4 minute read | November.03.2016
The Federal Circuit recently issued another Rule 36 affirmance of an International Trade Commission order barring the importation of products made using misappropriated trade secrets. (See our previous post about another Rule 36 affirmance of an ITC trade secrets order here.) This time, the Commission barred for ten years the importation into the U.S. of crawler cranes that relied on the trade secrets at issue.
Background Regarding the ITC’s Investigation
In June 2013, Manitowoc Cranes LLC filed a complaint under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337) against Sany Heavy Industry Co., Ltd. and Sany America Inc. Certain Crawler Cranes and Components Thereof, Inv. No. 337-TA-887, 78 Fed. Reg. 42800 (July 11, 2013). The complaint alleged violations of Section 337 based on the importation into the U.S. of crawler cranes that incorporated misappropriated trade secrets and that infringed two patents. At trial, the ALJ adjudicated six of these trade secrets, which related to Manitowoc’s variable-position counterweight technology, combinations of that technology, and related marketing strategies.
The crux of Manitowoc’s allegations was that Sany hired former Manitowoc employees with knowledge of Manitowoc’s trade secrets, and that those employees helped Sany’s research and development team in China create a rival crawler crane. Sany marketed and sold this crane in the U.S., where it edged Manitowoc out of its market share.
The ALJ Found That Sany Misappropriated Some of Manitowoc’s Trade Secrets
Sany argued that Manitowoc’s trade secret claims could not give rise to a Section 337 violation for two reasons: first, because Manitowoc’s alleged trade secrets were general engineering ideas that lacked economic value, and therefore could not qualify for trade secret protection; and second, because even if Manitowoc’s ideas qualified as trade secrets, Sany did not misappropriate them while developing and marketing its crane.
On July 11, 2014, the presiding ALJ issued his Final Initial Determination, finding violations of Section 337 with respect to four of Manitowoc’s trade secrets. The ALJ rejected Sany’s first argument, as there was market need for Manitowoc’s crane features and marketing strategies, and Manitowoc had undertaken the steps necessary to safeguard the information as a trade secret. The ALJ also rejected Sany’s second argument, because knowledge of Manitowoc’s trade secrets played a prominent role in Sany’s recruiting former Manitowoc employees, and before Sany hired these employees, Sany’s cranes had been unsellable in the U.S. The ALJ found that by misappropriating Manitowoc’s trade secrets, Sany avoided a “developmental dead end” and forced Manitowoc to compete against its own technology.
However, the ALJ found no violation with respect to Manitowoc’s two remaining trade secrets, as Manitowoc had described the first trade secret in broad terms that rendered it unclear, and the second trade secret simply combined features from the first.
The Commission Found That Sany Misappropriated All Six of the Adjudicated Trade Secrets and Imposed a 10-Year Ban
On review, the Commission affirmed the ALJ’s Initial Determination in part and reversed it in part, finding that all six of Manitowoc’s trade secrets were protectable and had been misappropriated, rather than only the four trade secrets for which the ALJ had found violations. In its reversal, the Commission offered its own grounds for protecting the two additional trade secrets; it did not address the ALJ’s finding that these trade secrets were too broad to be protectable. The Commission issued a ten-year limited exclusion order prohibiting the importation of cranes and components that relied upon the trade secrets at issue.
The Federal Circuit Summarily Affirmed the ITC’s Order
On appeal to the Federal Circuit, Sany argued that the ITC’s findings on the merits and with respect to the 10-year exclusion order were unsupported by the evidence. Sany emphasized that the ITC had ignored Manitowoc’s disclosure of the trade secrets through various channels, including a patent application and communications between Manitowoc employees and outside entities. The Federal Circuit’s Rule 36 affirmance of the ITC’s exclusion order implicitly rejected these arguments. See Sany Heavy Indus. Co., Ltd. v. Int’l Trade Comm’n, No. 2015-1780 (Fed. Cir. Oct. 11, 2016).
Effect of the Federal Circuit’s Affirmance
The Commission’s order, as affirmed by the Federal Circuit, once again confirms the power of the ITC as a forum to redress the misappropriation of trade secrets. In particular, the Commission’s issuance of a ten-year exclusion order distinguishes the ITC from other courts that hear trade secret misappropriation claims. Whereas it may have been difficult for Manitowoc to obtain a ten-year injunction from another court, exclusion is the primary remedy available in the ITC. The ITC usually determines the length of an exclusion order arising from a finding of trade secret misappropriation based on the period of time required to develop the misappropriated trade secret. Although money damages are not an available remedy from the ITC, long-term exclusion of competitive products from the U.S. market can often be a better result.