Organik Kimya, San. Ve Tic. A.S. v. International Trade Commission

United States Court of Appeals
for the Federal Circuit
______________________
ORGANIK KIMYA, SAN. VE TIC. A.S., ORGANIK
KIMYA NETHERLANDS B.V., ORGANIK KIMYA US,
INC.,
Appellants
v.
INTERNATIONAL TRADE COMMISSION,
Appellee
ROHM AND HAAS COMPANY, ROHM AND HAAS
CHEMICALS LLC, DOW CHEMICAL COMPANY,
Intervenors
______________________
2015-1774, 2015-1833
______________________
Appeal from the United States International Trade
Commission in Investigation No. 337-TA-883.
______________________
Decided: February 15, 2017
______________________
CATHERINE EMILY STETSON, Hogan Lovells US LLP,
Washington, DC, argued for appellants. Also represented
by JOHN ROBERT ROBERTSON, BENJAMIN HOLT.
SIDNEY A. ROSENZWEIG, Office of the General Counsel,
United States International Trade Commission, Washing-
2 ORGANIK KIMYA v. ITC
ton, DC, argued for appellee. Also represented by DOMINIC
L. BIANCHI, WAYNE W. HERRINGTON.
RAYMOND N. NIMROD, Quinn Emanuel Urquhart &
Sullivan, LLP, New York, NY, argued for intervenors.
Also represented by WILLIAM ADAMS, JAMES BAKER; S.
ALEX LASHER, PAUL F. BRINKMAN, Washington, DC;
CHARLES KRAMER VERHOEVEN, San Francisco, CA.
______________________
Before LOURIE, MAYER, and O’MALLEY, Circuit Judges.
O’MALLEY, Circuit Judge.
Organik Kimya San. ve Tic., A.Ş., Organik Kimya
Netherlands B.V., and Organik Kimya US, Inc. (collec-
tively, “Organik Kimya”) appeal from the International
Trade Commission’s (“the Commission” or “ITC”) 1 deci-
sion imposing default judgment sanctions for spoliation of
evidence and entering a limited exclusion order against
Organik Kimya. See Certain Opaque Polymers, Inv. No.
337-TA-883, 2015 ITC LEXIS 139, at *5–6 (Apr. 17, 2015);
see also Certain Opaque Polymers, Inv. No. 337-TA-883, at
16–24, available at http://www.itcblog.com/images/
commopin883.pdf (“Commission Opinion”); Certain
Opaque Polymers, Inv. No. 337-TA-883, USITC Order No.
27, 2014 WL 5768586 (Oct. 20, 2014) (“ALJ Order”).
Because the Commission did not abuse its discretion in
entering default judgment as a sanction for Organik
Kimya’s spoliation of evidence and further did not abuse
its discretion in entering the limited exclusion order, we
affirm.
1 This opinion uses “the Commission” to refer to the
entity rendering the decision in this case and “ITC” to
refer to the party in this appeal and the agency generally.
ORGANIK KIMYA v. ITC 3
I. BACKGROUND
This case involves trade secrets relating to opaque
polymers, which are hollow spheres used as paint addi-
tives for interior and exterior paints to increase the
paint’s opacity. Organik Kimya and Dow Chemical Com-
pany (“Dow”) 2 both manufacture opaque polymers. Dow
is the market leader in supplying opaque polymers to
paint manufacturers, both in the United States and
worldwide. Dow has maintained this position through a
combination of patent and trade-secret protections.
In May 2013, Dow filed a complaint with the ITC re-
questing an investigation into whether Organik Kimya’s
opaque polymer products infringed four Dow patents. The
ITC granted Dow’s request, and the parties began discov-
ery. During the proceedings, Dow amended its complaint
to add allegations of trade secret misappropriation when
it discovered that Organik Kimya may have coordinated
the production of its opaque polymers with the assistance
of former Dow employee Dr. Dilip Nene. Dow discovered
that other former Dow employees, Dr. Guillermo Perez
and Leonard Strozzi, also may have assisted Organik
Kimya with its development of opaque polymers. As Dow
attempted to obtain discovery relating to the activities of
Dr. Perez, Dr. Nene, and Strozzi, however, Dow discov-
ered spoliation of evidence on a staggering scale.
A. Administrative Law Judge’s Findings
1. Findings Relating to Dr. Perez
In response to a discovery order issued by the Admin-
istrative Law Judge (“ALJ”), Dow’s forensic investigators
2 Rohm and Haas Company and Rohm and Haas
Chemicals LLC became subsidiaries of Dow after Dow
acquired Rohm and Haas in 2009. This opinion collective-
ly refers to the companies as “Dow.”
