International Trade Lawyers Share Their Secrets
Four attorneys who have dealt with cases involving international trade secrets discussed their experiences at a recent meeting of the International Business Initiative Committee.
The speakers included Dean Pelletier of McAndrews, Held & Malloy of Chicago, counsel in Tian Rui v. ITC, a recent decision in which the International Trade Commission enjoined import of products derived from illegally obtained trade secrets; Glenn Strapp, of Bracewell and Guiliani, LLP, in Houston, who wrote an article on the case; Brian Riopelle of McGuireWoods in Richmond, counsel in Dupont v. Kolon Industries, in which a jury awarded $920 million for trade secret violations; and Ernest Sasso, a Washington Crossing attorney.
In Tian Rui, Amsted Industries manufactured steel railway wheels with grip and Wheel technology. Its employees were conduits for misappropriating the trade secrets to two corporate partners in China that were used to manufacture products in China that were imported to the U.S. The decision of the ITC covered misappropriation that occurred overseas as long as products are shipped to the
U. S. The ITC may not award damages and no counterclaims may be brought in ITC matters. The ITC has in rem jurisdiction, a 16-18 month docket and permits overseas discovery. A default can be obtained to get an exclusionary order. Discovery took place in Hong Kong, not in China (where depositions are not permitted under Chinese law).
DuPont manufactured Kevlar, used for body armor, bulletproof vests and tires, which is subject to export controls because of military use. In a criminal investigation FBI agents recorded incriminating conversations of four former employees. In February 2009 a suit was filed alleging trade secrets encompassing the entire manufacturing process were stolen. The judge held a five-day hearing on intentional destruction of documents and gave an adverse instruction to the jury. Several defendants invoked their Fifth Amendment rights. A transcript of a meeting between defendants was played at the seven-week trial, the longest ever in the Eastern District of Virginia. The jury found violations of 149 trade secrets. The court enjoined production of a product competing with Kevlar for 20 years. The 4th Circuit stayed the injunction. DuPont is seeking counsel fees and costs. Kolon Industries did not post bond on appeal so collection against assets has been initiated. The injunction affects a plant in South Korea. Trade secrets are the only form of intellectual property to arise out of state law, so state law determines the standard for injunctions. Some states permit an injunction merely for a violation of state law, different than the federal standard.
To avoid litigation or theft, and to protect a company’s interest if there is litigation, it is vital to make a reasonable effort to keep trade secrets private. All employees must sign confidentiality and non-disclosure agreements pre- and post-hiring before, and those with access must sign before they are given access. The speakers suggested the following safeguards: mark clearly in bold letters all matters that are trade secrets; restrict access – only persons who need it and to the extent needed to do their job; use password protections; limit the number of copies; store in a locked facility; keep a visitor log; consider videotape monitoring; ban the use of recording devices in the facility; restrict visitor access, with an escort provided; provide ongoing education on trade secret protection; create a culture of protection; teach confidentiality to employees; warn of firing for violations; and agreements must include improvements and derivative works.
In taking depositions overseas, ask short questions and use easy-to-understand terms. Work ahead of time with a translator. In ITC cases, the FRCP – not Hague Convention rules – apply. If the defendant does not participate, obtain a default judgment. In the DuPont case, depositions took place in the U.S. Courthouse. Consider obtaining an order that depositions occur in the U.S. Take FRCP 30 (b)(6) depositions of each manager agent. The party taking the deposition hires an official translator and the opposing party, a check translator. In DuPont, a third translator was hired, a special master translator. Translation doubles the time to take a deposition. Have counsel from your firm who speak the foreign language attend the deposition. Videotape all depositions to limit disputes over meaning. A certified translator of documents is needed to admit transcripts in federal court. Since under Rule 30 FRCP, deposiTions are limited to seven hours, seek an extension of the limit. An international deposition may take three to four days. Ask if the deponent speaks English and listen to him if he does off the record and note it in the record. Plan on gamesmanship. Exchange a glossary of terms beforehand. It is a red flag if the check interpreter says nothing in the first hour. A dilemma is that discovery risks revealing information that could help the competition. A transcript may reveal data. Obtain a protection order early in the case. Get counsel to sign an agreement to be bound by the order. Have documents filed under seal. Move the court to seal the courtroom, for specially sensitive testimony. Consider obtaining foreign relief. Use criminal investigation and prosecution to help your client. Seek an order to inspect the foreign plant. Get a second order if not permitted to inspect as needed. Hire local counsel for discovery advice and strategy. Pennsylvania law permits criminal remedies. Protect your client in the war for trade secrets.
J. Michael Considine Jr. is chair of the International Business Initiative Committee.