New Complaint: Botox and Korean Trade Secrets

Nabota

On January 30, a complaint was filed at the ITC by Allergan (the Ireland-based pharmaceutical company that makes Botox brand cosmetic injections) and Medytox (a Korean company that makes a similar product) against Daewoong (another Korean pharmaceutical company) and Evolus (its U.S. distributor).  The complaint alleges trade secret misappropriation by Daewoong and seeks to block imports into the United States of Daewoong's newly approved Botox-like product.

The complaint—Botulinum Toxin Products, Processes for Manufacturing or Relating to Same and Certain Products Containing Same—alleges that Daewoong hired away a Medytox employee who shared manufacturing secrets and a stolen physical sample necessary to develop Daewoong's accused product.

This is one more example of an ITC trade secret complaint based on conduct that took place entirely outside the United States.  Medytox has apparently already filed lawsuits in state court in both California and Indiana, but those courts refused to take up the case, because the actions all occurred in Korea, where the case is being litigated in Korean court.  

But all of this is unlikely to matter for the ITC.  The extraterritorial application of Section 337 for trade secrets was expressly approved by the Federal Circuit in TianRui Group Co. v. ITC  in 2011.  

One thing that makes this Botox case unusual is that one of the two complainants (Medytox) is the alleged victim of trade secret theft while the other complainant (Allergan) is the domestic industry allegedly injured by the accused imports.  The two companies are competitors in the global market, and the only cooperative relationship between them is that Allergan has agreed to market and distribute one of Medytox's products in the United States.  

It looks a lot like Allergan simply doesn't want a competitor to enter the market and so is trying to co-opt Medytox's trade secret complaint in order to build a Section 337 case.

Daewoong has submitted a public interest statement painting this complaint as part of a larger scheme by Allergan to maintain its monopoly power in the U.S. market through anti-competitive conduct.  Specifically Daewoong notes that Allergan settled a class action lawsuit alleging that Allergan paid off Medytox in 2013 to keep the Korean company from introducing its own Botox competitor into the U.S. market.

Daewoong also relies on Allergan's own arguments about the injury it will suffer from the introduction of a Botox competitor to argue that Allergan is using Section 337 to preserve market dominance.  Allergan states in the complaint that Botox's market share is "in excess of 70%" which Daewoong characterizes as "so overwhelmingly dominant" that "Allergan has nearly unfettered ability to charge U.S. consumers whatever prices it desires."  The introduction of a new competing product, Daewoong argues, would significantly reduce prices for consumers and save the government money on Medicare payments.  

It will be interesting to see whether these allegations of anti-competitive intent have any impact on how the ITC addresses the peculiar disconnect in this case between the domestic industry and the victim of the unfair act.