4 ORGANIK KIMYA v. ITC
traveled to Turkey in February 2014 to inspect Dr. Perez’s
laptop computer. ALJ Order, 2014 WL 5768586, at *15.
Four days before the forensic investigation took place, and
three days after the ALJ issued the discovery order au-
thorizing the examination of the computer, Organik
Kimya began overwriting the laptop’s hard drive by
copying the Program Files folder at least 108 times. Id. at
*15–16. While performing this overwriting, Organik
Kimya also backdated the computer’s internal clock so
that the metadata on the copied files would hide the fact
that the overwriting took place only days before the
inspection. Id. at *16. Organik Kimya even ran a pro-
gram called CCleaner “multiple times to delete a large
percentage of the C drive and all of the D drive in Dr.
Perez’s laptop.” Id. To ensure that its efforts had been
successful, Organik Kimya also used a program called
WinHex at least twelve times to see whether it could
recover any of the deleted information before the court-
ordered forensic investigation took place. Id. at *52.
After Dow informed the ALJ of the forensic examin-
ers’ findings, Organik Kimya submitted a letter to the
ALJ explaining that the IT work done on Dr. Perez’s
computer was simply maintenance undertaken because
Dr. Perez was encountering troubles with the computer.
Id. at *46–47. Organik Kimya also asserted that there
was “no ill-intent or desire to destroy evidence.” Id. at
*47.
The ALJ found Organik Kimya’s explanation to be “a
work of fiction.” Id. He found that Organik Kimya’s
actions made it impossible to know the exact volume and
content of any previously recoverable data, but noted it
was at least clear that it involved “potentially hundreds of
thousands of files.” Id. at *16. The ALJ also found that
there was “no innocent explanation” for Organik Kimya’s
conduct relating to the use of the CCleaner program. Id.
at *52.
ORGANIK KIMYA v. ITC 5
The ALJ concluded that this evidence “leads me to the
inescapable conclusion that Organik Kimya acted in bad
faith when, in contravention of Order No. 16, Organik
Kimya undertook the massive spoliation of evidence on
Dr. Perez’s laptop . . . . In fact, were there such a thing, I
would find Organik Kimya’s egregious behavior to be
gross bad faith.” Id. at *54. The ALJ further stated that
Organik Kimya’s actions, “coupled with the multitude of
lies Organik Kimya knowingly and deliberately presented
to the undersigned to hide or explain away its wrong-
doing, leave[] no doubt that Organik Kimya destroyed
evidence on Perez’s laptop with the intent to impair Dow’s
ability prove [sic] its allegations of trade secret misappro-
priation.” Id. The ALJ found the spoliated evidence
“relevant to Dow’s allegation of trade secret misappropri-
ation and its destruction prejudicial to Dow’s ability to
prosecute same.” Id. at *58.
2. Findings Relating to Dr. Nene
Organik Kimya failed to identify Dr. Nene in response
to an interrogatory seeking the identification of all former
Dow employees who had worked for Organik Kimya. J.A.
14878–79. When Dow discovered Dr. Nene’s involvement
with Organik Kimya and served a subpoena upon him,
Dr. Nene asserted that his communications with Organik
Kimya were never of a technical nature. ALJ Order, 2014
WL 5768586, at *22. A forensic inspection conducted by
Dow, however, found that Dr. Nene engaged in various
technical discussions with Organik Kimya. Id. at *23.
Dow also uncovered two emails relating to Dr. Nene’s
involvement with Organik Kimya and evidence of Organ-
ik Kimya’s attempt to purge those emails; these emails
read: “Confidential information related to the consultant
[Dr. Nene] are still recorded here, they were supposed to
be erased by the IT department,” id. at *15; and “Basak,
can you print them and give them to me please? Then we
should erase them from the system please,” J.A. 4073.
6 ORGANIK KIMYA v. ITC
During discovery, Dow uncovered a suspicious meet-
ing between Dr. Nene and Organik Kimya’s co-CEO at a
hotel in Rotterdam. ALJ Order, 2014 WL 5768586, at
*44. After Dow served Organik Kimya with the complaint
in this matter, Mr. Kaslowski, Organik Kimya’s co-CEO,
called Dr. Nene directly and directed him to travel to
Rotterdam for a “safety audit.” Id. When Dr. Nene
traveled to Rotterdam about a month later, Mr. Kaslowski
was the first person to meet with Dr. Nene. They met at
Dr. Nene’s hotel rather than at Organik Kimya’s offices.
Id. Both Dr. Nene and Organik Kimya’s co-CEO denied
having this meeting, but the forensic investigation con-
firmed that it occurred. Id.
Dr. Nene also admitted that, around the time he re-
ceived the call from Mr. Kaslowski asking Dr. Nene to
travel to Rotterdam for the “safety audit,” Dr. Nene
“removed the hard drive from his personal computer and
smashed it with a hammer and threw it in the garbage.”
Id. Dr. Nene testified that he smashed the hard drive to
make sure that the information on the drive could not be
recovered. Id. at *25. He also admitted to destroying a
bag full of zip drives. Id. The ALJ found this evidence
“very significant, as well as extremely troubling, as it
shows not only joint purpose, but tends to establish Dr.
Nene and Mr. Kaslowski recognized the obvious implica-
tion that such a meeting would have since it occurred
shortly after this investigation commenced.” Id. at *44.
The ALJ also determined that “it seems unlikely the co-
CEO of Organik Kimya would participate in a routine
safety audit and meet in a hotel to discuss it and then lie
about the meeting afterwards.” Id.
The ALJ found sufficient evidence to conclude that
Organik Kimya had the ability to control Dr. Nene and
had failed to act responsibly to preserve Dr. Nene’s infor-
mation, thereby rendering Organik Kimya in reckless
disregard of its duty to preserve Dr. Nene’s information.
Id. at *57. But the ALJ determined that there was insuf-
ORGANIK KIMYA v. ITC 7
ficient evidence to link Dr. Nene’s deletion of evidence to a
design by Organik Kimya to destroy the data deliberately.
Id. The ALJ accordingly found “no sanction-worth[y]
spoliation” relating to Dr. Nene’s documents. Id. at *65.
3. Findings Relating to Strozzi
On March 21, 2014, one day after the ALJ ordered
Strozzi’s files to be preserved and four days prior to the
scheduled forensic examination of Strozzi’s computer,
someone logged into the computer and deleted 2,742 user-
created files and folders, many of which were later recov-
ered and found to be responsive to previously identified
keyword search terms. Id. at *20–21. The inspectors also
found evidence of numerous undisclosed and unproduced
USB storage devices used on Strozzi’s work computer. Id.
at *21. But before Dow learned about the existence of the
external storage devices, Strozzi took his computer bag,
which had his computer and storage devices, “into a
bathroom of a highway rest stop, but ‘accidentally’ left [it]
there.” Id.
The ALJ found that Organik Kimya had control over
Strozzi’s laptop but not the external storage devices. Id.
at *54. The ALJ also found that Organik Kimya had
never given its employees a litigation hold notice, instead
leaving it up to each individual employee whether to save
or delete electronic files. Id. at *56. Although the evi-
dence from Strozzi’s laptop was later recovered through
forensic investigation, the ALJ determined that the
deletion of the files “evinces an attempt to cover-up wrong
doing. What is even more shocking is that at the time I
issued my Preservation Order, Organik Kimya was al-
ready on notice of the massive spoliation of evidence on
Dr. Perez’s laptop.” Id. at *56. The ALJ noted that “[t]he
matter is even worse when discussing the loss of the
laptop itself, for Organik Kimya had the laptop in its
possession for the forensic inspection and yet inexplicably
returned it to Strozzi, which allowed him to ‘lose’ it.” Id.
8 ORGANIK KIMYA v. ITC
at *57. Additionally, Dow only received a small portion of
the deleted documents because only a few were responsive
to the search terms the parties identified prior to the
forensic search. Id. at *63. The ALJ noted, however, that
many of the additional files for which Dow received the
file name but never saw the full document seemed plainly
relevant to the case based on the file names, whether or
not associated with the identified search terms. Id. The
ALJ determined that Organik Kimya failed to show that
these documents were neither relevant nor prejudicial.
Id.
As to Organik Kimya’s conduct relating to Strozzi’s
laptop, the ALJ found “the spoliation of evidence on the
Strozzi laptop and the spoliation of the Strozzi laptop
itself was done in an effort to prevent Dow from access to
evidence it might use to support its allegations in this
investigation.” Id. at *57. The ALJ concluded that “the
spoliation of evidence on the Strozzi laptop and the loss of
the Strozzi laptop itself was in bad faith.” Id. The ALJ
also found “at least some of the documents deleted from
the Strozzi laptop to be relevant and prejudicial to Dow’s
allegations in this investigation.” Id. at *63.
4. The ALJ’s Conclusions
On May 19, 2014, Dow moved for sanctions, including
a default judgment against Organik Kimya. Id. at *2.
Two days later, Organik Kimya filed a motion to termi-
nate the investigation by consent order. Id. at *66 n.19.
