft occurring outside of the United States. Among other things, the ITC is fast (about half the time compared to federal court) and can exercise jurisdiction over foreign companies. This is beneficial for American companies that would otherwise have a difficult time initiating a case abroad due to complicated and unknown foreign laws and complicated Hague Convention requirements. In short, the TianRui decision provided an effective and less complicated means for enforcing trade secrets abroad.

If the Supreme Court takes up this case and overturns TianRui, it will again bring forth complicated issues for American companies dealing with the misappropriation of trade secrets abroad.

Twitter: @TS_Watch

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.