The ITC is currently reviewing an Initial Determination of violation in Lithium Ion Batteries (Inv. 1159), part of a trade secret dispute between LG and SK involving batteries used in electric vehicles.  The case highlights the peculiar role of Section 337 in a world of globalized supply chains and investment flows.

Both companies are giant Korean conglomerates manufacturing and selling products all over the world.  And both companies operate manufacturing facilities in the United States to provide batteries used by U.S. automakers.  LG’s Section 337 complaint accused SK of poaching engineers in Korea in order to develop a competing EV battery business using protected LG trade secrets.  Prior to trial, the administrative law judge found a violation of Section 337 after issuing a default determination against SK for hiding evidence.  That finding is under review by the Commission.

Foreign trade secret cases, which the Federal Circuit affirmed were actionable under Section 337 in TianRui v. ITC (2011),  pose some unique policy questions for ITC litigation.  For one thing, is it appropriate or desirable to impose the requirements of U.S. trade secret law on acts occurring outside U.S. jurisdiction?

In TianRui, the complainant was a U.S. company whose U.S.-developed trade secrets were misappropriated in China when employees of its licensed Chinese manufacturer were hired by a different, unlicensed Chinese manufacturer.  But the Lithium Ion Batteries case involves not only foreign acts, but also foreign companies and foreign trade secrets.  Does the United States have any real economic interest in preventing or remedying purely foreign trade secret misappropriation?

A large number of third parties have submitted public interest comments to the Commission describing the economic impact of both LG and SK’s investments in the United States.  Writing in favor of an exclusion order were two Congressmen from western Michigan and two Senators from Ohio extolling the contributions of LG in creating jobs, particularly in connection with the company’s collaboration with General Motors, who also submitted comments.

Arguing against an exclusion order were two Representatives from eastern Michigan, a Representative and a Senator from Tennessee, one Representative from western Ohio, and seven members of Georgia’s congressional delegation.  These comments extolled the economic contributions of SK in building a manufacturing plant in Georgia to supply batteries for Ford in Michigan and Volkswagen in Tennessee.  There were also comments from Ford, Volkswagen, and 16 U.S.-based manufacturers who supply other parts for Ford vehicles.

What the various public interest comments reveal is that an exclusion order would ultimately harm Georgia and Tennessee in favor of western Michigan and eastern Ohio while giving General Motors an advantage over Ford in the production of electric vehicles.  None of these downstream winners or losers have any connection to the Korean trade secret dispute.

Section 337’s domestic industry requirement ostensibly ensures that ITC exclusion orders help a U.S. industry, but the test does not consider whether an import ban might also harm an industry as well.  The law does, however, provide the Commission a way to take these kinds of concerns into account through application of the public interest factors.

In patent cases, the Commission has all but eliminated the public interest test by giving apparently infinite weight to the value of protecting intellectual property regardless of downstream consequences.  If the agency takes the same approach in purely foreign trade secret cases, it’s hard to see how the ITC will avoid becoming a global trade secret cop, supplanting foreign courts to impose a remedy that arbitrarily harms U.S. businesses and consumers.

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