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December 07, 2015
Brattle Economists Co-Author Article on Determining Injury from Trade Secret Misappropriation before the ITC

Brattle economists Pallavi Seth and Kevin Neels have recently written an article with Mark Whitaker of Baker Botts that was published in Law360. The article examines the types of evidence required to show injury to a domestic industry from trade secret misappropriation before the U.S. International Trade Commission (ITC).

An alternative to traditional enforcement actions in State or Federal court for misappropriation of trade secrets can be found through investigations before the ITC pursuant to Section 377 of the Tariff Act of 1934. In such cases, under Section 337, the complainant must demonstrate that the alleged unfair act causes an actual injury or a threat of injury to a domestic industry.

In the article, the authors illustrate the types of evidence required to establish injury to a domestic industry in such cases. They outline several types of injury that can be used as a focus for discovery by counsel and economic experts preparing to demonstrate injury to domestic industries:

  • lost sales to respondent
  • respondent’s import volume
  • underselling
  • price erosion
  • reduced profits
  • declining domestic production
  • foreign cost advantages and production capacity
  • marketing campaigns targeting the owner’s customers
  • respondent’s demonstrated intentions to penetrate the U.S. market

The authors also explain that the evidence required to show injury will depend upon the nature of the trade secrets at issue. Although many different types of information could potentially meet these requirements, the authors focus on the distinction between technical trade secrets (scientific results, technologies, production processes, formulas, or “know how”) and business trade secrets (a range of commercially-sensitive business intelligence). Drawing upon their recent experience in Certain Crawler Cranes and Components Thereof (Inv. No. 337-TA-887), the authors demonstrate the appropriate use of evidence in trade secret misappropriation cases.

Drs. Seth and Neels assisted Mr. Whitaker (counsel for complainant Manitowoc) in evaluating Manitowoc’s domestic investments related to the asserted patents and the extent to which misappropriation of trade secrets by the respondent had led to or were likely to lead to loss of sales, revenue and market position, damage to reputation, and price erosion within the domestic industry for crawler cranes. The administrative law judge (ALJ) granted a motion for summary determination, finding that Manitowoc had satisfied the economic prong of the domestic industry requirement and had shown that actions by the respondent had injured or threatened to injure the domestic crawler crane industry. In its opinion, the Commission affirmed related parts of the ALJ’s ID and issued a cease and desist order against respondent Sany America with respect to the asserted trade secrets for 10 years.

The article, “Determining Injury from Trade Secret Misappropriation at the ITC,” is available for download using the link below.