Organik Kimya “agreed to completely and indefinitely
withdraw the accused products from the U.S. market.”
J.A. 9142. Organik Kimya admitted that “a portion of the
hard drive of Mr. Perez’s computer was overwritten in
such a way that previously deleted files were potentially
rendered unrecoverable through forensic means.” ALJ
Order, 2014 WL 5768586, at *29. Nevertheless, Organik
Kimya urged the ALJ to enter its proposed consent order
rather than a default judgment.
ORGANIK KIMYA v. ITC 9
The ALJ conducted a two-day hearing on Dow’s sanc-
tion motion and Organik Kimya’s consent order motion.
At the hearing, Organik Kimya also argued in the alter-
native that any sanction be limited to an adverse infer-
ence precluding Dr. Perez from testifying about Organik
Kimya’s alleged independent development of its opaque
polymers. J.A. 11509 at 399:24–400:14. The ALJ granted
Dow’s motion for default judgment in a 119-page initial
determination. See generally ALJ Order, 2014 WL
5768586. The opinion recounted Organik Kimya’s de-
struction of evidence in detail. It included the following
excerpt as part of its Executive Summary:
[A]s will be made clear in the pages that follow
this is an extreme case, for Organik Kimya flouted
its obligation to preserve evidence, deliberately
destroyed evidence, and then actively attempted
to deceive the undersigned as to what it had done.
Given: (1) the grave damage Organik Kimya’s de-
liberate conduct potentially could have on the ad-
ministration of justice; (2) the need to deter such
egregious conduct in the future; and (3) the cer-
tain prejudice to Dow, only the strongest remedy
available is sufficient.
Id. at *2.
When discussing a sanction, the ALJ stated that Or-
ganik Kimya’s “willful, bad faith misconduct” had de-
prived Dow of its ability to pursue its trade secret
misappropriation claim effectively and the ALJ of his
“ability to oversee a prehearing process that would facili-
tate a fair and timely resolution of this investigation on
its merits.” Id. at *65. The ALJ therefore found that “[n]o
sanction short of default is available to return the parties
to the position in which they would have been but for the
deliberate destruction by Organik Kimya of evidence
potentially favorable to Dow.” Id. The ALJ then ex-
plained why shifting the burden of proof and using ad-
10 ORGANIK KIMYA v. ITC
verse inferences would not address adequately Organik
Kimya’s conduct in this case. Id. at *66. According to the
ALJ, “no lesser sanction will adequately deter the repeti-
tion of this kind of easily accomplished and highly preju-
dicial destruction of evidence.” Id.
The ALJ further clarified that he found “Organik
Kimya’s abhorrent conduct” with regard to Dr. Perez’s
laptop and files to be “more than sufficient to justify the
Default Sanction against Organik Kimya.” Id. at *76. He
found “Organik Kimya’s contumacious and inexplicable
conduct” with regard to Strozzi and his documents “to
independently justify the most severe sanction, even were
I to heed Organik Kimya’s lack of prejudice argument.”
Id.
B. The Commission Affirms the ALJ’s Conclusions
The Commission determined that the initial determi-
nation “recites in detail the discovery-related misconduct
in this investigation,” and the Commission affirmed and
adopted all of the initial determination’s factual findings.
Commission Opinion, at 6. The Commission also “af-
firm[ed] and adopt[ed] the ALJ’s determination of de-
fault.” Id.; see also id. at 12 (“We affirm all of the [initial
determination’s] findings concerning the default sanc-
tion.”). The Commission determined that the spoliation of
evidence on Dr. Perez’s computer “alone is more than
sufficient to justify the sanctions ordered by the ALJ.” Id.
at 13. It went on to find that the intentional deletion of
files by Strozzi “is at least circumstantial evidence relat-
ing to the culpable state of mind found by the ALJ.” Id. at
14.
Organik Kimya argued that the ALJ failed to consider
its proposed lesser sanctions. See id. at 14–17. The
Commission rejected Organik Kimya’s argument as to the
consent order, noting that “[t]he Commission has always
reserved the right to deny termination by consent in
appropriate circumstance.” Id. at 15. The Commission
ORGANIK KIMYA v. ITC 11
also noted that “allowing Organik Kimya to exit the
investigation on consent ‘without accepting the full meas-
ure of its responsibility for its egregious actions’ would not
be a sufficient deterrent” because, “[i]f such termination
were allowed here, future parties may decide to engage in
discovery abuse with the understanding that if they are
caught they can merely exit the investigation through the
consent order procedures without being held accountable
for their misconduct.” Id. at 15–16. As to an adverse
inference or some lesser sanction, the Commission stated
that “[t]he ALJ also explained why any sanction less than
default would be insufficient” and that the Commission
could “discern no conflict between the ALJ’s determina-
tion and Shepherd [v. American Broadcasting Cos., 62
F.3d 1469 (D.C. Cir. 1995)],” which Organik Kimya had
cited in support for its argument. Commission Opinion,
at 17.
