04
Dec
By Robert Nissen
Further to our October 19 post, on November 20, 2009, ALJ Carl C. Charneski issued the public version of the Initial Determination (“ID”) (dated October 16, 2009) in Certain Cast Steel Railway Wheels, Certain Processes For Manufacturing Or Relating To Same And Certain Products Containing Same (Inv. No. 337-TA-655).

By way of background, the Complainant in this investigation is Amsted Industries Inc. (“Amsted”).  The Respondents are Tianrui Group Co. Ltd, Tianrui Group Foundry Co. Ltd, Standard Car Truck Company, Inc., and Barber Tianrui Railway Supply (collectively, “Tianrui”).  On October 16, 2009, ALJ Charneski issued the ID in this investigation finding that a violation of Section 337 “ha[d] occurred in the importation into the U.S., the sale for importation, and the sale within the U.S. after importation of certain cast steel railway wheels or products containing the same by reason of trade secret misappropriation.”

There were 128 trade secrets at issue in this investigation.  Amsted had grouped those trade secrets into 12 categories.

Before addressing the specific trade secrets, ALJ Charneski addressed Tianrui’s arguments that went to all the trade secrets.  Tianrui asserted that 1) Amsted lacked standing because it did not own the trade secrets; and 2) the trade secrets were not trade secrets because they were generally known.

Regarding the ownership of the trade secrets, ALJ Charneski accepted the Commission Investigative Staff’s suggestion that Tianrui had waived that argument because it was not included in its prehearing statement.  In any event, ALJ Charneski found Amsted had “established its ownership of the asserted trade secrets.”

ALJ Charneski also disagreed with Tianrui and found that the alleged trade secrets were, in fact, trade secrets under Illinois law because 1) they were not generally known; 2) Amsted took efforts to maintain the secrecy of the trade secrets; and 3) they were valuable.  With respect to the first issue, ALJ Charneski credited the testimony of Amsted’s expert but found that no weight should be given to the testimony of two experts put forward by Tianrui because one expert (Dr. Skinner) only looked at “individual trade secrets in isolation,” and the other (Dr. Packer) “offer[ed] no opinion as to whether there is any relationship among the trade secrets.”

ALJ Charneski found that Amsted and its predecessors had taken steps to maintain the secrecy of their trade secrets.  He credited testimony that “the then-principle developer of the process [was told] to ke[ep it] confidential . . . [and] that for that reason only limited patent protection would be sought.”  He also found that only limited necessary disclosures to third-party vendors were made and that the facilities where the process was used were kept secure.  In addition, licensees of the process also kept information about the process secure.

Finally, ALJ Charneski found that the trade secrets “have demonstrated value in both a qualitative and quantitative sense.”

After finding that Amsted did own the information at issue, and that the information was, in fact, trade secrets, ALJ Charneski next discussed in general terms Tianrui’s misappropriation of those trade secrets. First, Tianrui conceded that it used the process described in the trade secrets.  But Tianrui put forth no evidence that it had independently developed that process.  In addition, Tianrui had hired nine people who had access to Amsted’s trade secrets, “often with significant pay increases.”  In addition, another person who had access to Amsted’s trade secrets worked for Tianrui under an assumed name.  Moreover, numerous documents describing the Amsted process “were found on the computers of Tianrui employees.”  Finally, ALJ Charneski found that Tianrui had attempted to conceal its misappropriation by sending a document that contained an Amsted trade secret to a third party and then having the third party send the document back to Tianrui, so that Tianrui could claim it received the information from a third party and not by misappropriating one of Amsted’s trade secrets  (ALJ Charneski denied the Staff’s motion to sanction Tianrui for its attempt to fabricate evidence because he gave the document no weight and based on his “ultimate holding of trade secret misappropriation . . . the issue is moot”).

ALJ Charneski then went through each of the twelve categories for the 128 trade secrets at issue and found that all the trade secrets in categories one through four had been misappropriated.  For the remaining categories, he found that in each category, at least some of the trade secrets in those categories had been misappropriated, but he did not address every trade secret in those categories.  Due to the heavy redaction of this part of the ID, it is difficult to determine the basis for ALJ Charneski’s finding that a particular trade secret was misappropriated, although for certain of the trade secrets it is discernable that they were misappropriated because the Tianrui documents and Amsted documents (which includes documents belonging to Amsted affiliates) are identical, with the Tianrui documents in some instances reproducing exact errors from the Amsted documents.

Tianrui asserted that there was no domestic industry because Amsted’s domestic manufacturing process “does not use the alleged trade secrets asserted in this investigation.”  ALJ Charneski did not agree with Tianrui because this action was not based on rights based on patent, trademark or copyright law.  Under those laws, to prove domestic industry, the complainant must show that it uses the asserted patent, trademark or copyrighted material.  But there is no such requirement to show actual use under the unfair competition statute, 19 U.S.C. § 1337(a)(1)(A).  It is sufficient for the complainant to merely “prove that there is a domestic industry subject to injury” due to the respondent’s unfair competition.  ALJ Charneski held that Amsted had met its burden of proving such an injury.
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