UNITED STATES INTERNATIONAL TRADE COMMISSION
`WASHINGTON DC
`
`Before the Honorable Charles E. Bullock
`Chief Administrative Law Judge
`
`In the Matter of
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`CERTAIN FOODSERVICE EQUIPMENT
`AND COMPONENTS THEREOF
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`Inv. No. 337- TA-1166
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`RESPONDENTS’ POST-HEARING BRIEF
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`RESPONDENTS’ POST-HEARING BRIEF
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`TABLE OF CONTENTS
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`I.
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`Introduction ......................................................................................................................... 1
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`A.
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`Procedural History .................................................................................................. 7
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`Major filings and rulings in the Investigation ............................................. 7
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`Substantive stipulations between the parties............................................. 11
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`B.
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`The Parties ............................................................................................................ 12
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`Complainants ............................................................................................ 12
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`a)
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`b)
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`c)
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`d)
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`e)
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`Illinois Tool Works, Inc. ............................................................... 12
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`Vesta (Guangzhou) Catering Equipment Co., Ltd and Vesta
`Global Limited .............................................................................. 12
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`Admiral Craft Equipment Corp. ................................................... 13
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`Vulcan ........................................................................................... 13
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`Entrée LLC.................................................................................... 13
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`Respondents .............................................................................................. 13
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`a)
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`b)
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`c)
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`d)
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`e)
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`Guangzhou Rebenet Catering Equipment Manufacturing
`Co., Ltd. ........................................................................................ 13
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`Zhou Hao ...................................................................................... 14
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`Ace Plus International Limited ..................................................... 14
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`Guangzhou Liangsheng Trading Co., Ltd..................................... 15
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`Zeng Zhaoliang (William Zeng) ................................................... 15
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`C.
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`D.
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`Products at Issue ................................................................................................... 15
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`Alleged Trade Secrets at Issue .............................................................................. 18
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`BOMs and Technical Drawings ................................................................ 20
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`Molds and Components ............................................................................ 22
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`Supplier Lists ............................................................................................ 23
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`Customer List and Pricing ........................................................................ 24
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`E.
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`Witness Testimony................................................................................................ 26
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`1.
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`Respondents .............................................................................................. 26
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`a)
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`b)
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`Fact Witnesses .............................................................................. 26
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`Expert Witnesses ........................................................................... 27
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`2.
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`Complainants and Alleged Third-Party Domestic Industry
`Participant Entrée ...................................................................................... 28
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`a)
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`Fact Witnesses .............................................................................. 28
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`b)
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`Expert Witnesses ........................................................................... 30
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`3.
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`Third Parties .............................................................................................. 31
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`II.
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`Jurisdiction and Importation ............................................................................................. 32
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`A.
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`B.
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`Jurisdiction ............................................................................................................ 32
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`Importation ............................................................................................................ 36
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`III.
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`Trade Secret Misappropriation ......................................................................................... 36
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`A.
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`Applicable Law ..................................................................................................... 37
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`Threshold Question Regarding Existence of Trade Secret ....................... 38
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`Elements of Misappropriation................................................................... 40
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`Sources for the Commission’s Federal Standard for Assessing
`Trade Secret Misappropriation ................................................................. 41
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`a)
`
`b)
`
`c)
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`Defend Trade Secrets Act (“DTSA”) ........................................... 41
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`Uniform Trade Secrets Act (“UTSA”) ......................................... 42
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`Restatement of Unfair Competition .............................................. 43
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`B.
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`Existence of Asserted Trade Secrets ..................................................................... 44
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`BOMs & Technical Drawings .................................................................. 44
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`a)
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`b)
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`c)
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`Bills of Materials........................................................................... 45
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`BOM Codes .................................................................................. 51
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`2D Drawings ................................................................................. 58
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`Molds and Components ............................................................................ 69
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`Supplier Lists ............................................................................................ 73
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`Customer Lists and Pricing of Products.................................................... 77
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`C.
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`Ownership of Trade Secrets .................................................................................. 84
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`BOMs & Technical Drawings .................................................................. 84
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`Molds and Components ............................................................................ 89
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`Supplier Lists ............................................................................................ 94
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`Customer Lists and Pricing of Products.................................................... 95
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`D.