The Commission found that an exclusion order and a
cease and desist order were appropriate remedies. Id. at
21. Based on the record evidence, the Commission deter-
mined that the evidence demonstrated it would have
taken Organik Kimya 25 years to develop a commercial
opaque polymer comparable to Dow’s without using Dow’s
trade secrets. Id. The Commission therefore found that a
25-year period would be an appropriate length for the
exclusion order. Id. The exclusion order included a
narrowing provision, however, that allows Organik Kimya
to seek an opinion from the Commission that would allow
Organik Kimya to import products that it shows were
developed without using Dow’s misappropriated trade
secrets. Id. at 23–24.
II. DISCUSSION
A. Default Judgment Sanction
Any sanctions imposed by the Commission are re-
viewed for an abuse of discretion. Genentech, Inc. v. U.S.
Int’l Trade Comm’n, 122 F.3d 1409, 1414 (Fed. Cir. 1997).
12 ORGANIK KIMYA v. ITC
An abuse of discretion occurs if “the Commission’s sanc-
tion decision (1) is clearly unreasonable, arbitrary, or
fanciful; (2) is based on an erroneous conclusion of law;
(3) rests on clearly erroneous fact findings; or (4) follows
from a record that contains no evidence on which the
decision-making body could rationally base its decision.”
Id. at 1415.
The parties initially dispute the proper standard for
reviewing the Commission’s decision to impose default
judgment sanctions against Organik Kimya. The ITC and
Dow argue that we need only look to 19 C.F.R. § 210.33(b)
and Federal Rule of Civil Procedure 37(b) in our review of
the sanctions. Under 19 C.F.R. § 210.33(b), the ALJ in an
ITC investigation has the authority to issue non-monetary
sanctions for failure to comply with an order compelling
discovery. The list of possible sanctions includes “any
other non-monetary sanction available under Rule 37(b)
of the Federal Rules of Civil Procedure.” 19 C.F.R.
§ 210.33(b)(6). Rule 37(b) states that a court may “ren-
der[] a default judgment against the disobedient party” if
the party fails to obey a discovery order. Fed. R. Civ. P.
37(b)(2)(A)(vi). Because Organik Kimya disobeyed the
ALJ’s express discovery orders through its spoliation of
evidence, the ITC and Dow argue that 19 C.F.R.
§ 210.33(b) and Rule 37(b) support affirmance of the
default judgment sanction.
Organik Kimya argues that the discussion of default
judgment sanctions in Micron Technology, Inc. v. Rambus
Inc., 645 F.3d 1311 (Fed. Cir. 2011), controls our decision.
In Micron, we addressed a default judgment sanction
imposed by a district court under its inherent authority to
control litigation and the judicial process. Id. at 1326. In
reviewing the district court’s decision, we analyzed the
district court’s findings with respect to: (1) bad faith,
(2) prejudice to the opposing party caused by the spolia-
tion, and (3) availability or efficacy of lesser sanctions. Id.
at 1326–29. Organik Kimya does not challenge the find-
ORGANIK KIMYA v. ITC 13
ing of bad faith in this case, but it argues that the Com-
mission erred under Micron because the degree of preju-
dice to Dow was minimal and the Commission did not
adequately address the efficacy of lesser sanctions.
We agree with the ITC and Dow that we should con-
sider the sanctions in this case under the standard of 19
C.F.R. § 210.33(b) and Rule 37(b), because the ALJ and
the Commission based their decisions on Organik Kimya’s
express disobedience of the ALJ’s discovery orders. See
ALJ Order, 2014 WL 5768586, at *4 n.2 (explaining that
the ALJ used 19 C.F.R. § 210.33(b) and Rule 37, not his
inherent authority—to the extent he has such authority—
to sanction Organik Kimya); see also Commission Opin-
ion, at 12–14 (affirming the ALJ’s findings). The ALJ
explicitly ordered the forensic inspection of Dr. Perez’s
computer. ALJ Order, 2014 WL 5768586, at *15. After
allegations arose that Dow was unable to procure certain
discovery from Organik Kimya because documents and
files had been destroyed, the ALJ ordered Organik Kimya
to preserve its documents and even warned that he would
be “mortally annoyed if anything was done to alter, de-
stroy or otherwise mess with the evidence in this case.”
