Bipartisan SECRETS Act Would Ban Import of Goods Made With Stolen Trade Secrets

Under Section 337 of the Tariff Act of 1930, the International Trade Commission investigates, and an administrative law judge determines whether the imports in question infringe on a valid U.S. patent or trademark, or whether they involve other unfair methods of competition. In the case of a patent, no injury has to be shown, but in the case of unfair competition, the complainant has to convince the judge that the importation either injures or threatens to substantially injure a domestic industry.

Under the proposed bill, an interagency committee led by the Attorney General's office, and including Commerce, the Office of the U.S. Trade Representative, Treasury, Homeland Security and the Intellectual Property Enforcement coordinator, would make the determination of whether an investigation should begin. Then the International Trade Commission would have no more than 30 days after an allegation of an import made with stolen trade secrets to conduct a confidential, ex parte preliminary review to determine if there's "a reasonable indication" that the good was made with stolen trade secrets.

The language of the new Section 342 of the Tariff Act, which was introduced by Sens. John Cornyn, R-Texas, Todd Young, R-Ind., and Chris Coons, D-Del., on June 15, says the Commission then would place an import ban, which the president could overrule in the 15 days after the determination. The full title is the Stopping and Excluding Chinese Rip-offs and Exports with United States Trade Secrets Act of 2021.

“Foreign governments like China make billions of dollars annually by selling goods and technology made from stolen U.S. trade secrets and taking advantage of American ingenuity to enrich themselves,” Cornyn said in a statement provided by his press office. “Bad actors shouldn’t be rewarded for stealing intellectual property from American companies and workers, and this legislation would create a rapid response, deterrent mechanism to prevent them from being able to exploit U.S. consumers.”

Lou Mastriani, partner at the international trade and intellectual property litigation firm Adduci Mastriani, said that the firm alleged to have stolen the trade secret has to be partially or wholly state-owned or -controlled -- "or, perhaps, subsidized, it remains to be seen."

Mastriani, whose firm is active in Section 337 cases, said of the bill: "It is a very draconian type of measure, which to me would be far more effective than the 337 action because of its speed and how quickly [decided] and onerous the remedy would be. Because you're almost presumed to be guilty of appropriating the secret. The degree of due process here is minimal to none."

"You have this secretive process to decide whether there is justification for asking the ITC to initiate further investigation that the accused party doesn’t get to participate in," he said. "The ITC does its own investigation. Do they do any investigation as to whether this trade secret is a trade secret?"

After the initial review, there is a 150-day period for a more in-depth review of the allegation, to see if the ban should continue. After both processes, the determination will be published in the Federal Register, no later than 30 days after the decision.

Fish and Richardson Principal Andrew Kopsidas, who also practices IP law, says that even the 180-day timeline seems "insanely fast. The ITC already works as hard as it can and as fast as it can to get these investigations done in 16 months and they’re pretty good about sticking to that."

He said he thinks more administrative law judges would need to be hired. And, he said, it's unclear to him what is being evaluated in the first 30 days -- is it just a sworn statement from a U.S. company that says it's been ripped off?

"I think the ITC is well equipped, and a great forum and, in some cases, the only forum for trade secret appropriation that originated abroad."

Kopsidas said he doesn't know what kind of chance the bill has at becoming law. "There have been bills over the years to amend [Section] 337; more often than not, they go nowhere," he said. But, he said, it has an admirable purpose "and it seems to be the kind of issue that would get bipartisan support."

Mastriani said he thinks the bill probably will not pass. Although it is thematically similar to elements of the China package that just passed the Senate, it did not get included, so it could miss out on that momentum.

Mastriani said that although the bill focuses on foreign companies, one should remember there's an American importer counting on those goods that would be blocked, and the seizure would hurt that party's business.

He predicted that if it becomes law, there would be a federal court challenge, and said he thinks that it could be ruled unconstitutional. This act is "redundant of other more fulsome and comprehensive laws that do have due process," he said. "This just sounds like a wrong-headed type of bill by senators that are apparently frustrated by the fact that ITC cases take some time."

Appeals would be allowed, but would go to the federal court of appeals, not to the Court of International Trade, and would have to be brought within 60 days of a petition for modification or rescission of an import ban.