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`Product-Specific Evidence of Misappropriation and Use ..................................... 96
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`1.
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`2.
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`3.
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`4.
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`BOMs & Technical Drawings .................................................................. 96
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`Molds and Components .......................................................................... 113
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`Supplier Lists .......................................................................................... 116
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`Customer Lists and Pricing of Products.................................................. 118
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`E.
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`General Evidence of Misappropriation and Use ................................................. 122
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`IV.
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`Tortious interference with contractual relation ............................................................... 122
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`A.
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`B.
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`Applicable Law ................................................................................................... 124
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`V.
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`Injury to a Domestic Industry ......................................................................................... 152
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`A.
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`B.
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`Applicable Law ................................................................................................... 152
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`Existence of a Domestic Industry ....................................................................... 159
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`The Alleged Domestic Industry Participants .......................................... 159
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`Complainants’ Domestic Industry Allegations ....................................... 162
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`Corrected Calculations of Domestic Investments ................................... 168
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`a)
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`Investments Categorized as Labor and Capital or Plant and
`Equipment ................................................................................... 172
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`(i)
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`(ii)
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`Labor or Capital .............................................................. 172
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`Plant and Equipment ....................................................... 187
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`b)
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`Investments Categorized by Nature of Activity .......................... 194
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`(i)
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`(ii)
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`Production ....................................................................... 195
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`Research and Development............................................. 196
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`(iii)
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`Product Certification ....................................................... 199
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`(iv)
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`Post-Importation Inspection ............................................ 200
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`(v)
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`Technical Service ............................................................ 202
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`(vi) Warranty Payments ......................................................... 204
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`Alleged Significance of the Domestic Investments ................................ 206
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`a)
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`b)
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`c)
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`d)
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`Adcraft, Entrée, and Vulcan’s Domestic Activities Are Not
`“Qualifying Activities” ............................................................... 207
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`The DI Participants’ Investments Are Not Significant Even
`if All Alleged Activities Are Considered Qualifying
`Activities ..................................................................................... 217
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`Value Added by Each Type of Activity ...................................... 218
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`Complainants’ Other Assertions of “Significance” .................... 221
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`(i)
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`(ii)
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`Significance to Adcraft, Entrée, and Vulcan’s
`Business .......................................................................... 222
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`Alleged Significance Relative to the Number of
`Domestic Value Chain Links .......................................... 227
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`(iii) Alleged Significance Based on Margin .......................... 228
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`(iv) Alleged Significance as Compared to Size of the
`Market ............................................................................. 230
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`Requirement for Production-Related Activities in the United States ..... 233
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`C.
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`Substantial Injury or Threat of Substantial Injury .............................................. 240
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`Alleged Existence of Injury .................................................................... 241
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`a)
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`b)
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`c)
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`d)
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`e)
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`f)
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`g)
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`Quantitative Evidence of Sales Growth ...................................... 242
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`Anecdotal Examples of Supposed Lost Sales, Revenue, or
`Customers ................................................................................... 245
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`Alleged Reduction in Profits or Margins .................................... 249
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`Alleged Reduction in Market Share ............................................ 252
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`Alleged Reduction in Employment ............................................. 254
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`Alleged Harm to Market Perception and Goodwill .................... 255
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`Alleged Injury to Third-Party Service Providers ........................ 255
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`Lack of Nexus between Any Injury and the Alleged Unfair Acts .......... 257
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`a)
`
`b)
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`c)
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`Other Manufacturers as the Source of Harm .............................. 258
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`New Tariffs as a Source of Harm ............................................... 260
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`Product Quality Issues as a Source of Harm ............................... 260
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`Complainants’ Insufficient Allegations Regarding Threat of Future
`Injury ....................................................................................................... 262
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`Complainants Fail to Show that Any Injury Attributable to
`Respondents’ Alleged Unfair Acts is Substantial ................................... 263
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`VI.
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`Alleged Spoliation .......................................................................................................... 267
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`A.
`
`B.
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`The Chief ALJ Has Already Rejected Complainants’ Evidence Spoliation
`Allegation Against Rebenet and Zhou Hao ........................................................ 267
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`............ 269
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`VII. Affirmative Defenses ...................................................................................................... 272
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`A.
