United States: Federal Circuit Upholds Trade Secret Exclusion Order In Section 337 Investigation

Last Updated: November 11 2011
Article by Gary M. Hnath

Originally published November 1, 2011

Keywords: federal circuit, trade secret, exclusion order, section 337 investigation

On October 11, 2011, the Federal Circuit Court of Appeals, in TianRui Group Company Limited v. U.S. International Trade Commission, issued an important decision addressing the scope of the International Trade Commission's ("ITC" or "Commission") jurisdiction in trade secret cases.

Specifically, the Federal Circuit held that the Commission "has authority to investigate and grant relief based in part on extraterritorial conduct insofar as it is necessary to protect domestic industries from injuries arising out of unfair competition in the domestic marketplace." The Federal Circuit also upheld the Commission's decision that the complainant could obtain relief under Section 337 based on injury to a domestic industry, even though no domestic manufacturer was currently practicing the protected process.

The ITC's investigation was instituted based on a complaint filed by Amsted Industries (Amsted), a domestic manufacturer of cast steel railway wheels. Amsted alleged that it owned two secret processes for manufacturing these wheels: the "ABC process" and the "Griffin process." Amsted had previously practiced the ABC process in the United States, but was no longer using that process. However, Amsted licensed the ABC process to several companies with foundries in China.

The respondents in the ITC investigation (TianRui) manufacture cast steel railway wheels in China. They tried to license Amsted's technology but were unable to agree to terms. After the negotiations failed, TianRui hired nine employees away from one of Amsted's licensees in China. Amsted alleged that these employees disclosed information and documents to TianRui that revealed details of the ABC process, and that, therefore, TianRui misappropriated Amsted's trade secrets.

Amsted filed a complaint with the ITC alleging that the misappropriation of its trade secrets constituted an "unfair method of competition and unfair act in the importation of articles ... into the United States ... the threat or effect of which is ... to destroy or substantially injure an industry into the United States." While most cases brought under Section 337 are based on alleged patent infringement, the reach of Section 337 is much broader and can include a variety of unfair acts, including trade secret misappropriation.

After a 10-day evidentiary hearing, the ITC's Administrative Law Judge found that TianRui had misappropriated 128 trade secrets relating to the ABC process and used those trade secrets in manufacturing cast steel railway wheels that were imported into the United States. The Commission affirmed the ALJ's decision, and TianRui appealed to the Federal Circuit.

On appeal, the Federal Circuit considered "whether section 337 applies to imported goods produced through the exploitation of trade secrets in which the act of misappropriation occurs abroad." The Federal Circuit acknowledged that there is a general presumption that legislation should not be applied to have extraterritorial effects. Here, however, the Court held that the "presumption against extraterritoriality" does not govern for three reasons. First, Section 337 is expressly directed at unfair methods of competition and unfair acts "in the importation of articles" into the United States. Thus, the Federal Circuit held that Congress did not have only "domestic concerns in mind" when it enacted the statute. Instead, "the focus of section 337 is on an inherently international transaction—importation."

Second, the Federal Circuit held that the Commission's Exclusion Order was not limited to regulating extraterritorial foreign conduct. Instead, the Order prohibited foreign unfair activity only to the extent that it results in the importation of goods into this country causing domestic injury.

Third, the Federal Circuit held that the legislative history of Section 337 supports the Commission's interpretation of the statute. By prohibiting "unfair methods of competition" instead of the traditional phrase "unfair competition," Congress intended for Section 337 to have a broad reach.

The Federal Circuit rejected TianRui's arguments that applying US trade secret law to conduct occurring in China would cause improper interference with Chinese law. Instead, the court held: (i) that by requiring importation of goods into the United States, the reach of the statute was not purely extraterritorial; (ii) that TianRui had failed to identify a conflict between principles of misappropriation that the Commission applied and Chinese trade secret law; and (iii) that in any event, the employees at issue had signed agreements not to disclose Amsted's trade secrets. To hold that the disclosure of information in breach of that duty was beyond the scope of Section 337 simply because the breach itself took place outside the United States would "invite evasion of section 337 and significantly undermine the effectiveness of the congressionally designed remedy."

The Federal Circuit also held that Amsted could obtain relief even though it was not itself using the trade secrets to make products in the United States. The court noted that in a trade secret case under Section 337 (unlike a case involving patents), relief is available based on unfair competition that threatens "to destroy or substantially injure an industry in the United States." Because Amsted was being injured, it met the statutory test.

In dissent, Judge Moore disagreed with the majority's holding that Section 337 could be used to exclude products from entering the United States where the trade secret misappropriation took place abroad. She found no "clear indication of congressional intent" to extend the reach of Section 337 to "wholly extraterritorial unfair acts," and, as there was nothing unfair about the importation of the wheels, as opposed to their manufacture abroad, she would have found no violation of the statute.

The Federal Circuit's decision in TianRui Group is significant because it establishes the proposition that Section 337 is available in cases where the unfair acts occur abroad as long as the resulting products are imported into the United States. One leading commentator has described the ITC's exclusion orders as a "powerful, and "formidable" remedy available to trade secret owners. Where the importation requirement can be satisfied, companies in the United States concerned about their trade secrets being misappropriated abroad should consider Section 337 as a possible remedy.

Learn more about our Intellectual Property and Global Trade practices.

Visit us at mayerbrown.com

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2011. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions