US Regulators Investigate Chinese Steelmakers for Hacking Trade Secrets
The U.S. International Trade Commission (“ITC”) last week launched an investigation into United States Steel Corporation’s (“U.S. Steel”) complaint that Chinese hackers stole trade secret information—including proprietary methods for making lightweight steel—on behalf of Chinese steel producers.
In its complaint filed with the ITC last month, U.S. Steel alleged that it was a victim of a 2011 hacking incident that exposed closely guarded research and intellectual property. According to the complaint, hackers stole, among other things, proprietary research data on U.S. Steel’s production techniques for a new generation of lightweight, high-strength steel now favored by global consumers. U.S. Steel’s Chinese competitors then allegedly used this stolen information to replicate the product, which U.S. Steel spent more than a decade developing. U.S. Steel contends that this hack, manufacture and sell pattern is consistent with “the pattern of previous attacks that the Chinese government conducted to benefit their state-owned companies.”
Forty Chinese steel makers and distributors were named as respondents in the ITC’s investigation.
In 2014, five Chinese military officials were indicted by a Federal grand jury on cyber-espionage charges in connection with the 2011 hack on U.S. Steel. No arrests have been made. In an official statement responding to U.S. Steel’s ITC complaint, the Chinese Commerce Ministry denied any wrongdoing and stated that the allegations of intellectual property theft are groundless and “have no factual basis.”
U.S. Steel’s complaint was brought under Section 337 of the Tariff Act of 1930, which authorizes the ITC to take action against unfair methods of competition and unfair acts in the importation and sale of products in the U.S. The ITC’s decision to investigate U.S. Steel’s complaint means that the case will proceed before an administrative law judge (“ALJ”), and the parties will begin the discovery process. Any decision by the ALJ will then be subject to review by the full commission. Authorized relief could include a ban and removal of all unfairly traded imports from the U.S. market. However, even if such relief is sanctioned, the U.S. Trade Representative maintains the authority to block any exclusion ordered by the ITC.
We will continue to monitor this case for noteworthy developments.