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`Reverse Engineering ........................................................................................... 272
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`Reverse Engineering of Product-Related Alleged Trade Secrets ........... 273
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`a)
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`Reverse Engineering Is Common In the Industry ....................... 274
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`b)
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`Rebenet Reverse Engineered the Accused Products
`Independent of Any Alleged Vesta Trade Secrets ...................... 276
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`Other Alleged Trade Secrets Are Readily Ascertainable ....................... 281
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`B.
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`Statute of Limitations .......................................................................................... 282
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`Applicable Law ....................................................................................... 282
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`a)
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`b)
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`Trade Secret Misappropriation ................................................... 282
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`Tortious Interference ................................................................... 284
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`Complainants’ Trade Secret Allegations Are Barred by Applicable
`Statutes of Limitations ............................................................................ 285
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`a)
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`b)
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`Complainants First Observed the Alleged Misappropriation
`in Early 2016 ............................................................................... 285
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`“Findings”
`Complainants’ Heavy Reliance on
`Before May 8, 2016 to Support Trade Secret
`Misappropriation Claim .............................................................. 287
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`Complainants’ Tortious Interference Claims are Barred by the
`Statute of Limitations .............................................................................. 291
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`C.
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`Remedy & Bonding ............................................................................................ 292
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`Limited Exclusion Order......................................................................... 292
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`Cease and Desist Order (CDO) ............................................................... 298
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`Bond ........................................................................................................ 299
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`VIII. Conclusion ...................................................................................................................... 300
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`List of Tables
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`Table 1: Public Explosive Diagrams and Part Lists of Gas Cooking Products ............................ 47
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`Table 2: Public Explosive Diagrams and Part Lists of Vesta Products ........................................ 49
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`Table 3: Public Use of “Vesta BOM Codes” ................................................................................ 52
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`Table 4: File Path Location of Vesta Drawings ............................................................................ 63
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`List of Exhibits
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`Exhibit 1 (CBI): Email correspondence between counsel ............................................................ 47
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`TABLE OF AUTHORITIES
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`Cases
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`Page(s)
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`Beard v. Edmondson & Gallagher,
`790 A.2d 541 (D.C. 2002) .....................................................................................................284
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`Blazer Foods, Inc. v. Rest. Properties, Inc.,
`259 Mich. App. 241 (2003)....................................................................................................284
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`C.I.R. v. Engle,
`464 U.S. 206 (1984) ...............................................................................................................239
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`Certain Activity Tracking Devices,
`Inv. No. 337-TA-963, ID (Aug. 23, 2016)....................................................................... passim
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`Certain Airtight Cast-Iron Stoves,
`Inv. No. 337-TA-69, Comm’n Op. (Jan. 1981) .............................................215, 216, 235, 236
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`Certain Apparatus for the Continuous Prod. of Copper Rod,
`1979 WL 445781, Inv. No. 337-TA-52, Comm’n Op. (Nov. 23, 1979) ...........................38, 41
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`Certain Arrowheads with Deploying Blades,
`Inv. No. 337-TA-977, Comm’n Op. (April 28, 2017) ...........................................................298
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`Certain Bone Cements, Components Thereof & Prods. Containing the Same,
`Inv. No. 337-TA-1153, Comm’n Op. (January 25, 2021) ............................................... passim
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`Certain Bone Cements, Components Thereof & Prods. Containing the Same,
`Initial ID, 2020 WL 2617311 (May 6, 2020) ..........................................................................39
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`Certain Botulinum Toxin Products, Processes For Mfg. Or Relating To Same And
`Certain Products Containing Same, Comm’n Op., 2021 WL 141507 (Jan 13,
`2021) ................................................................................................................................ passim
