The Botox Rival Case: Section 337 Reaches Foreign Trade-Secret Theft

The most effective venue for stopping foreign trade-secret theft is sometimes not a court at all, but the International Trade Commission. The investigation captioned Certain Botulinum Toxin Products, Processes for Manufacturing or Relating to Same, and Certain Products Containing Same, Inv. No. 337-TA-1145, produced a Commission final determination on December 16, 2020, explained in an opinion whose public version issued on January 13, 2021, that found a violation of Section 337 of the Tariff Act of 1930 and banned imports of a Botox competitor for 21 months. What makes the decision notable is that the trade-secret misappropriation occurred in South Korea, between South Korean companies, and never touched US soil until the product was imported. It is the highest-profile use of Section 337 to police wholly foreign trade-secret theft since the Federal Circuit blessed that reach in TianRui Group Co. v. International Trade Commission, 661 F.3d 1322 (Fed. Cir. 2011).

At a glance

• Case: Certain Botulinum Toxin Products, Inv. No. 337-TA-1145, U.S. International Trade Commission
• Decided: Commission final determination December 16, 2020, public opinion January 13, 2021; limited exclusion order and cease-and-desist order for 21 months; final determination later vacated in 2021 after settlement
• Holding: A Section 337 violation existed based on misappropriation of Medytox’s manufacturing-process trade secrets, warranting an import ban on Daewoong’s product; the Commission reversed the administrative law judge’s finding that the bacterial strain itself was a trade secret.
• Significance: A leading application of Section 337 to trade-secret misappropriation occurring entirely abroad, demonstrating the ITC as a venue where the secrets and the theft never touched the United States.

The parties and the neurotoxin

Botulinum toxin, marketed most famously as Botox, is a purified neurotoxin produced by the bacterium Clostridium botulinum and used for cosmetic and therapeutic injection. Medytox Inc., a South Korean firm, alleged that a former employee had carried its manufacturing know-how and a bacterial strain to a competitor, Daewoong Pharmaceuticals Co., Ltd., also of South Korea. Daewoong used its product, DWP-450, which reached the US market as Jeuveau, distributed by Evolus, as a lower-cost alternative to Botox. Medytox, joined by Allergan, the maker of Botox, filed a complaint at the ITC in early 2019 seeking to block importation of the competing product on the theory that it was made using misappropriated trade secrets.

The choice of forum is the story. Medytox could have litigated in Korean courts, and related litigation did proceed abroad. But the ITC offered something a Korean court could not: the power to shut the accused product out of the lucrative US market through an exclusion order enforced at the border by Customs.

Section 337 and the reach established by TianRui

Section 337, codified at 19 U.S.C. 1337, empowers the ITC to bar from importation articles that involve unfair methods of competition or unfair acts, a category the Commission and the Federal Circuit have long read to include trade-secret misappropriation. The pivotal question for cross-border theft is whether Section 337 reaches misappropriation that occurs outside the United States. TianRui answered yes. There, the Federal Circuit held that the ITC could find a Section 337 violation based on trade-secret misappropriation that took place in China, because the statute focuses on the domestic injury caused by importing the tainted goods, not on where the wrongful acts occurred. The presumption against extraterritoriality did not bar the Commission from considering foreign conduct where the resulting products were imported into and injured a domestic industry.

The botulinum investigation applied that framework to a new set of facts. The misappropriation happened in Korea, the misappropriator was Korean, and the trade secrets were Korean manufacturing know-how. None of that placed the conduct beyond Section 337, because the accused product was imported into the United States and threatened a domestic industry. TianRui supplied the doctrinal permission; the botulinum case supplied a marquee demonstration of how far that permission runs.

What the Commission found, and what it reversed

The administrative law judge had found misappropriation and recommended relief in a final initial determination issued in July 2020. The Commission’s December 2020 determination largely sustained the violation but narrowed its basis. It found a Section 337 violation as to the misappropriation of Medytox’s trade secrets relating to its manufacturing processes, the know-how for producing the toxin, and issued a limited exclusion order against Daewoong’s and Evolus’s botulinum toxin products, plus a cease-and-desist order against Evolus covering its US inventory, for a period of 21 months.

Critically, the Commission reversed the administrative law judge’s finding that the Clostridium botulinum bacterial strain itself was a protectable trade secret. That reversal matters doctrinally. Strains of bacteria can be found in nature and, depending on the record, may not satisfy the secrecy and independent-value requirements of a trade secret in the way that proprietary manufacturing processes do. By separating the strain from the process, the Commission grounded the violation on the misappropriated know-how, the sequence of manufacturing steps and conditions that Medytox had developed and guarded, rather than on ownership of a microorganism. The distinction narrowed the theory but did not save Daewoong, because the process misappropriation alone supported the exclusion order.

The 21-month term tracked the administrative law judge’s alternative recommendation. The judge had recommended a ten-year ban tied to misappropriation of the strain, but 21 months if the Commission limited the violation to the manufacturing process alone. Once the strain fell out of the case, the shorter period was what remained. Tailoring the exclusion period to the head start a misappropriator gains, rather than imposing a permanent ban, is a familiar ITC approach in trade-secret investigations.

