Should the ITC enforce foreign trade secrets?
Trade secret cases are on the rise at the ITC and many of the recent investigations involve allegations of misappropriation occurring entirely overseas. The trade agency’s power to adjudicate such cases was affirmed by the Federal Circuit in TianRui v. ITC (2011). The court also held in TianRui that a trade secret-based Section 337 violation can occur even if the domestic industry does not actually use the asserted trade secret.
In Botulinum Toxin Products (Inv. 1145), the ITC is currently adjudicating a trade secret complaint involving three companies that make botox injections. What has made this investigation peculiar from the start is that one of the co-complainants (Korea-based Medytox) is the alleged victim of trade secret misappropriation in Korea by Korean respondent Daewoong, while the other co-complainant (“Botox” brand maker Allergan) claims to be the domestic industry allegedly injured by the accused imports.
Daewoong recently filed a motion for summary determination that Allergan lacks standing to be a complainant in this investigation because it does not own the asserted trade secrets. Here’s the crux of their argument:
Complainants are . . . trying to connect one party’s claim of having been wronged (Medytox) to another party’s assertion of domestic industry/injury (Allergan), while conceding neither party’s ability to satisfy both legal requirements. This division of legal burdens among multiple, unrelated complainants is unprecedented in Section 337 investigations.
. . .
Medytox and Allergan have brought this case based upon a novel theory of standing before the Commission: that a party that lacks domestic industry (here, Medytox) can borrow another party’s domestic industry (here, Allergan) . . .. There is no support in ITC or other case law for stretching standing principles so far.
Daewoong also points out the potential policy problems:
That Allergan’s standing claim goes too far is evident from the implications for ITC practice if it were adopted. If Complainants’ logic were to prevail, any foreign entity lacking a domestic industry could avail itself of ITC jurisdiction by purchasing a generic license from an unrelated company that had a domestic presence—even where the license had (as here) no connection to the alleged trade secrets in question.
Normally, foreign misappropriation of a foreign trade secret would not injure a domestic industry, because third parties are not usually harmed in these situations. But Allergan and Medytox have a history of dividing up markets to limit competition—an arrangement that doesn’t work if Daewoong’s product is allowed to enter the U.S. market. If the ITC allows foreign trade secrets to be asserted based on a third party’s domestic industry, it’s possible we could see more cases designed primarily to protect anti-competitive arrangements.