U.S. Steel ITC Case Alleging Chinese Government Hacked Its Network and Stole Its Secret Formulas May Be Revived

First, a little background for those unfamiliar with the wonderful world of the International Trade Commission (ITC). 

Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337) prohibits “unfair methods of competition and unfair acts in the importation of articles … into the Unites States,” including the importation of articles that infringe various types of intellectual property.  Companies can file complaints in the ITC and administrative law judges oversee the investigations.  ITC investigations proceed at a much faster pace than the typical federal court case—a trial-like evidentiary hearing is usually held within 9-12 months.  The administrative law judge issues an initial determination, which may be reviewed by the Commission.  The decision can then be appealed to the Federal Circuit.  The ITC cannot award damages but can exclude articles from importation and issue cease and desist orders precluding the sale of domestic inventories.

While ITC investigations usually involve allegations of patent infringement, the ITC is a viable venue for trade secret misappropriation.  If successful, the complainant can obtain an order excluding importation of articles using the misappropriated trade secrets.

This brings us to data security.  As this blog has discussed previously, trade secret misappropriation claims are an important tool to combat data breaches that compromise a company’s closely guarded secrets.  And when you are hacked and your competitors gain access to your trade secrets, an ITC investigation could be a good option for preventing those competitors from importing goods using your stolen data.

This is precisely the route taken by U.S Steel last year.  According to its ITC complaint, U.S. Steel spent millions of dollars on R&D over more than a decade to develop its Advanced High-Strength Steel (AHSS).  But in 2011, hackers working for the Chinese government broke into U.S. Steel’s secure servers and stole its trade secrets, including the formula for AHSS.  The Chinese government then shared these trade secrets with Chinese steel companies, allowing them to make competing steel.  U.S. Steel requested that the ITC prohibit the import of such steel.

Unfortunately for U.S. Steel, its case immediately hit roadblocks.  U.S. Steel brought three claims against various Chinese steel manufacturers and distributors: (1) conspiracy to fix prices and control output and export volumes; (2) misappropriation of trade secrets; and (3) false designation of origin of manufacturer.  Soon after the ITC instituted the investigation, the administrative law judge suspended the case over jurisdictional concerns, but the Commission vacated the suspension, allowing the case to proceed.

The administrative law judge then dismissed both the antitrust claim and the false designation of origin claim.  This only left U.S. Steel’s trade secret claim, which the company withdrew without prejudice last month.  In a statement, the company warned: “Today, businesses are more connected and data-centric than ever before, so they are more vulnerable to cyber theft.  Whether the stolen data is proprietary trade secrets, business strategy or personal data related to customers, when a cyber attack by a state-sponsored actor is carried out upon our corporations, the unbearable burden for response is currently borne by the corporate victim. This threatens our nation’s economic health and our security.”

However, U.S. Steel’s case is not over yet.  The Commission agreed to review the administrative law judge’s dismissals, and at the end of last month reversed the dismissal of U.S. Steel’s false designation of origin claim.  The dismissal of U.S. Steel’s antitrust claim is still before the Commission, who recently scheduled oral argument for April 20.

Whatever the ultimate fate of U.S. Steel’s case, it serves as a reminder of the need to secure digital trade secrets and the option of seeking redress in the ITC when competitive products using stolen trade secrets are imported into the United States.


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