Id. at *18. Organik Kimya’s destruction of thousands of
documents, despite the ALJ’s explicit orders to conserve
the documents, brings this case under the purview of 19
C.F.R. § 210.33(b) and Rule 37(b).
As explained above, 19 C.F.R. § 210.33(b) states that
an ALJ may order any non-monetary sanction available
under Rule 37(b) that is not already included in
§ 210.33(b). Rule 37 permits a court to render a default
judgment against a party that fails to obey an order to
provide or permit discovery. Fed. R. Civ. P.
37(b)(2)(A)(vi); see also Shepherd, 62 F.3d at 1480 (ac-
knowledging that Rule 37(b) “expressly authorizes dis-
missal or default for noncompliance with a discovery
order”); Everyday Learning Corp. v. Larson, 242 F.3d 815,
817–18 (8th Cir. 2001) (“When the facts show willfulness
14 ORGANIK KIMYA v. ITC
and bad faith, as in this case, the district court need not
investigate the propriety of a less extreme sanction. In
such cases, the ‘selection of a proper sanction, including
dismissal, is entrusted to the sound discretion of the
district court.’” (quoting Avionic Co. v. Gen. Dynamics
Corp., 957 F.2d 555, 558 (8th Cir. 1992))). Although the
entry of a default judgment for failure to comply with a
discovery sanction may seem harsh, the Supreme Court
has explained that the most severe sanctions must be
available to district courts in appropriate cases:
There is a natural tendency on the part of review-
ing courts, properly employing the benefit of hind-
sight, to be heavily influenced by the severity of
outright dismissal as a sanction for failure to
comply with a discovery order. It is quite reason-
able to conclude that a party who has been sub-
jected to such an order will feel duly chastened, so
that even though he succeeds in having the order
reversed on appeal he will nonetheless comply
promptly with future discovery orders of the dis-
trict court.
But here, as in other areas of the law, the most
severe in the spectrum of sanctions provided by
statute or rule must be available to the district
court in appropriate cases, not merely to penalize
those whose conduct may be deemed to warrant
such a sanction, but to deter those who might be
tempted to such conduct in the absence of such a
deterrent.
Nat’l Hockey League v. Metro. Hockey Club, Inc., 427 U.S.
639, 642–43 (1976).
Despite these authorities, Organik Kimya argues that
19 C.F.R. § 210.33 effectively mirrors the inherent author-
ity standard discussed in Micron, rather than the Rule 37
standard, because it states that the ALJ can grant relief
“as may be sufficient to compensate for the lack of with-
ORGANIK KIMYA v. ITC 15
held testimony, documents, or other evidence.” 19 C.F.R.
§ 210.33(b)(6). But we have stated previously that
§ 210.33(b) is “coextensive” with Rule 37. Genentech, 122
F.3d at 1418. We further explained that the “only differ-
ence between [§ 210.33] and Rule 37, as construed by the
Commission, is that [§ 210.33] does not provide authority
to award reasonable expenses and attorney fees as a
sanction for cases instituted before August 31, 1994.” 3 Id.
at 1418 n.9; see also Final Rules for Investigations and
Related Proceedings Concerning Unfair Practices in
Import Trade, 59 Fed. Reg. 39,020 (Aug. 1, 1994) (noting
that § 210.33(b) was based on Rule 37(b)).
The Commission therefore can issue default judgment
sanctions in appropriate cases when a party disobeys a
discovery order if the Commission determines that the
conduct at issue warrants such sanctions. This does not
mean that a party’s failure to comply with a discovery
order will warrant imposing default judgment sanctions
in every case; instead, such sanctions can be imposed in
appropriate cases “to penalize those whose conduct may
be deemed to warrant such a sanction” and “to deter those
who might be tempted to such conduct in the absence of
such a deterrent.” Nat’l Hockey League, 427 U.S. at 643.
We leave the determination of such cases to the sound
discretion of the ALJ and the Commission, whose deci-
3 Genentech refers to 19 C.F.R. § 210.36(b) instead
of § 210.33(b) because the interim rule was found at
§ 210.36(b). See Interim Rules Governing Investigations
and Enforcement Procedures Pertaining to Unfair Practic-
es in Import Trade, 53 Fed. Reg. 33,043 (Aug. 29, 1988).
