ITC Ban for China Trade Secret Theft Risky, Petition Says

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By Tony Dutra

Oct. 5 — The U.S. risks retaliation if the International Trade Commission bans imports because trade secrets have been misappropriated overseas, a petition for U.S. Supreme Court review from Asia’s largest rubber and tire resin manufacturer said ( Sino Legend (Zhangjiagang) Chem. Co. v. Int'l Trade Comm'n, U.S., No. 16-428, review sought, 9/30/16 ).

Sino Legend (Zhangjiagang) Chemical Co., arguing that the U.S. shouldn’t “run roughshod” over other countries’ trade secret laws, is actually challenging the controversial TianRui Group Co. v. ITC decision in 2011 by the U.S. Court of Appeals for the Federal Circuit, which was never appealed to the high court. In both cases, the ITC found illegal misappropriation wholly within China and then issued an exclusion order preventing imports from the perpetrator. In Sino Legend, Chinese courts have found no misappropriation under Chinese law.

The ITC and the appeals court are inviting “significant and unnecessary friction with the laws and institutions of other countries,” according to the petition.

In fact, the Trade Remedy and Investigation Bureau of the Ministry of Commerce of the People's Republic of China filed a friend-of-the court brief in the appeal. It expressed “disappointment and displeasure” with the “astonishing” ruling “that the decisions of Chinese courts on the identical issue between the same parties are totally irrelevant and, therefore, can simply be ignored by the ITC.”

Source Material:

Cases below:No. 337-TA-849, part 1 and part 2 (ITC Feb. 26, 2014) 623 Fed. Appx. 1016 (Fed. Cir.)

ITC Ignores China Court Ruling

The case arose after two China-based employees of SI Group Inc. left to join Sino Legend. SI Group alleged that the pair misappropriated trade secrets on synthetic rubbers containing “tackifiers” that increase the strength of the adhesive bonds between layers. The case was litigated up to China’s Supreme Court in Sino Legend's favor.

But the commission, saying it was bound by Federal Circuit precedent in TianRui, determined that it could bar Sino Legend's shipments into the U.S. if Sino Legend was liable for trade secret misappropriation under U.S. law. The ITC made that finding in February 2014 in Certain Rubber Resins and Processes for Mfg. Same, Inv. No. 337-TA-849, and issued a general exclusion order for a period of 10 years.

The Federal Circuit affirmed without opinion in December 2015 and denied Sino Legend's petition for en banc rehearing May 3.

Comparison to Patent Law

The petition focused on interpretation of Section 337(a)(1)(A) of the Tariff Act of 1980, 19 U.S.C. §1337(a)(1)(A), which begins with a reference to “[u]nfair methods of competition and unfair acts in the importation of articles” into the U.S. In TianRui, the Federal Circuit majority relied on “importation” to infer that Congress meant the ITC to consider “acts” beyond U.S. borders. TianRui Grp. Co. v. Int'l Trade Comm'n, 661 F.3d 1322, 100 U.S.P.Q.2d 1401 (Fed. Cir. 2011) (198 PTD10/13/11).

Sino Legend now relied on Judge Kimberly A. Moore's dissent in TianRui, which in summary said that no law Congress passes has extraterritorial effect unless it explicitly expresses that intent.

For example, by contrast, the petition said, the same statute has a provision in patent cases involving process patents, in 19 U.S.C. §1337(a)(1)(B). Congress in that case was explicit that companies couldn't set up overseas manufacturing plants to infringe a U.S. patent on making a product and then import the product with impunity, Sino Legend argued.

The petition cited eight other cases since TianRui where the ITC is considering a similar fact pattern.

It further contended that the concern goes well beyond trade secret law because the statutory provision in question applies to unfair business practices in general. The ITC could extend the TianRui ruling to cover cases ranging from false advertising to environmental or labor law principles, Sino Legend said.

Andrew J. Pincus of Mayer Brown LLP, Washington, filed the petition. The government's response is due Nov. 2.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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