ITC Lightens Domestic Industry Requirement for Trade Secret Complainants 

The International Trade Commission recently issued an opinion in a trade secret-based investigation, Certain Selective Thyroid Hormone Receptor-Beta Agonists, Processes for Manufacturing or Relating to Same, and Products Containing Same, Inv. No. 337-TA-1352 (“Beta Agonists”), that arguably makes it easier for complainants to satisfy Section 337(a)(1)(A)’s domestic industry requirement.  

In Beta Agonists, Viking Therapeutics sued several Ascletis Pharma respondents, including Ascletis’s CEO, Mr. Jinzi Jason Wu. Viking’s beta agonists, which were in Food and Drug Administration (FDA) clinical trials when the complaint was filed, aim to treat fatty liver disease; Viking alleged that Ascletis misappropriated Viking’s drug formulations, production processes, and pre-clinical and clinical trial information needed to commercialize new beta agonists.  

At the outset of the investigation, the Commission ordered the parties and presiding administrative law judge (ALJ) to complete a 100-day proceeding to determine whether Viking could satisfy Section 337(a)(1)(A)’s injury requirement. During discovery in the 100-day proceeding, Ascletis made false representations and violated multiple discovery orders, including falsely claiming that its document production was substantially complete, providing false interrogatory responses, and failing to produce documents subject to a motion to compel.  

The ALJ sanctioned all respondents and counsel $689,000 and also drew adverse inferences with respect to several facts bearing on the injury analysis. Specifically, the ALJ inferred (1) that Ascletis would continue to pursue FDA approval for its beta agonists, (2) that, if approved, Ascletis’s products would compete with Viking’s, and (3) that Ascletis would continue to pursue partners to commercialize its products. Additionally, because of Ascletis’s misconduct, the ALJ extended the 100-day proceeding and continued the injury inquiry under a standard procedural schedule.  

On review, the Commission largely affirmed the initial determination’s sanctions findings, but vacated findings with respect to Ascletis’s CEO because Mr. Wu did not engage in sanctionable conduct in a personal capacity.  

As to misappropriation, the Commission reviewed the initial determination’s findings in detail and found that Ascletis misappropriated additional trade secrets. In particular, the Commission found additional misappropriation where Ascletis “intermingled Viking’s information with its own and relied on the results in its clinical development efforts for the accused products.” In contrast, the Commission declined to find misappropriation where Viking’s arguments were  
“unsupported and conclusory.”  

Having found misappropriation, the Commission turned to domestic industry and injury — specifically, whether Ascletis’s misappropriation threatened to injure Viking’s domestic industry. The Commissioners unanimously found that Viking had established a domestic industry per Section 337(a)(1)(A) based on research and development. Commissioners Karpel and Kearns further found that Viking had shown it was in the process of developing a domestic industry. Specifically, Commissioners Karpel and Kearns found that the test from Stringed Musical Instruments, which was a patent-based investigation, “is applicable for demonstrating an industry in the process of being established under section 337(a)(1)(A).” Commissioners Karpel and Kearns further noted that a complainant need not show “readiness to commence production” to satisfy Section 337(a)(1)(A)’s domestic industry requirement. Consequently, Commissioners Karpel and Kearns found that Viking could show it was in the process of establishing a domestic industry, even though it had not sold a commercial product.    

With respect to injury, the Commission found that Ascletis’s misappropriation and attendant commercial activity threatened to injure Viking. In finding a threat of injury, the Commission clarified that its jurisprudence differs from federal trade secret jurisprudence in that Section 337(a)(1)(A) contains a “distinct” statutory injury requirement. The Commission also noted that “a commercially sold product is not required” to show threatened injury and again referenced the in-the-process standard from patent-based investigations. Lastly, the Commission expanded its injury analysis by considering “other factors” beyond the Rubber Resins injury factors. For instance, in finding a threat of injury, the Commission considered the similarities between Viking’s and Ascletis’ products and noted that Ascletis’ misappropriation hindered Viking’s ability to secure a commercialization partner.  

Finally, with respect to remedy, the Commission set the length of the exclusion order at seven years. In setting this duration, the Commission noted that it did not “simply aggregate the time to develop each trade secret independently” but rather considered the nature of Viking’s development process and accounted for “overlap” in development.  

Takeaway 

Beta Agonists represents a notable development in the Commission’s trade secret jurisprudence. Among other things, Beta Agonists demonstrates that the Commission is continuing to review trade secret initial determinations in detail and that the Commission may be receptive to new approaches to satisfying the domestic industry and injury requirements.