妥当な措置 ポッドキャスト

Samsung vs. BOE: A Case Study in Global Trade Secret Protection

The episode highlights a high-profile ITC case filed by Samsung Display against China’s BOE, accusing BOE of trade secret misappropriation. The case underscores the ITC’s willingness to investigate trade secret theft regardless of where the alleged theft occurred, as long as there is a domestic injury in the U.S. This broad jurisdiction allows companies like Samsung to leverage the ITC as a powerful tool for protecting global trade secrets. The hosts emphasize how trade secrets differ from patents, as they are not registered locally but function as global assets that can be used in multiple legal venues.

Samsung’s lawsuit complaint stems from allegations that BOE lured away key executives and engineers, leading to a significant brain drain. This case, like others, illustrates how companies can use the ITC not only to block imports but also as a strategic leverage point to negotiate global settlements. The discussion also touches on Samsung’s history of successfully employing the ITC for its intellectual property protection, demonstrating its effectiveness in trade secret enforcement.
The episode concludes with a broader reflection on the evolving role of the ITC in handling trade secret disputes. As the number of such cases continues to rise, the ITC’s ability to handle global misappropriation while ensuring domestic protection cements its importance as a venue for resolving high-stakes IP disputes.

収穫：

• The International Trade Commission (ITC) is an independent federal agency that administers trade remedy laws and handles import investigations related to intellectual property (IP).
• The ITC has the power to block the import of offending goods as a remedy in trade secret cases.
• ITC investigations are known for their speed and efficiency, with the entire process typically taking a year or less.
• Trade secrets are considered global assets and can be used in different ways to protect a company’s interests.
• The ITC can be used as leverage to achieve a global settlement in trade secret disputes.
• Trade secret theft can lead to a brain drain, with valuable employees being lured away by competitors.
• Samsung has effectively utilized the ITC as a tool in protecting its trade secrets.

Transcript:

Tim Londergan (00:00.986):
Countdown. All right, Chris, we’re back. Episode four, the Reasonable Measures podcast. Love the name, man. Thanks again for that. All right, what are we talking about today? ITC.

Chris Buntel (00:11.165):
It’s a good title. Be reasonable.

Tim Londergan (00:15.354):
Exactly. It’s going to be a new Tangibly tagline, isn’t it? What’s it take to be reasonable? Wow, we could go on about that. Let’s not. ITC, the International Trade Commission, is the topic today, and specifically, Trade Secret Matters brought before the ITC. So just a quick little kind of overview of the ITC. It’s an independent, nonpartisan, quasi-judicial federal agency. They have three mandates: to administer trade remedy laws in the US, they do analysis, provide reports to Congress, the President, and the Office of Trade Representatives, and they maintain the harmonized tariff schedule of the US. That’s what they do. And we’re interested in, number one, administering these trade remedy laws.

And so specifically within the ITC, there is a group, one of their five operating groups, that is IP-related based import investigations. And so that’s what we’re talking about today. There’s a really good—there’s a bunch of stuff written about the ITC and IP investigations and cases. There’s a particularly good one. Then we’ll put it in the notes section from the folks at Denton’s, who have quite a bit of experience in trying cases at the ITC. So I think there’s really kind of two other things, Chris, we need to just kind of talk about as the setup here: the remedy at ITC and then the speed and overall sort of savviness of the judges within the ITC. So maybe remedy—let’s go there first. Talk to us about what this ITC remedy actually is.

Chris Buntel (02:11.805):
And the ITC is really interesting because it’s just different enough from traditional litigation that you’d have in federal court. And really, the whole process is different. Even the way that the cases are described is different. So it’s not even a lawsuit. It’s actually an investigation. Section 337, you’ll hear very often. But the remedy… in some ways is very limited, but in some ways can be very powerful in the right situation. So the only real thing that the ITC can do is block the import of somehow offending goods. And people historically use this as a way of enforcing patents. So they would say, “There are some goods coming in on a ship from wherever that are going to infringe one or more US patents.” And they would use this investigation process at the ITC as a way of closing the border to those offending goods. And that still works. You can still use the ITC for patents. But the cool thing is, on the books, you could always do it for trade secrets, but no one ever did. Like, it was a super rare event.

