ITC Update: Commission Agrees to Block Botox Competitor Based on Foreign Theft of Foreign Company’s Foreign Trade Secret
The ITC issued a Final Determination last week in Botulinum Toxin Products (Inv. 1145) finding a violation of Section 337 and issuing an exclusion order barring imports of Juveau, a newly introduced competitor for Botox cosmetic injections.
The case involved an unprecedented arrangement where one of the two complainants was the victim of an unfair act and the other was a domestic industry injured by import competition. The victim was Korea-based Medytox—a foreign company with no U.S. operations whose foreign trade secrets were stolen by another foreign company overseas. And the domestic industry was Botox-maker Alergan.
In his Initial Determination, an administrative law judge at the ITC accepted the co-complainants’ arrangement, found that respondent Daewoong misappropriated Medytox’s trade secrets thus injuring Alergan’s Botox business, and recommended an exclusion order lasting 10 years.
Earlier this year, R Street submitted comments criticizing the ALJ’s determination and urging the Commission not to issue an exclusion order on public interest grounds. Here’s part of that submission:
Central to the ALJ’s findings on standing and domestic industry was the existence of a “license agreement” between Medytox and Allergan. . . .
According to publicly available information, the agreement in question grants Allergan the sole right to distribute Medytox’s products outside Korea and Japan, a right for which Allergan paid at least $300 million. However, the purpose of that agreement was not to help Medytox market its products in the United States but to enable Allergan to prevent those products from entering the U.S. market as competition for Botox. We know this because the agreement was negotiated after Medytox developed a product in Korea they planned to introduce in the United States and because Allergan’s Botox was already dominant in the U.S. market. Allergan’s only reasonable motivation for this agreement was to limit competition for Botox.
. . .
If the Commission accepts the ALJ’s determination that a market allocation agreement between Allergan and Medytox counts as a “license” sufficient to tie Allergan’s domestic industry to Medytox’s foreign grievance, then we urge the Commission to recognize the harm the recommended remedy will cause for competitive conditions in the United States and on American consumers.
Blocking imports of the accused product will cement Botox’s ill-gotten market dominance, will leave American consumers with less choice and higher prices, and will fail to further in any way the enforcement of U.S. intellectual property or to protect the legitimate interest of an aggrieved domestic industry.
On review, the Commission affirmed all of the ALJ’s conclusions except one (on whether a physical sample of the toxin strain is a protectable trade secret) and shortened the exclusion period significantly from 10 years to 21 months.
We won’t know the Commission’s full reasoning until a public version of the Commission Opinion is published, but the decision to affirm the initial determination on standing and domestic industry sets a troubling precedent. The agency appears to be setting itself up as a global trade secret cop willing to block imports that pose no harm to the U.S. economy or American innovation.