2020 saw a marked uptick in unfair import investigations at the International Trade Commission (ITC), with an especially strong close to the year: eight new complaints in December alone brought the year’s total to 62 new complaints to the Commission, well above the ten-year average of 49. Complaints alleging trade secret misappropriation rose particularly, as the ITC becomes increasingly popular due to its speed, jurisdiction and unique remedies. While just five investigations solely of trade secrets were instituted in the five years of 2011-2015, fifteen such investigations were instituted in the next five years of 2016-2020, including five in 2020 alone.
We have previously written about recent determinations issued by the ITC that bolster the ITC’s jurisdiction and scope of trade secret protection. See our recent blog posts Final ITC Ruling in Botox Rival Case Creates More Head-Lines and ITC Decision Adds New Wrinkle to Ban of Botox Competitor in Trade Secret Misappropriation Case. This post identifies several factors to consider when deciding if the ITC may be a better forum that a U.S. federal district court for enforcing trade secrets.
The ITC is considerably faster than pursuing trade secret litigation in most U.S. federal district courts. Trade secret litigation in U.S. federal district court typically takes years to resolve. In contrast, ITC trade secret investigations are usually resolved within 18 months, even during COVID. If you are facing considerable financial or reputational damage as a result of a competitor’s sales of imported products resulting from trade secret misappropriation, a quick import injunction from the ITC may be your best option for preventing significant harm to your sales or your brand.
In contrast to federal district court, the ITC allows companies to seek exclusion orders based on extraterritorial trade secret misappropriation, without showing evidence of an act in the U.S. in furtherance of the misappropriation. The Defend Trade Secrets Act (DTSA), enacted in 2016, creates a civil cause of action in U.S. federal district court for trade secret misappropriation, including misappropriation that occurred outside the U.S., and provides for remedies that include monetary damages and injunctive relief. Unlike claims brought under the DTSA, however, which require acts in the U.S. in furtherance of the misappropriation, the ITC can issue an exclusion order where there is evidence that the importation of the offending products will harm a domestic industry. If there is little to no evidence of acts performed in the U.S. in furtherance of misappropriation, the ITC may therefore be a better choice for preventing a competitor from profiting from their foreign misappropriation.
Additionally, the standard for injunctive relief at the ITC, causing domestic injury, is considered to be easier to meet than that of the traditional four-factor test used in federal district court. Where the four-factor test may be difficult to meet, or time is simply of the essence, the ITC may be the preferred forum.
And in contrast to federal district court, the ITC is not required to have personal jurisdiction over the parties; instead it has in rem jurisdiction over the offending products themselves. If there are questions about whether a foreign entity will be subject to personal jurisdiction in the U.S., the ITC may be the better forum.
When might the ITC not be the best forum? The ITC may not be the best choice if a company or a licensee has significant foreign, but not domestic, operations because the ITC requires a showing that a U.S. domestic industry will be substantially injured by the misappropriating party’s acts. Additionally, monetary damages are not available at the ITC (although a parallel district court action is commonly brought for that reason). So where financial damages are the primary goal of a trade secret action, as opposed to quick injunctive relief, federal district court is often the better option.
The ITC’s recent opinion in the Matter of Botulinum Products (Inv. No. 337-TA-1145), aka the “Botox Brawl,” is the latest furthering trade secret enforcement at the ITC. While it remains to be seen whether the opinion will be upheld on appeal, companies seeking to enforce their trade secrets would be wise to consider the ITC as an alternative to federal district court, especially in circumstances where a speedy injunction against a foreign entity is the goal.