But we’ve seen in the last few years that there’s more and more people—and more and more investigations—starting on using trade secrets at the ITC. So it’s a really different and growing, I mean, the numbers aren’t huge, but the percentage growing very rapidly of people blocking that import. There’s no damages. So you’re not going to be seeing the hundreds of millions of dollars or $2 billion kind of damages because that’s not what the ITC does. But if you’re relying on an overseas manufacturer for the goods you’re going to import and sell in the US, having the border get blocked is massive. That’s a huge problem for you on the receiving side of one of these investigations.

Tim Londergan (04:19.962):
Absolutely. So, from… Yeah, your numbers—going back to the numbers—from 2017 to 2021, the number of cases heard at the ITC went from one a year to nine. So, it’s always fun to talk percent increases when you got these small numbers: 800% increase. And prior to that, it sort of…

Chris Buntel (04:45.149):
That’s right.

Tim Londergan (04:49.818):
Steadily, still to a year, roughly, right? So it’s been interesting. We’ve seen the talk around ITC and trade secrets go from, you know, three years ago, it was still like, you know, you’d hear it occasionally. And now it comes up in conversation quite frequently as a, you know, as a venue. So yeah.

Chris Buntel (05:14.525):
Yeah, it’s an interesting option that if used wisely or strategically, can make life very difficult for someone who’s allegedly infringing your trade secrets. It’s not useful all the time. There will be cases where it just doesn’t apply or it doesn’t fit into your IP strategy, but it’s a great arrow to have in your quiver to be used at the right time.

Tim Londergan (05:28.442):
It’s—

Tim Londergan (05:41.946):
Yeah. And again, just to put a pin in it, this has been historically a patent venue. People think of it as a patent infringement venue, right? If you’re infringing my patents, I can stop you at the border. And so now we’re seeing, like, pure trade secret cases at ITC. I think this kind of gained a little more widespread understanding in 2021.

Chris Buntel (05:57.469):
Exactly.

Tim Londergan (06:07.066):
And I know today’s case, we’re going to talk about Samsung and BOE, but the 2021 case that really maybe put things on the map was SKLG. Again, two Korean companies that were arguing at the ITC. It ended up resulting in a settlement. In that settlement, SK agreed to pay LG—actually LG Energy Solution—$1.8 billion US cash and royalties to settle the case. So you can see the impact that shutting down the border has, right? Pretty amazing.

Chris Buntel (06:48.605):
Yeah, there’s also a time factor. So traditional patent litigation is a very slow, painful process. It can take years and years, and it’s just a very drawn-out ordeal. The ITC investigations, on the other hand, are lightning fast. Like, the whole thing from soup to nuts can be a year or less. So actually, on both sides of the coin, there’s tremendous time pressure and stress involved.

So some people will actually use an ITC investigation as kind of leverage to achieve a more global settlement that might include patents or other assets, but just, you know, people would be willing to pay to resolve the dispute because the ITC is so fast and furious.

Tim Londergan (07:37.178):
It’s amazing and there’s no jury, right? This is just a—

Chris Buntel (07:40.445):
It’s strictly administrative. Yeah, they have judges within the ITC and yeah, it doesn’t go to a jury like a normal case would.

Tim Londergan (07:50.202):
Yeah. So if you imagine, you know, even a normal case is stressful for a company to respond on, you know, a pretty regular beat of, you know, actions and so, boy, can you imagine, like, being under the gun and sort of knowing that you need to have this wrapped up in, you know, kind of a year or a little bit more? So yeah, it’s pretty intense.

Chris Buntel (08:13.053):
Well, and even if you’re the trade secret owner, you need to have all of your ducks in a row before initiating. Well, you actually request the ITC to launch an investigation. But if you’re on the other side, if you’re the goods owner that’s on the ship heading to the US, you’re not prepared. Like, you probably don’t know this is coming or the timing might be a surprise. So for them to respond on a very aggressive timeline is super stressful. It’s actually very expensive as well, because you have to pay lawyers to work like crazy very quickly. So it’s kind of a stressful ordeal for everyone involved.

