With the ability to block unfair imports, the US International Trade Commission (ITC), an independent government agency, offers a powerful tool, particularly for enforcing intellectual property (IP). Under section 337 of the US Tariff Act of 1930, the ITC can prevent IP-infringing goods from coming into the country, and the number of companies that are making use of this procedure is growing: in 2021, the ITC took on 82 investigations, versus just 53 in 2020. Trade secret investigations have been one of the fastest growing segments.

GTR speaks to Josh Pond, co-leader of US law firm Crowell & Moring’s ITC 337 litigation practice in Washington, DC, who represents companies in proceeding before the ITC and has been observing this trend, to learn more.

GTR: What is driving this uptick in ITC trade secrets cases?

Pond: Trade secrets are increasingly important in this ever-more global environment. China has most recently been at the centre of US trade secret concerns, but we are seeing disputes from all over the world: one of last year’s biggest headlines was Korea’s LG Energy Solution’s ITC action against SK Innovation – also of Korea – which threatened to block SK’s electronic vehicle battery technology from the US before SK agreed to pay LG US$1.8bn to settle.

The ITC has traditionally been a forum for patent hearings, but it is now hearing more trade secrets cases, as companies seek to protect their intellectual property globally and thus grow in the global market. Indeed, LG’s ITC action against SK was for trade secret misappropriation. 

GTR: What are the benefits of the ITC as a forum to bring trade secrets claims?

Pond: A company should consider the ITC if there are US imports that it considers to be unfair competition. The ITC poses four unique threats, so if you are on the offensive, these are the threats you want to bring to bear, and if you’re on the defensive, these are what you should be concerned about.

The first is the speed. It’s 10 months from an ITC complaint to trial. Compare this to US district court, which is generally three years from complaint to trial. This speed gives complainants significant leverage.

The second threat is the spectre of a US government investigation. This is not just company A versus company B in a civil case. If a company files a complaint with the ITC, the ITC will issue a notice that the US federal government is investigating unfair imports by the accused importers. When one of those notices comes out, it is a big deal that impacts reputation and stock price.

The third factor is extraterritoriality, because the ITC gives the ability to this US agency to police actions abroad – a trade secret that was misappropriated in Korea or China, for example. This extraterritoriality plays out uniquely in discovery as well. ITC discovery proceeds quickly and broadly, with key differences from district court litigation. In the district court, a foreign defendant could hide behind territorial limits or the Hague Convention. Meanwhile, the ITC simply takes the stance that if you don’t produce discovery, they will issue a default order against you. So you either play ball, or you suffer an exclusion order.

The fourth and ultimate threat is that of losing the US market. There are no monetary damages in the ITC – although you can chase those in a co-pending US district court – but if the ITC finds against you, you are blocked from the entire US market, which is huge leverage for a complainant.

GTR: What do companies need to know about defending themselves in an ITC investigation?

Pond: I would offer two considerations for effective defence. The first is use the unique ITC rules to your defensive advantage. Because the ITC is so unique from the US district court or any other court around the world, there are a lot of distinctive procedural moves that you can make on defence. A good example: within eight days of the filing of an ITC complaint, you can make your first defensive statement. It’s an optional statement, you don’t have to do it, but there are a number of claims that you can make against the complaint within those eight days. Defendants need to get out in front of an ITC complaint quickly.

The second consideration is to consider pushing to end an ITC investigation as soon as possible. Obviously, if there is a showdown brewing, and you’re going to go to trial, you have to go to trial. But many companies that are named are seeking an early exit ramp as a defendant, and there are a number of those. You can move for summary determination, for example, or you can consent to stop importing the product that’s the subject of the dispute – however you must be very careful about consenting, because you would face significant penalties at the ITC if you were to breach that consent order. No matter what, though, don’t just not show up – suffering a default exclusion order is to be strictly avoided.