In 1994, the rule was moved to § 210.33(b) as part of the
final rules. See Final Rules for Investigations and Related
Proceedings Concerning Unfair Practices in Import Trade,
59 Fed. Reg. 39,020 (Aug. 1, 1994).
16 ORGANIK KIMYA v. ITC
sions we review for an abuse of discretion. See Genentech,
122 F.3d at 1414.
The ALJ in this case made extensive findings regard-
ing Organik Kimya’s spoliation of evidence on multiple
occasions despite explicit orders from the ALJ to preserve
the evidence. The facts of this case were so extreme that
they led the ALJ to explain, “were there such a thing, I
would find Organik Kimya’s egregious behavior to be
gross bad faith.” ALJ Order, 2014 WL 5768586, at *54.
Organik Kimya compounded its actions when it “actively
attempted to deceive the [ALJ] as to what it had done.”
Id. at *2. The Commission, in reviewing the ALJ’s deci-
sion, stated that it “affirm[ed] and adopt[ed]” all of the
ALJ’s factual findings and his determination of default.
Commission Opinion, at 6. The Commission did not
abuse its discretion in implementing default judgment
sanctions because Organik Kimya destroyed “potentially
hundreds of thousands of files,” ALJ Order, 2014 WL
5768586, at *66, despite explicit orders from the ALJ to
preserve documents and then tried to deceive the ALJ as
to its actions. 4 Indeed, these facts put this case squarely
4 Even if we were to analyze this case under Mi-
cron, the result would be the same. Organik Kimya did
not contest the finding that it acted in bad faith. The
degree of prejudice to Dow was high. The ALJ and the
Commission, which adopted the ALJ’s findings, found
that Organik Kimya destroyed “potentially hundreds of
thousands of files,” ALJ Order, 2014 WL 5768586, at *66,
making it “impossible to know the exact volume and
content of the destroyed data,” Commission Opinion, at
17. This “willful, bad faith misconduct” deprived Dow of
“its ability to pursue its claim of trade secret misappro-
priation” and deprived the ALJ of his “ability to oversee a
prehearing process that would facilitate a fair and timely
resolution of this investigation on its merits.” ALJ Order,
ORGANIK KIMYA v. ITC 17
within the Supreme Court’s admonition that “the most
severe in the spectrum of sanctions provided by statute or
rule must be available to the district court in appropriate
cases” to penalize a party’s sanctionable conduct and to
deter future parties from repeating such conduct. Nat’l
Hockey League, 427 U.S. at 643.
B. The Limited Exclusion Order
If a party is found in default, the Commission can im-
plement relief against the party in default upon the
motion of the complainant. 19 C.F.R. § 210.16(c)(1); see
also 19 C.F.R. § 210.16(a)(2) (specifying that this section
applies to parties found in default under § 210.33(b) for
failure to make or cooperate in discovery). The Commis-
sion will presume the facts alleged in the complaint to be
true, and the Commission may issue an exclusion order, a
cease and desist order, or both. Id. § 210.16(c)(1). This is
consistent with 19 U.S.C. § 1337, which states that the
Commission shall enter a limited exclusion order if it
determines that a violation of § 1337 has occurred and
public interest factors do not counsel against its issuance.
19 U.S.C. § 1337(d)(1); see also Spansion, Inc. v. U.S. Int’l
Trade Comm’n, 629 F.3d 1331, 1358 (Fed. Cir. 2010) (“By
statute, the Commission is required to issue an exclusion
order upon the finding of a Section 337 violation absent a
2014 WL 5768586, at *65. The Commission determined
that the lesser sanctions Organik Kimya sought were
inadequate. Commission Opinion, at 15–16. The Com-
mission also reviewed and adopted the ALJ’s findings,
which included the determination that “no lesser sanction
will adequately deter the repetition of this kind of easily
accomplished and highly prejudicial destruction of evi-
dence.” ALJ Order, 2014 WL 5768586, at *66. The Com-
mission accordingly did not abuse its discretion under
Micron.
18 ORGANIK KIMYA v. ITC
finding that the effects of one of the statutorily-
enumerated public interest factors counsel otherwise.”).
“[T]he Commission has broad discretion in selecting
the form, scope, and extent of the remedy” after finding a
violation of 19 U.S.C. § 1337. Hyundai Elecs. Indus. Co.
v. U.S. Int’l Trade Comm’n, 899 F.2d 1204, 1209 (Fed. Cir.
1990) (quoting Viscofan, S.A. v. U.S. Int’l Trade Comm’n,
787 F.2d 544, 548 (Fed. Cir. 1986)). We can set aside the
Commission’s choice of remedy “only if it is legally errone-
ous, arbitrary and capricious, or constitutes an abuse of
discretion.” Fuji Photo Film Co. v. U.S. Int’l Trade
Comm’n, 386 F.3d 1095, 1106 (Fed. Cir. 2004).