Tim Londergan (08:48.73):
Round the clock.

Tim Londergan (08:54.49):
Amazing. Thank you. So let’s jump into today’s case. OK, so Samsung Display. This is a Reuters headline. This is in November 2023, so fairly recent. Samsung Display files a complaint in the US against China’s BOE, alleging trade secret leak. This was filed at the ITC. So BOE and Samsung are—I think—the two largest display manufacturers now. In this case, it basically sets up like probably most cases we’ll talk about. Occasionally, the one-off that doesn’t follow this fact pattern, but surprise: an executive leaves Samsung, heads to BOE, and sort of off we go here. So why don’t you take it away, Chris? Tell us a little bit more on the fact patterns here.

Chris Buntel (09:52.061):
Well, and even the way the case is described is a little different at the ITC. So you said Samsung versus BOE, it’s actually technically not that. So all of the ITC cases are kind of titled interestingly, where they’ll say “regarding certain OLED displays” or “regarding certain bicycles or aircraft engines.” So there’s this thing…

Tim Londergan (10:16.25):
I see.

Chris Buntel (10:19.645):
…that you rarely encounter in the patent world called in rem jurisdiction, which goes back to Latin, but it’s basically “regarding property.” So, regarding a thing, and the ITC cases are always titled “regarding” like what the offending article is versus Samsung versus BOE that you would see in a normal federal case. So…

Tim Londergan (10:39.898):
Got it.

Chris Buntel (10:47.069):
Yeah, basically what happened here, and this was interesting because all of the drama—all the action—actually happened in Korea. None of it happened in the US. Where Samsung had a partner in Korea called TopTech and a manufacturer or subcontractor that was leaking information to BOE. And BOE is China’s largest display manufacturer.

So it was a trade secret theft that was actually litigated in Korea and people even went to jail. Like, it was a very clear case of trade secret misappropriation in Korea. And what I find really fascinating is like, normally in a patent litigation, you would sue either where the damage happened, like where the bad action happened, or the location where the defendant is located or incorporated. So you’ll see a lot of cases in Texas, a lot in Delaware. That’s all very common in the patent world. Here, like, all signs would point to Korea. And it’s interesting that Samsung was using the import of displays into the US as the basis for this ITC investigation.

So it’s really a way of proving or showing that the ITC is willing to look basically globally, maybe galactically or universally. Wherever the trade secret happens, we don’t care, as long as there are offending goods coming into the US, it’s fair game. So it really is remarkable to me how broad the ITC is willing to look at trade secret misappropriation happening anywhere.

Tim Londergan (12:20.666):
Thank you.

Chris Buntel (12:42.749):
…as fair game.

Tim Londergan (12:44.538):
Yeah, and I think this has been one of these topics we talk a lot about this idea of, in the patent world, if there’s an infringement case, most companies will typically file their patents where things are made and used. I think in a sort of a general sense. And so, obviously, if you want to file that patent case in Japan, for instance, you need to have your patent in Japan.

And I think what makes this just so interesting and unique is that, you know, Samsung had not filed any trade secrets in the US, right? They didn’t need to, they were just sort of managing their trade secrets, you know, like assets. And so, and they were thinking of them as important parts of the business. And so they were probably fairly well-prepared to file this case.

Again, I think it’s important to kind of point out that these trade secret cases, whether it’s ITC or even in federal court in the US under DTSA, you’re getting foreign companies filing cases in the US. Now, obviously, there has to be a cause of action in the US, but anyway, it makes it very different.

Chris Buntel (14:01.501):
Yeah, there needs to be a US entity or some kind of damage to a US company. But Samsung, of course, is global and does a lot of business in the US, so they could still qualify. And at Tangent, yeah, go ahead.

Tim Londergan (14:17.754):
Actually, can I pick on that for a second? Like the ITC, that is one of the requirements of filing an ITC complaint, right? Is there has to be damage to a US.

