Judge Dee Lord dismissed U.S. Steel's antitrust claims on the pleadings because U.S. Steel did not plead facts showing that it had antitrust standing. U.S. Steel would be required to plead antitrust standing in district court, and Judge Lord ruled that it is required to do so in a Section 337 proceeding as well.
The case was originally filed by U.S. Steel naming numerous Chinese steel manufacturers and distributors as the Respondents. In its complaint, U.S. Steel pleads antitrust violations, alleging that the Chinese manufacturers sell their products at less than fair market value to flood the U.S. market and destroy competition. U.S. Steel also alleges trade secret misappropriation and false designation of origin. We previously posted on the institution of this investigation and various procedural developments here and here.
Section 337(a)(1)(a)(iii) requires that U.S. Steel establish an unfair trade practice by Respondents, and that the practice must have the threat or effect to restrain or monopolize trade and commerce in the United States. Judge Lord concluded that U.S. Steel must show antitrust injury to have standing to bring such an allegation—injury that must stem from an anti-competitive aspect of the practice under scrutiny. The judge explained that to sustain the antitrust based claims in its complaint, U.S. Steel must allege that the Respondents engaged in predatory pricing: (i) Respondents priced goods below cost to drive competitors out of the market, and (ii) there exists a dangerous probability that Respondents will then raise prices to recoup the losses from the initial below cost pricing. Instead of arguing predatory pricing, however, U.S. Steel argued that Respondents' pricing was "less than fair value" and contended that it need not allege predatory pricing in a Section 337 proceeding. Judge Lord disagreed, relying on Tianrui Group Co. Ltd. v. ITC, 661 F.3d 1322, 1327-28 (Fed. Cir. 2011) and Young Engineers, Inc. v. ITC, 721 F.2d 1305, 1315 (Fed. Cir. 1983) to apply federal antitrust standing requirements to a Section 337 context. The dismissal is now subject to review by the Commission.
Judge Lord also held that the Commission's decision to institute an investigation of the antitrust claims did not constitute a determination that those claims were legally sufficient. Contrary to the arguments of U.S. Steel and the Office of Unfair Import Investigations, Judge Lord determined that dismissal for failure to state a claim does not require fact discovery or an intervening event.
The investigation of the remaining claims is scheduled to proceed with a hearing on the trade secret misappropriation claims scheduled for April 25 to April 28, 2017 and a hearing on the false designation of origin scheduled for July 31 to August 4, 2017.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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