9th Circuit Tosses Challenge to Trade Secret Theft Allegation From Chinese Steel Companies

A request from a group of four Chinese steel companies to dismiss a case in which the U.S. government alleged the group stole trade secrets was denied by the U.S. Court of Appeals for the 9th Circuit on July 26. The group, comprising Pangang Group Company (PGC) and three of its subsidiaries, is accused of stealing DuPont trade secrets for the production of titanium dioxide in violation of the Economic Espionage Act. In their motion to dismiss, the group claimed immunity from criminal prosecution under the Foreign Sovereign Immunities Act (FSIA), arguing that the group is an "instrumentality" of the Chinese government.

A three-judge panel, made up of two circuit judges and Judge Richard Eaton from the Court of International Trade, unanimously decided to toss the motion because the group failed to prove that they're instrumentalities of a foreign state. In the case, U.S. businessman Walter Liew led an effort to transfer DuPont trade secrets to the Pangang companies. Liew was convicted and the companies were charged with a count of conspiring to commit economic espionage for the benefit of a foreign government or instrumentality. In its motion to dismiss, PGC and its subsidiaries used this indictment only as evidence of its existence as an instrumentality -- a move the court said didn't clear the necessary standard to prove such a claim.