About 5 years ago, the Federal Circuit held that the U.S. International Trade Commission (“ITC”) had the power to adjudicate trade-secret theft occurring wholly overseas. The case was TianRui Group Co. Ltd. v. ITC, 661 F.3d 1322 (Fed. Cir. 2011), and we blogged about it here. That decision is now under attack. Last week a Chinese company known as Sino Legend petitioned the U.S. Supreme Court for a writ of certiorari to review TianRui Group’s principle holding—namely, that Section 337 of the Tariff Act gives the ITC jurisdiction over trade-secret misappropriation, even if the predicate acts of misappropriation occur entirely outside the United States.
The background to this significant development sounds similar to many trade-secret stories. A New York company known as SI Group developed a process for producing a type of rubber component, a “tackifier,” commonly used in tires. To serve its overseas customers, the New York company set up a manufacturing operation in China; it created a Chinese subsidiary and hired Chinese nationals to manage the company. Eventually, two of the Chinese nationals left the subsidiary and began working for a competitor in China—Sino Legend. SI Group alleges that the Chinese nationals worked with Sino Legend to misappropriate SI Group’s trade secrets in the tackifier.
In 2008, SI Group began its quest to enforce its purported trade secrets in China. It initiated a series of proceedings before Chinese tribunals, but none were successful. Then, in May 2012, SI Group brought its efforts home to the United States and filed a Section 337 complaint with the ITC. Section 337 of the Tariff Act authorizes the ITC to bar entry into the United States any “articles” that are produced through “[u]nfair method of competition” and which threaten “to destroy or substantially injure an industry in the U.S.” 19 U.S.C. § 1337. The Federal Circuit has previously interpreted the ITC’s power over “unfair methods competition” to include trade-secret theft.
The issue presented by SI Group’s complaint—similar to the issue in TianRui Group—was whether the ITC’s Section 337 authority over trade secrets extends to trade-secret misappropriation that occurs wholly outside the United States and entirely overseas. Relying on TianRui Group, the ITC held that it had authority over Sino Legend’s alleged trade-secret theft and found that Sino Legend had engaged in misappropriation. In accordance with Section 337, it issued a general exclusion order, barring Sino Legend’s importation of infringing products into the United States for a period of ten years. The Federal Circuit, also relying on its TianRui Group decision, affirmed.
Sino Legend now challenges that affirmation by the Federal Circuit and with it the holding of TianRui Group. The question presented in Sino Legend’s certiorari petition says it all: “Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States.” Sino Legend contends that the ITC lacks this authority. To bolster its argument, the Chinese company references a long-established statutory presumption that federal statutes do not extend extraterritorially unless there is clear congressional intent to the contrary. Sino Legend asserts that nothing in Section 337 clearly indicates that the ITC has jurisdiction over trade-secret theft occurring wholly overseas. Not to mention, it contends that applying Section 337 to trade-secret theft outside the United States, absent clear congressional intent, disrupts international relations by allowing the ITC to supplant the local laws and institutions of foreign governments. In short, Sino Legend argues that TianRui Group is wrong as a matter of statutory interpretation, but it is also bad policy.
We will continue to watch this case closely. As we have blogged before, the aftermath of TianRui Group rendered the ITC an effective forum for U.S. companies litigating international trade-secret theft, particularly when the theft occurs in countries where trade-secret law is more relaxed or less developed. But should the Supreme Court grant certiorari over Sino Legend’s petition, that may all change.