ITC ALJ Issues Severe Sanctions Against Respondents and Their Counsel for Abhorrent Conduct

Managing Intellectual Property

Calling Respondents’ behavior “reprehensible,” “astonishing,” “shocking,” “inexplicable,” “callous,” and “contumacious,” an Administrative Law Judge (“ALJ”) of the U.S. International Trade Commission (“ITC”) recently imposed severe sanctions against Organik Kimya and its U.S. counsel. See Certain Opaque Polymers, U.S.I.T.C. Inv. No. 337-TA-883, Order No. 27 (Oct. 20, 2014) (Pender, ALJ). The ALJ found Organik Kinya in default with regard to Complainants’ trade secret misappropriation claims and ordered Organik Kinya and its counsel to pay Complainants almost two million U.S. dollars. The ALJ’s order is subject to review by the full Commission.

Complainants Rohm and Haas and Dow Chemical filed an amended complaint against Organik Kimya and its distributors alleging patent infringement and trade secret misappropriation. Dow alleged that it owned trade secrets consisting of the manufacturing instruction and recipes for an opaque polymers paint additive. Complainants alleged that Organik Kinya had hired several Rohm and Haas employees, including Dr. Guillermo Perez and Leonardo Strozzi, and consulted with Dr. Dilip Nene, a 27-year Rohm and Haas employee, and that those former Rohm and Haas employees revealed Rohm and Haas’s trade secrets, which Organik Kimya misappropriated. 

Parties to U.S. litigation – either in district court or before the ITC – must take steps to preserve documents and other potential evidence. Spoliation “is the destruction or material alteration of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011) (quotations omitted). Complainants alleged that Organik Kimya was responsible for the spoliation of evidence in the possession of Drs. Perez and Nene and Mr. Strozzi.

The ALJ agreed as to Dr. Perez and Mr. Strozzi. With respect to Dr. Perez, the ALJ found that Organik Kimya destroyed the files on his laptop by copying the Program File folder 108 times, back-dating the computer clock, running a program designed to determine whether previously deleted data was still recoverable, and then running a different program to wipe unallocated space. The ALJ further found that Organik Kimya “knowingly and deliberately presented” a “multitude of lies” to the ALJ to cover up these actions. With respect to Mr. Strozzi, the ALJ found that one day after he issued a Preservation Order, 2,742 files and folders were deleted from Mr. Strozzi’s laptop; subsequently, Mr. Strozzi “accidentally left” his laptop and a number of USB devices in a highway rest stop bathroom from which they disappeared. The ALJ also found no evidence that Organik Kimya disseminated any preservation memorandum to its employees to ensure that relevant evidence was not destroyed.

This order highlights the importance of preserving evidence that may be relevant to claims and defenses at issue in U.S. litigation. If a party to an ITC investigation spoliates evidence, the ALJ may issue any of a number of monetary and non-monetary sanctions, including drawing adverse inferences and rendering a default judgment. Accordingly, any entity sued in the ITC or in any other court in the United States should immediately take steps to preserve relevant documents under that entity’s control and to direct any relevant employees or consultants to take similar action to preserve relevant documents.

By Bas de Blank, Jordan L. Coyle and Zheng Liu
This article was originally published in Managing Intellectual Property in November 2014.