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Sino Legend Urges U.S. International Trade Commission (ITC) to Consider Parallel Chinese Court Proceeding in Ongoing Trade Secret Litigation Brought by SI Group

Posted in International, Trade Secrets

Bringing to light the fact that US and Chinese forums can reach opposite conclusions on the same trade secret misappropriation allegations, China-based rubber and tire resin manufacturer Sino Legend urged the U.S. International Trade Commission (ITC) to consider a parallel Chinese court proceeding seeking to convince the Commission to overturn an unfavorable initial determination by the Administrative Law Judge (“ALJ”).

Last month the U.S. International Trade Commission (ITC) notified parties it will review an initial determination that China-based Sino Legend (Zhangjiagang) Chemical Co., Ltd. and a group of related respondents (“SI Group”) unlawfully imported rubber resins made with the misappropriated trade secret process of New York-based SI Group. The investigation — captioned In the Matter of Certain Rubber Resins and Processes for Manufacturing Same (Inv. No. 337-TA-849) — is based on allegations that Sino Legend poached a manager from one of SI Group’s Chinese facilities who disclosed SI Group’s trade secrets to Sino Legend. SI Group contends Sino Legend used these trade secrets to make rubber resins that were ultimately imported into the United States. Like the now well-known 337-TA-655 Investigation involving steel railcar wheel manufacturers Amsted and TianRui, SI Group’s allegations in the ITC are based on acts of misappropriation occurring entirely in China, allegations for which a US District court lacks jurisdiction. You can find our previous post on the TianRui case here.

An interesting twist overshadowing SI Group’s litigation in the ITC is the co-pending litigation SI Group initiated in China, which resulted in a much different outcome. SI Group sued in a Chinese court claiming Sino Legend published SI Group’s trade secrets in a Chinese patent application. SI Group’s efforts in the Chinese court system were unsuccessful. On October 12, 2013 the Shanghai Higher People’s Court rejected a final appeal by SI Group Inc. seeking to overturn rulings in favor of Sino Legend. According to a recent Sino Legend press release, the Shanghai Higher People’s Court “ruled that SI [group’s] appeal lacked factual and legal basis, and reiterated there is no infringement of any trade secrets by Sino Legend.”

Sino Legend has attempted to introduce evidence of the Chinese Court proceedings on several occasions, contending the ITC should show deference to the Chinese court system:

Complainant has affirmatively chosen to avail itself of the Chinese courts and legal system to resolve the dispute at issue. The Chinese court proceedings culminated in a Judgment adverse to Complainant. See Respondents’ Notice of New Authority. Under these circumstances, deference should be shown to the Chinese court ruling, based on the principles of abstention and comity.

SI Group responded it “sued in China only because it had no choice: no US court had personal jurisdiction over Respondents then (as they had not yet imported), or subject matter jurisdiction to adjudicate inventorship of a patent application filed in China.” SI Group also asserted Sino Legend “fail[ed] to offer any evidence that the Chinese court was fair or competent.” According to SI Group “[t]he inability of U.S. trade secret plaintiffs to obtain fair trials in China has been independently confirmed by the U.S.” The ALJ excluded all evidence of the Chinese court proceedings in the evidentiary hearing and the Commission has not signaled any intention to consider such evidence on review.

Regardless, Sino Legend expressed optimism concerning the ITC litigation in a press release announcing the recent decision of the Shanghai Higher People’s Court. According to Sino Legend, “the initial determination in favor of SI [Group] made by the ITC Administrative Law Judge will be reviewed by the Commission in its entirety … signaling a turning point in this investigation.”

For valuable insight on protecting trade secrets and confidential information in China and other Asian countries, including the effective use of non-compete and non-disclosure agreements, please check out our recent webinar titled, “Trade Secret and Non-Compete Considerations in Asia.