After finding Organik Kimya in default and in viola-
tion of § 1337, the Commission determined that a limited
exclusion order against Organik Kimya and a cease and
desist order against Organik Kimya’s U.S. subsidiary
were appropriate. Commission Opinion, at 21. Based on
the facts in the record, the Commission found 25 years,
the length sought by Dow and supported by Dow’s expert,
to be the proper length for the limited exclusion order and
the cease and desist order. Id. The Commission, howev-
er, expressly allowed Organik Kimya to bypass the lim-
ited exclusion order and import products using opaque
polymers into the United States prior to the completion of
the 25-year period as long as Organik Kimya shows the
Commission that it has developed its opaque polymers
without the use of Dow’s misappropriated trade secrets.
Id. at 23.
On appeal, Organik Kimya does not challenge the
cease and desist order; Organik Kimya only challenges
the limited exclusion order, alleging that the Commission
committed legal error by failing to consider Organik
Kimya’s arguments regarding the proper remedy, includ-
ing its challenge to the 25-year term. The Commission
considered Organik Kimya’s briefing, however, and de-
termined that its arguments as to the scope of the exclu-
ORGANIK KIMYA v. ITC 19
sion order relied entirely on arguments regarding the
merits of the trade secret allegations. Id. at 19–20.
Because Organik Kimya defaulted on those claims due to
the discovery sanctions imposed, the Commission deter-
mined that Organik Kimya could not relitigate the under-
lying merits of the trade secret claims by collaterally
attacking the merits in its remedy briefing. Id. at 20.
The Commission also found Dow’s expert credible
when he opined that it would take Organik Kimya 15 to
25 years to develop opaque polymers independently. Id.
at 21. Dow’s expert explained the basis for his calculation
and supported his opinion with extensive facts from the
record. The Commission, in its discretion, found 25 years
to be the proper length for the exclusion order, and that
decision finds ample support in the record. Given this
basis for the Commission’s decision, and that Organik
Kimya can end the exclusion order period at any time by
seeking an advisory opinion or initiating a modification
proceeding before the Commission and showing that
Organik Kimya has produced opaque polymers inde-
pendently, we do not find that the Commission abused its
discretion or committed legal error in this case.
In an attempt to rebut the Commission’s decision to
impose a 25-year exclusion order in this case, Organik
Kimya points to various cases to support its assertion that
exclusion orders in trade secret misappropriation cases
typically last five to ten years. As Organik Kimya itself
recognizes, however, the Commission bases the time
period of a limited exclusion order on a “reasonable re-
search and development period” or an “independent
development time” for the trade secrets at issue. Certain
Cast Steel Ry. Wheels, Certain Processes for Mfg. or Relat-
ing to Same & Certain Prods. Containing Same, USITC
Inv. No. 337-TA-655, 2009 ITC LEXIS 2387, at *11 (Oct.
29, 2009)). The length of the exclusion order therefore
depends on the trade secrets at issue and evidence in the
record, not the particular length of exclusion orders in
20 ORGANIK KIMYA v. ITC
other cases. See id. As discussed above, the record in this
case supports the limited exclusion order imposed by the
Commission.
Organik Kimya also attempts to find fault with the
Commission’s citation of 19 U.S.C. § 1337(g). According to
Organik Kimya, the Commission relied on § 1337(g),
which relates to parties that fail to respond to a com-
plaint, as a basis for refusing to consider Organik Kimya’s
arguments regarding the proper remedy. The Commis-
sion’s opinion confutes this argument. The Commission
first used § 1337(g) as support for presuming that the
allegations of Dow’s amended complaint were true based
upon Organik Kimya’s default. Commission Opinion, at
19. This use of § 1337(g) comports with 19 C.F.R.
§ 210.16(c)(1) and is not legally erroneous. The Commis-
sion then used § 1337(g) merely as support for its asser-
tion that Congress has spoken to the existence of remedial
orders in default cases. Commission Opinion, at 22.
These uses of § 1337(g) in the Commission opinion do not
amount to legal error; indeed, the Commission does not
even use the citations in the manner Organik Kimya
claims.
The record in this case supports the Commission’s
limited exclusion order of 25 years with the opportunity
for Organik Kimya to bypass the exclusion order period at
any time if it can show that it has developed its opaque
polymers without using Dow’s misappropriated trade
secrets.
III. CONCLUSION
We have considered Organik Kimya’s remaining ar-
guments and find them unpersuasive. For the foregoing
reasons, the decision of the Commission is affirmed.
AFFIRMED
ORGANIK KIMYA v. ITC 21
COSTS
Costs to Appellee.