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`Certain Cast Steel Railway Wheels,
`Inv. No. 337-TA-655, ID (Oct. 16, 2009) ..............................................................152, 153, 234
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`Certain Crawler Cranes,
`Inv. No. 337-TA-887, Comm’n Op. (May 6, 2015) ....................................................38, 40, 41
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`Certain Cube Puzzles,
`Inv. No. 337-TA-112, USITC Pub. No. 1334, Comm’n Op. (Jan. 1983)........................ passim
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`Certain Cube Puzzles,
`Inv. No. 337-TA-112, ID, 1982 WL 212675 (Sept. 27, 1982) ..............................................229
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`Certain Dynamic Random Access Memories,
`Inv. No. 337-TA-242, USITC Pub. No. 2034, Comm’n Op. (Nov. 1987) ............................154
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`Certain Foodservice Equip.,
`Inv. No. 337-TA-1166, Comm’n Op. (Dec. 14, 2020) ..........................................................265
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`Certain Ink Markers and Packaging Thereof,
`Inv. No. 337-TA-552, Order No. 30 (Oct. 27, 2005) .............................................152, 153, 234
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`Certain Indus. Automation Sys. & Components Thereof,
`Inv. No. 337-TA-1074, 2018 WL 3491700, Order No. 30 (June 21, 2018) ..........124, 126, 135
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`Certain Kinesiotherapy Devices and Components Thereof,
`Inv. No. 337-TA-823, Comm’n Op. (June 17, 2013) ............................................154, 220, 229
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`Certain Male Prophylactic Devices,
`Inv. No. 337-TA-546, Comm’n Op. (Aug. 1, 2007) ..............................................155 221, 229
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`Certain Miniature, Battery-Operated, All Terrain, Wheeled Vehicles,
`Inv. No. 337-TA-122, USITC Pub. 1300, Comm’n Op (Oct. 1982) ............................... passim
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`Certain Non-Volatile Memory Devices,
`Inv. No. 337-TA-1046, ID (Apr. 27, 2018), aff’d Comm’n Op. (Oct. 26, 2018) ..........156, 211
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`Certain Processes for the Manufacture of Skinless Sausage Casings & Resulting
`Prod.,
`Inv. No. 337-TA-148/169, ID, 1984 WL 273789 (July 31, 1984)
`(“Sausage Casings”) ........................................................................................................ passim
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`Certain Prods. with Gremlins Character Depictions,
`Inv. No. 337-TA-201, USITC Pub. 1815, Comm’n Op. (Mar. 1986) ............................. passim
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`Certain Rubber Resins,
`Inv. No. 337-TA-849, Comm’n Op., 2014 WL 7497801 (Feb. 26, 2014) ....157, 272, 273, 295
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`Certain Solid State Storage Drives,
`Inv. No. 337-TA-1097, Comm’n Op. (June 19, 2018) ..........................................................236
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`Certain Ultra-Microtome Freezing Attachments,
`Inv. No. 337-TA-10, Comm’n Op. (Apr. 2, 1976) ................................................................234
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`Certain Vertical Milling Machines,
`Inv. No. 337-TA-133, USITC Pub. 1512, Comm’n Op. (Mar. 1984) ...........................157, 261
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`FDA v. Brown & Williamson Tobacco Corp.,
`529 U.S. 120 (2000) .......................................................................................................238, 239
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`First Express Servs. Grp., Inc. v. Easter,
`286 Neb. 912 (2013) ..............................................................................................................281
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`Glynne v. Wilson Med. Ctr.,
`236 N.C. App. 42 (2014) .......................................................................................................284
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`GPX Int’l Tire Corp. v. United States,
`666 F.3d 732 (Fed. Cir. 2011)........................................................................................238, 239
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`Incase, Inc. v. Timex Corp.,
`No. CV 02-40022-FDS, 2005 WL 8176487 (D. Mass. Mar. 22, 2005) ..................................80
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`InterDigital Commc’ns, LLC v. Int’l Trade Comm’n,
`707 F.3d 1295 (Fed. Cir. 2013)......................................................................................236, 237
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`Lelo Inc. v. Int’l Trade Comm’n,
`786 F.3d 879 (Fed. Cir. 2015)........................................................................154, 218, 220, 221
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`Metallurgical Indus. Inc. v. Fourtek, Inc.,
`790 F.2d 1195 (5th Cir. 1986) .................................................................................................81
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`Northstar Energy LLC v. Encana Corp.,
`Case No. 1:13-CV-200, 2014 WL 5343423
`(W.D. Mich. Mar. 10, 2014) ..................................................................................134, 145, 151
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`Pearson v. U.S. Bank Nat. Ass’n,
`Case No. CIV. 13-889, 2014 WL 4163020 (D. Minn. Aug. 21, 2014) .................................270
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`Petrella v. Metro-Goldwyn-Mayer, Inc.,
`572 U.S. 663 (2014) ...............................................................................................................284
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`Rousseau v. Diemer,
`24 F. Supp. 2d 137 (D. Mass. 1998) ......................................................................................284
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`TianRui Group Co. Ltd. v. Int’l Trade Comm’n,
`661 F.3d 1322 (Fed. Cir. 2011)........................................................................................ passim
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`WaveDivision Holdings, LLC v. Highland Capital Mgmt. L.P.,
`Case No. CIV.A. 08C-11-132-JO, 2011 WL 13175837
`(Del. Super. Ct. Oct. 31, 2011) ..............................................................................................284
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`Zippertubing Co. v. Teleflex Inc.,
`757 F.2d 1401 (3d Cir. 1985).............................................................................................80, 81
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`Statutes
