Using §337 of the 1930 Tariff Act to Prevent the Import of Products Made with Stolen IP
American companies are getting some assistance from the ITC in preventing foreign companies that disregard U.S. intellectual property rights from importing the offending goods to the United States. US manufacturers have long made use of protections offered through Section 337 of the 1930 Tariff Act. Put into place during the dire times of the Great Depression, §337 has survived, while punitive tariff rates and many other protectionist provisions have gone the way of the dodo. Even though the United States evolved from a home-turf economy to a leader in global trade, §337 has remained in place, quietly protecting American business.
Normally used to uphold US patents and trademarks, §337 prevents a foreign producer from selling into the US in a way that infringes US registered patents or trademarks. Valid US patents and trademarks create a US monopoly for their owners. As a result, a foreign manufacturer cannot export to the US a product that infringes a competitor’s patent or trademark rights. The patent or trademark owner may be able to use §337 to block the offending products at ports of entry.Recently, US companies have had some luck expanding the protections of §337, which is not specifically restricted to registered patents and trademarks. The U.S. Court of Appeals for the Federal Circuit recently ruled that §337 had a broader reach than previously thought. In a 2-1 decision, the Court affirmed a decision of the US International Trade Commission (ITC) that it could prevent Chinese imports that infringed, “trade secrets” of a US company. See TianRui Group Company Ltd. v. International Trade Commission, No. 2010-1395 (Fed. Cir. Ct. App. Oct. 11, 2011).Unlike a patent, a trade secret is not evidenced by an official piece of paper. It is secret information that derives its value from the fact that others don’t know the information and the owner of the trade secret is given a “leg up” over the competition by owning it. There is no way to obtain a registered monopoly over a trade secret (other than patenting the technology, in which case it is no longer secret). In the TianRui case, the trade secret was a process for making wheels owned by Amsted Industries Inc. Amsted licensed the process to certain Chinese firms. TianRui and Amsted discussed but did not agree on a license for use of the technology. TianRui used the process on the wheels anyway without a license and shipped them to a US buyer.
Section 337 prohibits “unfair methods of competition, and unfair acts in their importation of article . . . into the United States.” 19 U.S.C. §337(a)(1)(A). Here, the unfair acts occurred in China, not in the United States. The imported wheels did not infringe a US patent or trademark, and there was no evidence that the wheels were marketed in an unfair manner. Nonetheless, the Federal Circuit upheld the ITC’s right to ban the wheels from coming into the States. Unless overturned by the Supreme Court, the decision puts a powerful arrow in the quiver of US manufacturers that can show that their trade secrets have been used abroad to create a product imported to the USA.
This entry was posted in Unfair Trade Practices
. Bookmark the permalink