Settlement and vacatur

The exclusion order did not remain the final word. The public-interest stakes drew criticism, since an import ban on a lower-cost neurotoxin alternative affects patients and the market, and the decision generated commentary about whether the ITC weighed those interests adequately. More decisively, the underlying business dispute settled. In February 2021 Medytox, Allergan, and Evolus announced a settlement, including licensing arrangements, that resolved their disputes over the competing product, and Medytox settled with Daewoong’s other US-facing licensee, AEON Biopharma, in June 2021. On the parties’ joint petition the Commission rescinded the exclusion and cease-and-desist orders on May 3, 2021, so the import ban itself came off within months. The Federal Circuit then dismissed the related appeals as moot on July 26, 2021, and the Commission voted on October 28, 2021 to vacate its final determination on remand. The formal determination no longer stands as binding precedent.

Vacatur does not erase the decision’s significance. As a demonstration of what Section 337 can do, the investigation remains a reference point. It showed complainants that the ITC will entertain, and can resolve in their favor, a trade-secret case in which every operative fact, the development of the secret, the theft, and the misappropriator, is foreign, so long as the resulting product is imported into the United States. The settlement that followed, on terms favorable to the complainants, only underscored the leverage the ITC forum provided.

Open questions

The botulinum investigation leaves important questions, some sharpened by its unusual ending. Because the final determination was vacated, its persuasive weight is contested, and future complainants cannot cite it as settled Commission precedent even as they invoke its reasoning. The decision does not fully resolve how the ITC should weigh public-interest factors, patient access and price, against trade-secret enforcement when the excluded product is a lower-cost medical alternative, a tension the case surfaced but did not lay to rest. It also leaves open how far the line between an unprotectable natural material, such as a bacterial strain, and protectable process know-how can be drawn in other biologic contexts, where the two are deeply intertwined. And the interaction between an ITC exclusion order and parallel foreign litigation over the same secrets remains a coordination problem for multinational disputes.

Implications for creators and businesses

• The ITC is a venue for foreign theft. If a competitor misappropriates your trade secrets abroad and imports the resulting product into the United States, Section 337 may let you seek an import ban even though the theft never touched US soil. Consider the ITC alongside, or instead of, district-court litigation.
• Speed and border enforcement are the draw. ITC investigations move on a fast schedule and produce exclusion orders enforced by Customs. For a company facing an imported knockoff, that combination can be more valuable than damages years later.
• Define the secret as process know-how, not raw material. The Commission protected manufacturing processes but rejected the bacterial strain as a trade secret. Frame your asserted secrets around the proprietary methods and conditions you developed and guarded, which are more defensible than claims over naturally occurring materials.
• Anticipate the public-interest inquiry. Where the accused product serves patients or lowers prices, expect scrutiny of the public interest in an exclusion order. Build a record addressing those factors rather than assuming a violation automatically yields a ban.

Frequently asked questions

Can the ITC block imports over trade-secret theft that happened entirely in another country? Yes. In the Certain Botulinum Toxin Products investigation the ITC found a Section 337 violation based on trade-secret misappropriation that occurred in South Korea between Korean companies, and imposed a 21-month import ban on the resulting product. Following the Federal Circuit’s decision in TianRui Group v. ITC, Section 337 can reach wholly foreign trade-secret misappropriation so long as the injury is felt in a domestic industry through importation into the United States.

What exactly did the ITC find and reverse? The Commission found a violation as to misappropriation of Medytox’s manufacturing-process trade secrets and issued a 21-month limited exclusion order against Daewoong’s product, sold in the United States as Jeuveau, together with a cease-and-desist order against its US distributor Evolus. But it reversed the administrative law judge’s finding that the Clostridium botulinum bacterial strain itself was a protectable trade secret, narrowing the basis of the violation to the manufacturing processes rather than the strain.

Is the ITC decision still in force? No. After the Commission’s December 2020 determination, the parties reached settlements in 2021, including licensing arrangements involving the US distributor of Daewoong’s product. The Commission rescinded the exclusion and cease-and-desist orders on May 3, 2021, the Federal Circuit dismissed the related appeals as moot, and the Commission voted on October 28, 2021 to vacate its final determination on remand. Neither the orders nor the determination is in effect, though the decision remains a leading example of Section 337’s reach over foreign trade-secret theft.

Authorities and sources

• Certain Botulinum Toxin Products, Inv. No. 337-TA-1145, Commission notice (Dec. 16, 2020): USITC
• Certain Botulinum Toxin Products, Notice of Commission Decision To Vacate Its Final Determination on Remand, 86 Fed. Reg. 60,469 (Nov. 2, 2021): govinfo
• Crowell & Moring, “Final ITC Ruling in Botox Rival Case Creates More Head-Lines”: Trade Secrets Trends
• IPWatchdog, “ITC Issues Limited Exclusion Order on Botox Products, Partially Reverses Trade Secret Finding”: IPWatchdog
• TianRui Group Co. v. International Trade Commission, 661 F.3d 1322 (Fed. Cir. 2011) (No. 2010-1395, decided Oct. 11, 2011): U.S. Court of Appeals for the Federal Circuit
• 19 U.S.C. 1337 (Section 337 of the Tariff Act of 1930): Cornell LII