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IP: Battling against foreign trade secret theft

Companies should consider three options for enforcement

Imagine your American company decides to compete globally (which is more and more of a reality for many businesses today). For any number of reasons, your company opens manufacturing facilities or sales offices in certain foreign countries. Alternatively, your company licenses your valuable technology to a foreign entity. To compete effectively in these foreign markets, your company’s priceless intellectual property, including trade secrets, follows your business there.

It’s no surprise your business in the foreign country has great success. But then, as is far too often the case, another foreign entity poaches your foreign employees or business associates with money enticements. They illegally take your company’s invaluable trade secrets with them. Suddenly, your company is competing against its own intellectual property, including the threat of competing in the U.S. What do you do now?

In the end, the Federal Circuit affirmed the ITC’s 10-year exclusion order preventing Tianrui from selling its wheels in the U.S. In a case of first impression, the court held that the ITC could apply U.S. domestic trade secret law to misappropriation that solely occurs in a foreign country. The court dismissed Tianrui’s arguments that the rulings are applying U.S. law to extraterritorial conduct and interfering with Chinese trade secret law. The overriding public policy of preventing unfair trade practices carried the day. Also, although the U.S. domestic industry injured was not using the trade secrets at issue, the Tianrui conduct injured a related domestic industry that was selling cast-steel railway wheels. Again, this was an issue of first impression that was found sufficient to invoke the protections of Section 337 of the Tariff Act. 

Most state trade secret statutes define “misappropriation” as an “acquisition, disclosure or use” of a trade secret of another person by improper means. “Use” is a broad concept under trade secret law. This is particularly important when the stolen trade secrets themselves cannot be determined by inspecting the product. For example, in Cognis v. Chemcentral Corp., the Northern District of Illinois explained that “marketing goods that embody the trade secret, employing the trade secret in manufacturing or production, relying on the trade secret to assist or accelerate research or development, or soliciting customers through the use of information that is a trade secret ... all constitute ‘use’.” Thus, selling products in the U.S. that were manufactured in a foreign country through the stolen trade secrets may constitute an actionable “use” misappropriation.

Contributing Author

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Greg Vogler

Greg Vogler is one of the co-founders of McAndrews, Held & Malloy. He focuses on patent, trade secret and trademark litigation, as well as...

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