The United States International Trade Commission argued that the Federal Circuit should deny rehearing en banc in a case involving trade secret misappropriation occurring overseas last week.
At the ITC, SI Group, a Schenectady, NY company, accused Sino Legend, a Chinese firm, of misappropriating trade secrets related to SI’s process for making tackifier resins to be used in tires. The ITC ultimately found for SI and issued an exclusion order.
On appeal, the Federal Circuit summarily affirmed.
In February, Sino Legend petitioned for rehearing en banc arguing that the ITC did not have jurisdiction under 19 U.S.C. § 1337 (“Section 337”) over the trade secret misappropriation because it occurred in China and comity should apply because a Chinese court had found no misappropriation based on the same allegations.
On the jurisdictional issue, Sino Legend urged the Federal Circuit to revisit its seminal decision in 2011 in TianRui Grp. Co. v. Int’l Trade Comm’n, 661 F.3d 1322 (Fed. Cir. 2011). We previously reported on TianRui Grp., which held that the ITC has jurisdiction over extraterritorial trade secret misappropriation, here.
Sino Legend argued that TianRui Grp. was wrongly decided as confirmed by a Supreme Court case in 2013, Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 185 L. Ed. 2d 671 (2013), which held that the Alien Tort Statute did not permit Nigerian nationals living in the United States to sue foreign corporations. Sino Legend asserted that there the Supreme Court established the rule that a presumption against extraterritorial application of a statute applies unless the statute “evinces a clear indication of extraterritoriality” and that this presumption is only overcome if the claims at issue relate to “the territory of the United States . . . with sufficient force.” In an amicus brief, the Chinese government strongly urged the Federal Circuit to recognize Sino Legend’s comity defense.
In its opposition, the ITC noted that Sino Legend did not appeal the ITC’s finding of trade secret misappropriation on the merits. The ITC and SI Group also assured the Federal Circuit that TianRui Grp. was still good law. It distinguished the Kiobel holding primarily on the basis that the focus of Section 337 is concerned with unlawful importation across American borders and protecting domestic industry and therefore claims under it relate to the “the territory of the United States . . . with sufficient force” to overcome any presumption against extraterritorial application. The ITC also argued that the Federal Circuit should reject the comity defense because it was not timely presented and was not supported by factual evidence that the Chinese judicial system offered an adequate forum to decide trade secret cases.
The Federal Circuit will now have to decide if Kiobel merits the full court taking another look at the extraterritoriality issue or whether Chinese courts offer a real opportunity for an American company to enforce their trade secret rights against a Chinese concern. Many commentators have noted a high degree of skepticism regarding the latter proposition.
In any event, the case warrants close attention from domestic manufacturers threatened by overseas misappropriation.