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The Federal Circuit Court of Appeals ruled this week that the International Trade Commission (ITC) can halt imports that incorporate misappropriated trade secrets, even when the misappropriation occurs entirely in a foreign country.
Amsted Industries Inc. is a domestic manufacturer of cast steel railway wheels that owns two secret processes for manufacturing wheels. Amsted’s “ABC process” is the subject of this claim. Amsted previously practiced the ABC process at its foundry in Calera, Alabama, but it no longer uses that process in the United States. Amsted has licensed the ABC process to several firms with foundries in China.
TianRui Group Company Limited and TianRui Group Foundry Company Limited (TianRui) manufacture cast steel railway wheels in China. In 2005, TianRui sought to license Amsted's wheel manufacturing technology, but the parties could not agree on the terms of a license.
After the failed negotiations, TianRui hired nine employees away from one of Amsted's Chinese licensees, Datong ABC Castings Company Limited. The employees had been trained in Amsted's ABC process.
Datong had previously notified those employees through a written employee code of conduct that information pertaining to the ABC process was proprietary and confidential. Each employee had been advised that he had a duty not to disclose confidential information. Eight of the nine employees had also signed confidentiality agreements before leaving Datong to begin working for TianRui.
TianRui partnered with Standard Car Truck Company, Inc., (SCT) to form the joint venture Barber TianRui Railway Supply, LLC. SCT and Barber have marketed TianRui wheels to United States customers and have imported TianRui wheels into the United States. Other than Amsted, SCT and Barber are the only companies selling or attempting to sell cast steel railway wheels in the United States.
Amsted brought a claim in the ITC to stop the import of TianRui's wheels into the U.S., alleging that the former Datong employees disclosed information and documents to TianRui that revealed the details of the ABC process and thereby misappropriated trade secrets. Amsted further claimed that the Tariff Act prohibits unfair methods of competition and unfair acts in the importation of articles that threaten, destroy, or substantially injure an industry in the United States.
The ITC ruled for Amsted. This week, the Federal Circuit Court of Appeals affirmed that decision. The holding effectively expands the reach of ITC authority and allows downstream consequences for extraterritorially misappropriated trade secrets, according to Washington College of Law's Intellectual Property Brief.