Trade secret litigation is experiencing a boom in the U.S., driven by several key factors. These include the increasing mobility of the global workforce, the ease with which electronic data can be captured and transferred, the involvement of nation-state actors in information theft, and the time-limited benefits and uncertainties of patent litigation. Additionally, the rise in trade secret litigation has been fueled by the federalization of trade secret laws through the Defend Trade Secrets Act (DTSA), the extraterritorial reach of these laws to actions outside the U.S., and the availability of strong legal remedies for trade secret misappropriation in the U.S. For companies seeking recourse for trade secret theft, the U.S. offers significant advantages as a legal venue—particularly with its extraterritorial application of laws and a wide range of monetary remedies available in U.S. District Courts, as well as the powerful exclusion of goods at the border through U.S. International Trade Commission (ITC) Section 337 proceedings. For international companies conducting business in or entering the U.S. market, understanding the risk of lawsuits is now more important than ever.
Trade Secret Litigation in U.S. District Courts
Under the DTSA, U.S. District Courts can award damages for misappropriated trade secrets, provided that at least one act related to the misappropriation occurred within the U.S. These damages can include lost profits, disgorgement of profits, head-start damages, exemplary damages, and attorney’s fees. This means that even if the misappropriation occurred mostly outside the U.S., plaintiffs can still recover damages for lost profits, disgorged profits, and cost savings on a global scale. A previous blog post discusses a Seventh Circuit appellate ruling that recognizes the range of available monetary remedies for acts of trade secret misappropriation, even if they happen outside the U.S.
Trade Secret Litigation at the ITC
Aside from U.S. District Courts, the ITC offers a robust remedy for trade secret protection. The ITC has the authority to exclude imports that result from misappropriated trade secrets. Regardless of where the trade secrets were stolen, the ITC can issue exclusion orders that block the offending products from entering the U.S. market. For instance, in 2021, the ITC issued a 10-year exclusion order on SK Innovation’s electric vehicle batteries after LG Chem successfully argued that SK Innovation had misappropriated trade secrets, including by hiring former LG Chem employees who then shared confidential information with their new employer. SK Innovation ultimately settled with LG Chem for $1.8 billion to avoid the exclusion order.
While the ITC has worldwide jurisdiction over defendants who import goods into the U.S., complainants must prove the existence of a U.S. domestic industry related to the goods they seek to protect. Additionally, in trade secret cases, the complainant must present a specific theory demonstrating that the misappropriation has threatened or will substantially harm a U.S. industry.
Choosing a Forum
Several factors influence the decision of whether to pursue a trade secret claim in district court or at the ITC, including:
– Nature of the Remedy Sought:U.S. District Courts offer monetary remedies, while the ITC provides exclusion orders.
– Speed to Resolution: ITC cases typically take 19–20 months from complaint filing to final determination, with “file to trial” often taking less than 12 months. In contrast, district court litigation can exceed 2 years to reach a trial and disposition, impacting both time and cost.
– Jurisdiction: As mentioned, the ITC has worldwide jurisdiction, while U.S. District Courts require defendants to be subject to personal jurisdiction.
– Discovery: Discovery in U.S. District Court is extensive, while ITC discovery tends to be more streamlined, with responses due within 10 days of service compared to 30 days in U.S. District Court.
– Adjudicator Expertise: ITC administrative law judges handle intellectual property cases daily, while U.S. District Court judges have varying levels of experience with trade secret law.
– Preclusive Effects: Unlike patent disputes, where an ITC ruling is typically not preclusive in district court, a final ITC determination on trade secret misappropriation generally must be recognized by U.S. District Courts, meaning defendants cannot re-litigate the same claims.
Takeaways
Choosing the right forum for trade secret misappropriation claims is a complex decision. A well-considered strategy is crucial for protecting trade secrets. However, defending against a claim in either forum can be challenging, but our DC IP lawyers are here to assist.