In this three-part series, we present a hypothetical case study on fictitious U.S. company “SFilm,” drawn from a range of actual litigation experiences, that lays out the varied elements of an international trade secret strategy, and identifies the most common pitfalls that arise.
“We’ve now concluded our patents in Asia are worthless.”
If your business leaders have pitched your board of directors on the justification for multimillion dollar projects on the assumption that “no one else has this,” only to discover afterward it isn’t true, you are not alone. U.S. corporations have made massive capital investments in research, technology and plants around the world on the assumption that their technology gives them a competitive advantage, only to learn later that competitors have neutralized that competitive advantage through theft of key technologies.
Then comes the fight. What starts as a simple flash drive gone AWOL, or a former employee making curiously effective sales calls, might appear to be a simple, discrete and containable problem. But more frequently, the problem turns out to be much bigger. Much more systematic theft has occurred, not only through the vehicle of defecting employees but also through computer system hacking, theft from equipment suppliers or joint venture partners and surreptitious surveillance of plant sites. And worse yet, the thief increasingly is a foreign company with little incentive to either play by the rules of U.S. litigation or to respect U.S. court judgments for damages and injunctive relief. Accordingly, handling trade secret theft as if it were any other typical lawsuit, in which one files, litigates and waits for a verdict, is not nearly sufficient to tackle the complex maze of concerns that arise in these international cases.
Case study: SFilm
SFilm has invested $750 million in developing a new method to make solar film that creates a multitude of new applications and vastly increases the potential market for solar products. Based on this breakthrough, SFilm built a new manufacturing plant. While the product has proven to be extremely profitable in the year since the factory opened, it will be years before SFilm recoups its R&D and plant manufacturing costs.
Trade secret misappropriation is a state law question, and as a result, such cases are often brought in state courts. However, because SFilm’s defendant is located in another country, instituting federal litigation is likely preferable, as federal courts have more resources and experience to handle international issues, such as the Hague Convention and multi-country enforcement. It also may be easier for SFilm to enforce the decisions and verdict from a U.S. district court depending on the applicable international treaties and principles of comity.
If SFilm is unable to establish jurisdiction in district court, or if there are serious concerns regarding enforcement, whether stemming from a default judgment or the defendant’s home country’s disinclination to respect the judgment of a U.S. court, an action at the U.S. International Trade Commission (ITC) may be preferable. Among the relevant and key differences that the ITC affords is the ability to bring an action against the offending goods that are imported into the U.S. As a result SFilm need not establish personal jurisdiction over the defendant.