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`18 U.S.C. §§ 1831-39, Defend Trade Secrets Act of 2016 (“DTSA”) .................................. passim
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`18 U.S.C. § 1836(d) .............................................................................................................282, 283
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`18 U.S.C. § 1839(3) ...............................................................................................................41, 273
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`18 U.S.C. § 1839(5) .......................................................................................................................42
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`18 U.S.C. § 1839(6) .......................................................................................................................42
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`19 U.S.C. § 1337(a) ............................................................................................................... passim
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`19 U.S.C. §§ 2901-06, Omnibus Trade and Competitiveness
`Act of 1988 ..............................................................................................36, 152, 233, 234, 237
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`19 U.S.C. 1337, Tariff Act of 1930 Section 337, as amended............................................... passim
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`Uniform Trade Secrets Act (“UTSA”) .................................................................................. passim
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`Other Authorities
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`132 Cong. Rec 7119 (1986) .........................................................................................................237
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`H.R. Rep. No. 100-40, Pt. 1 (1987) .....................................................................................237, 238
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`N.Y. C.P.L.R. § 214 .....................................................................................................................284
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`Pub. L. No. 112-99, 126 Stat. 265 (2012) ....................................................................................238
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`Restatement (2d) of Conflict of Laws § 136 ..................................................................................35
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`Restatement (2d) of Torts § 766 ....................................................................................................34
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`Restatement (3d) of Unfair Competition § 39 (1995) ....................................................................43
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`Restatement (3d) of Unfair Competition § 40 (1995) ......................................................43, 44, 283
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`Restatement (3d) of Unfair Competition § 42 cmt. d. (1995) ...................................38, 74, 82, 272
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`Restatement of Torts § 757, cmt. b. ..............................................................................................39
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`S. Rep. No. 100-71 (1987) ...................................................................................................237, 238
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`I.
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`INTRODUCTION
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`This Investigation was deeply flawed from the outset. Complainants’ allegations amount
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`to no more than speculation and assumption that Respondents must have committed
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`misappropriation and tortious interference. Complainants’ logic is, at best, post hoc ergo propter
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`hoc fallacy. They start with the unsupported, and unsupportable, premise that Rebenet could not
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`have designed and developed its products—notwithstanding that they are basic, almost
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`commodity, utilitarian commercial kitchen appliances—without misappropriating Complainants’
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`trade secrets. They then point to circumstantial evidence that they contend is merely consistent
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`with that false narrative. This not only attempts to reverse the burden of proof, but it has already
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`been rejected by the Chinese authorities. Specifically, after
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` Vesta,
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`Vesta filed reports urging the Chinese authorities to investigate. Complainants’ scheme
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`established nothing. Much like the allegations being presented here, Vesta’s police filings were
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`based on speculative evidence, including visual similarities between Complainants’ products and
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`Rebenet’s products. According to Vesta’s private investigator, the Chinese authorities declined
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`to even accept the case.
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`It is unsurprising that the Chinese authorities did not find reason to investigate.
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`Complainants’ products are far from unique, or innovative, or complex. Vesta is one of many
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`companies in China that manufacture
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`and sell gas cooking equipment to the
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`foodservice equipment industry. Their
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`products (as shown in the image at
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`right) are largely similar in design,
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`specifications, and overall appearance to those supplied by others in the industry, including not
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`only Rebenet but also others such as Atosa and Kingbetter.1
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`These similarities between products are a direct result of their utilitarian nature.