Chris Buntel (14:25.373):
That’s right. There has to be a domestic injury. So typically you would have a factory or some kind of meaningful business being performed in the US, which for large multinationals usually is not difficult. And Samsung is doing a lot of manufacturing and a lot of R&D in the US. But yeah, that’s a key point. If they had no…

Tim Londergan (14:32.954):
Okay.

Chris Buntel (14:55.357):
…connection with the US at all, they would not be able to get into the ITC as a venue because they would fail that domestic industry prompt, for sure. And I was going to say, before we get off on that good point, was, you know, tangibly, we always talk about trade secrets being global assets. You know, patents are really local assets where if you want protection in four countries…

Tim Londergan (15:05.626):
Got it. Okay, so, yeah. Yeah.

Chris Buntel (15:23.133):
…you need to file and get a patent in those four countries. But then you’ve given up access to the other 160 or 180 countries in the world. This case, again, I think it’s really fascinating and it’ll be fun to watch how this pans out later this year. Their trade secrets at Samsung are being viewed kind of as a global asset. So they were able to use it very successfully in Korea to go after…

Tim Londergan (15:33.402):
Yep.

Chris Buntel (15:52.669):
…the offending actors, but then they’re also able to use it in the US. Even though there was no—you don’t file or register trade secrets, like that’s kind of nonsense, but they function as a global asset. And this just reinforces what we keep saying at Tangibly is, it’s a whole different type of asset class that behaves very differently and can be used in different ways.

Tim Londergan (16:18.522):
I love it. I will cut some of that out and put it in the summary for sure. Good stuff. So on this case, where is this case right now? Is it midstream?

Chris Buntel (16:30.877):
Yeah, so it’s midstream. So the case just started at the end of November last year, and they typically take around a year. So Samsung requested the investigation about a month before that. So it’s still very much midstream and probably in the next six months or so, we’ll see how this pans out. And it might be that they use this as leverage for another global settlement. So it may not even be concluded at the ITC, or the ITC might provide Samsung the kind of leverage and stress that it needs to affect a good settlement. So we’ll definitely keep our eyes open on this one.

Tim Londergan (17:12.41):
So what happens? Do they just withdraw the case? Let’s say they come to a settlement to Samsung, like, just formally withdraw the case? Is that how it works?

Chris Buntel (17:20.605):
Well, again, the funny thing is, it’s not Samsung’s case. So like, once you go to the ITC, it’s an ITC case. Now, you can—like, suppose it gets settled. So there’s a global license or a global settlement. You could go to the ITC and say, you know, this problem is resolved. The goods are no longer offending. You know, let them in the country. And chances are, the ITC will say, “Okay, sure.”

Tim Londergan (17:28.378):
Got it.

Tim Londergan (17:44.442):
Got it.

Chris Buntel (17:48.701):
…you know, just clear it off our docket. But technically, it’s not Samsung’s case anymore. So, you know, it’s kind of like what happens if you go to the FBI and DOJ to pursue, you know, the criminal aspects of trade secret theft, you lose a lot of control. And, you know, the ITC is kind of similar, but we’ll find out in six months.

Tim Londergan (18:09.05):
Interesting.

Tim Londergan (18:48.349):
Interesting. One notable fact about this case that I thought was worth mentioning was the executive helped lure 200 chip experts from Samsung and Hynix with higher paying jobs. And so, boy, you know, with 200 people coming over, it’s just, it’s such a humongous brain drain, isn’t it? Incredible.

Chris Buntel (18:51.322):
It is, yeah, it’s amazing. Yeah, and Samsung keeps using the ITC. There’s actually been a couple of cases that they’ve asked the ITC to investigate. So it’s definitely a tool that Samsung is using to good effect.

Tim Londergan (18:57.754):
Yeah, OK.

Tim Londergan (18:57.754):
Okay.

Tim Londergan (19:05.914):
All right, man. Well, let’s call it episode four. Thanks for getting the black shirt memo and for not making me learn Latin. Thank you. All right, man. We’ll see you on the next one. Take it easy. See you, Chris.

Chris Buntel (19:13.981):
Yeah.

Chris Buntel (19:22.461):

Sounds good. Thanks, Tim. Catch you later.