By Eric Schweibenz
On May 21, 2012, SI Group, Inc. of Schenectady, New York (“SI Group”) filed a complaint requesting that the ITC commence an investigation pursuant to Section 337.

The complaint alleges that the following entities unlawfully import into the U.S., sell for importation, and/or sell within the U.S. after importation certain rubber resins made using misappropriated SI Group trade secrets:

  • Sino Legend (Zhangjiagang) Chemical Co., Ltd. of China

  • Sino Legend Holding Group, Inc. of the British Virgin Islands

  • Sino Legend Holding Group Ltd. of Hong Kong

  • HongKong Sino Legend Group Ltd. of Hong Kong

  • Red Avenue Chemical Co. Ltd. of the British Virgin Islands

  • RedAvenue Chemical Corp of America of Rochester, New York

  • Thomas R. Crumlish, Jr. of Rochester, New York

  • Ning Zhang of Canada

  • Quanhai Yang of China

  • Shanghai Lunsai International Trading Company of China

  • Precision Measurement International LLC of Westland, Michigan

According to the complaint, the technology at issue relates to improved techniques for manufacturing rubber resins with tackifier (“tackifiers”) and other rubber resins.  The complaint states that, in the manufacture of natural or synthetic rubber articles, it is often necessary to add tackifiers to provide improved uncured ply adhesion for assembling and improved knitting of contact areas.  In particular, since these tackifiers are oil soluble and compatible with various synthetic rubbers, they are ideally suited for plied-up construction of tires and mechanical rubber goods which require high tack levels.  According to the complaint, these tackifiers are used primarily to produce tack in the underside and skin coat of tires.

In the complaint, SI Group refers to its tackifier manufacturing process for making its SP-1068 tackifier resin (the “SP-1068 Process”), as well as other manufacturing processes based on the same basic process as the SP-1068 Process (the “SP-1068 Related Processes”).  According to the complaint, SI Group owns the intellectual property embodied in or relating to the SP-1068 Process  (the “SP-1068 Technology”), as well as the intellectual property embodied in the SP-1068 Related Processes (the “SP-1068 Related Technology”).  SI Group further states that certain SP-1068 Technology comprises trade secret information that provided SI Group with significant economic value and competitive advantage from not being generally known to other people or readily ascertainable by proper means (the “SP-1068 Trade Secrets”).  According to the complaint, the SP-1068 Trade Secrets include or relate to:  (a) innovative SP-1068 manufacturing processes, materials, intermediates, and related control parameters; and (b) tackifier manufacturing equipment, and other equipment used for the SP-1068 Process.  The complaint also states that the SP-1068 Related Technology comprises certain trade secret information (the “SP-1068 Related Trade Secrets”).  The complaint additionally refers to secret manufacturing processes for making other rubber resin products, including C&R Rubber Resin.

According to the complaint, a Mr. Xu Jie, a.k.a. Jack Xu (“Xu”), was employed by SI Group (Shanghai) beginning on April 14, 2004, and SI Group started manufacturing SP-1068 tackifier in Shanghai shortly thereafter.  The complaint states on information and belief that, by virtue of his employment and position, Xu was the only employee at the SI Group (Shanghai) plant who had access to the entire trade secret processes for making SP-1068 and other resins.  On April 30, 2007, Xu resigned from SI Group (Shanghai).  While Xu apparently denied that he was leaving to join a competitor, SI Group alleges in the complaint that Xu in fact joined Sino Legend (Zhangjiagang) Chemical Co., Ltd., Sino Legend Holding Group, Inc., Sino Legend Holding Group Ltd., HongKong Sino Legend Group Ltd., Ning Zhang, and Quanhai Yang (collectively, “Sino Legend”).  According to the complaint, shortly after Xu joined Sino Legend, Sino Legend started to market its SL-1801 resin, which has specifications substantially the same as those for SI Group’s SP-1068 tackifier.  The complaint therefore alleges that Sino Legend misappropriated SI Group’s trade secrets through hiring Xu (or otherwise) to develop SL-1801 and other rubber resins corresponding to SI Group rubber resins.

The complaint further states that SI Group has recently announced plans to expand into North America and Europe and that RedAvenue Chemical Corp. of America is expected to serve as Sino Legend’s North American market representative.  The complaint further states that Sino Legend has already begun importing tackifier embodying SI Group’s trade secrets into the U.S.

Regarding domestic industry, SI Group states that it has made substantial investments in the U.S. in connection with its trade secrets.  According to the complaint, these investments include plant and equipment, labor and capital, manufacturing, engineering, research and development, and other domestic exploitation by virtue of distribution and sales in the U.S. of tackifiers made by the SI Group trade secrets.  SI Group specifically refers to its facilities in Rotterdam Junction, Niskayuna, and Schenectady, New York.  SI Group further states that it has continuously employed approximately 450 people in the U.S. from 2009 through the first quarter of 2012.

As to related litigation, SI Group states that on November 26, 2008, it contacted the Shanghai Public Security Bureau (the “PSB”) to initiate a criminal investigation against Xu.  The complaint states that the PSB eventually terminated its investigation without SI Group’s consent, issuing only a perfunctory statement that there was a “lack of evidence.”  According to the complaint, as a result of PSB’s decision to terminate the criminal investigation, SI Group filed two civil actions against Sino Legend and Xu before the Shanghai No. 2 Intermediate People’s Court in early February 2010.  SI Group re-filed these cases on March 24, 2011.  The complaint states that no court has rendered a judgment in these Chinese actions.

With respect to potential remedy, SI Group requests that the Commission issue an exclusion order—including but not limited to a general exclusion order and in the alternative a limited exclusion order—and a permanent cease and desist order.

We note that while SI Group initially sought relief in Chinese court for Sino Legend’s alleged trade secret misappropriation, SI Group now asserts that “[t]he Commission has jurisdiction because, inter alia, Respondents have imported into the United States, sold for importation into the United States and/or sold within the United States after importation, tackifiers that Sino Legend has manufactured and is manufacturing in China using misappropriated SI Group Trade Secrets, and Respondents are likely to imminently further engage in such activities.” 

We further note that the facts alleged in this complaint are similar to the facts at issue in the Federal Circuit’s 2011 decision in Tianrui Group Co. Ltd. v. ITC, 661 F.3d 1322, 1332 (Fed. Cir. 2011).  See our November 7, 2011 post for more details.