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`Customer expectations and needs are largely standardized, and the products have roughly the
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`same physical dimensions because they are dictated by pragmatic considerations and commercial
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`kitchen layouts. For example, counter top griddles have similar heights that must account for
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`average counter height in a restaurant, and gas fryers must be designed to fit fry baskets that have
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`a common shape and dimensions within the American restaurant industry. The products are also
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`rudimentary in materials, components, design, and manufacture. Their basic structures are made
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`from sheet metal that is cut, bent, and assembled together to form a housing. Other components
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`like knobs, burners, and grates are added and, in many cases, can be obtained “off the shelf”
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`from any number of well-known suppliers in China. The same or similar components are used in
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`many companies’ products in the industry.
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`In short, there is no secret sauce. This is not an industry of radical or complex product
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`designs that are produced with cutting edge or innovative manufacturing techniques. It is an
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`industry of “me too” products that fall into well-defined categories (ranges, griddles, fryers, etc.)
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`and that all look and function roughly the same. Complainants are part of this industry,
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`; see also JX-
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`1 Kingbetter is partially owned by Foremost, is sold in the U.S. by Foremost under the name Core
`Pro Cooking (CPC), and competes against Complainants’ companies for sale of foodservice
`equipment. [See RX-0002C (Corliss RWS) at Q/A 18; JX-0261C
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`; JX-0376C (Powers Dep. Tr.) at 181.]
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`RESPONDENTS’ POST-HEARING BRIEF
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`INV. NO. 337-TA-1166
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`Vesta is simply concerned about facing competition from another startup company that
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`has entered the market and is now offering similar products. But Rebenet has not committed any
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`unfair act by developing and entering the market with its own “me too” products, just as Vesta
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`and others in the industry have done before it. Vesta asserts no patents, no copyrights, no
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`trademarks, and no trade dress, so questions of whether the products look or function alike (or
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`even identically) are simply not at issue. The only question is whether Complainants can
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`actually sustain any of their allegations that Respondents have competed unfairly in developing,
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`manufacturing, or selling the products at issue. They cannot.
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`If Complainants are to be believed, they filed this Investigation after
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` Even with Complainants’ scheme and other efforts to investigate, there is not a shred of
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`reliable evidence suggesting that Respondents actually took or used any Vesta BOM, drawing, or
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`other document. Complainants filed a report with local Chinese authorities, but the speculation
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`and inferences they relied upon did not meet the local Chinese authorities’ standards to open an
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`investigation. And so, Vesta turned its attention to the United States and the ITC, even though
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`the dispute is indisputably one that is based in China—the alleged trade secrets were developed
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`in China, the agreements being asserted are private contracts between Chinese companies, and
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`the alleged unfair acts all occurred in China. [See CPHB (EDIS 703691) at 12 (“Vesta has been
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`making kitchen equipment for more than 20 years. . . . Since its beginnings, Vesta has invested
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`substantially in developing, engineering, and designing its foodservice equipment products and
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`their components.”).] Turning to the Commission, Complainants would have the ALJ and
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`RESPONDENTS’ POST-HEARING BRIEF
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`Commission apply United States law to, and extend United States jurisdiction over, what is at its
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`heart a dispute over Chinese intellectual property and private contracts.
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`Complainants fared no better here, despite months of discovery that turned Rebenet
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`upside down for every last detail of how the accused products are designed. Rebenet produced
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`thousands of technical drawings, and Vesta produced thousands as well to compare to Rebenet’s.
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`Complainants inspected physical samples of Rebenet’s products, and Vesta produced samples of
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`its own products for comparison. Despite this, Complainants have identified little to no
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`correspondence between the detailed structure of Rebenet’s products and Vesta’s. Indeed, of the
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`thousands of drawings across dozens of accused products, Vesta’s technical expert focuses on
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`comparing one Rebenet drawing to one Vesta drawing—concluding that
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`174.] As Respondents will explain, even this, the slenderest of reeds, fails to establish that any
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` [CX-5268C