Botox Case May Cause Wrinkles at the ITC

The U.S. International Trade Commission is an independent federal agency that holds significant power: the ability to ban the import of foreign goods that infringe American intellectual property rights like patents and trade secrets.

Recently, it was called on to decide a genuinely unprecedented, far-reaching case involving Botox. By the time the commissioners finish furrowing their brows over this one, they may have need for wrinkle-reducing treatments themselves.

The case was brought by Allergan, the maker of Botox—a product so dominant that its name is virtually interchangeable with the market. In 2013, Allergan paid a hefty sum to be the U.S. distributor of a similar wrinkle-smoothing treatment made by Medytox, a Korean manufacturer.

Seven years later, that Medytox product has still not hit the U.S. as its application awaits approval by the Food and Drug Administration. Some observers believe Allergan entered into its agreement with Medytox to keep Medytox’s rival product off the market, thereby leaving Botox without a major competitor in the U.S.

In 2019, California biotech company Evolus began selling an FDA-approved competitor to Botox, produced by another Korean company, Daewoong. According to doctors and patients, the product, called Jeuveau, has distinct advantages over Botox and can be less expensive. But this put Allergan’s monopoly at risk. What could the company do to get Jeuveau out of the U.S. market?

At this point Allergan’s agreement with Medytox became useful a second time, but for a rather curious reason: Medytox has alleged that Daewoong stole its trade secrets in Korea more than a decade ago. Daewoong strongly disputes that claim and the two firms are involved in a protracted court case in Korea, where the case belongs.

Thin Tie to Distribution Agreement Brings it Under ITC

But creative attorneys theorized that if they could link the alleged theft of Korean trade secrets to Allergan’s U.S. operations, they might be able to shoehorn this strange set of circumstances into an ITC case and protect Allergan’s monopoly.

Under normal circumstances, such a case never would pass muster at the ITC. Medytox has no operations in the U.S.; it would have no ability to bring a case at the ITC on its own. For its part, Allergan is not a wronged party; it cannot (and does not) claim that any Botox intellectual property has been misused.

But through the slender and questionable connection provided by the distribution agreement, the two companies have sought access to the ITC’s formidable power to ban imports.

In August, an administrative law judge recommended a 10-year import ban against Jeuveau. If approved by the full ITC, that decision would leave Evolus—an actual American firm that has created hundreds of jobs and invested millions of dollars in the U.S. economy—fighting for survival as it risks losing the ability to sell its competing product.

The ITC commissioners have ample reason for squinting as they review this case. A significant challenge is simply finding any U.S. intellectual property right that has been infringed. If there has been inappropriate behavior (again, an allegation Daewoong contests), it was a decade ago in Korea, not in the U.S., and it involved alleged trade secrets under Korean law, not U.S. law.

Another challenge is identifying why Allergan should get a remedy based on Botox, where Botox has nothing to do with the trade secret case. Regardless, tenuous legal arguments have been made linking possible mishandling of Korean trade secrets from long ago to ITC jurisdiction today. The ALJ who conducted the hearing found the legal connection to be adequate.

ITC to Review ALJ Findings, Broader Questions

On Sept. 21, the commissioners issued a public notice, stating that they would be reviewing nearly every finding made by the ALJ. They will have the opportunity to consider not only the technical legal issues, but also the broader policy questions.

For starters, should the scope of ITC jurisdiction be expanded in this manner, transforming the ITC into an international court for trade secret violations regardless of where those intellectual property rights reside?

Would doing so encourage mischief by attorneys searching the world for allegations of trade secret misappropriation that could be brought to the ITC through licensing or distribution agreements?

Would denying consumers a meaningful alternative to Botox serve the public interest? And how might the U.S. Court of Appeals for the Federal Circuit—the home for any appeal of the commission’s decision—react to such a meaningful expansion of the ITC’s reach?

Most ITC cases are decided on the basis of the intellectual property issues alone. Of necessity, policy considerations will play a major role in this one. The outcome should be interesting. If the commission decides simply to adopt the reasoning of the ALJ, this case is likely to be the source of many unfortunate wrinkles down the road.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Daniel R. Pearson is a former chairman and commissioner of the U.S. International Trade Commission. He serves as a consultant to Daewoong.