On February 15 local time, U.S. Steel issued a statement saying it is withdrawing its lawsuit alleging that Chinese hackers stole key formulas for its high-tech steel. This is part of the first Section 337 investigation against Chinese steel products.

At the same time, U.S. Steel stated that it will continue to pursue allegations that Chinese manufacturers violated antitrust regulations and evaded tariffs by shipping various steel products through third countries, and reserves the right to refile the cyber theft lawsuit.

Regarding this Section 337 investigation, China's Ministry of Commerce issued a statement on May 27, 2016, saying that the United States' unprecedented Section 337 investigation against Chinese steel products carries obvious "trade protectionism" overtones, and China expresses firm opposition and strong dissatisfaction. The Ministry of Commerce believes that the application and allegations of the U.S. Section 337 investigation against Chinese steel are "without factual basis."

The reason for U.S. Steel's withdrawal of the lawsuit may be that cyber theft is not suitable for Section 337 investigations. In its statement, U.S. Steel pointed out that Section 337, as an old law decades old, does not take into account the technological advances of the past 50 years, which have led to the prevalence of cyber theft and other cybercrimes against American companies. In addition, according to The Wall Street Journal, U.S. Steel stated that without sufficient help from the U.S. government, the company faced an "unbearable burden" in this complex international lawsuit.

It is worth noting that this case is the first Section 337 investigation involving the use of cyber attacks to steal trade secrets and infringe intellectual property rights.

As the largest steel company in the United States, U.S. Steel's allegations against the Chinese steel industry began on April 26, 2016. At that time, U.S. Steel filed an investigation application with the U.S. International Trade Commission (USITC), requesting a Section 337 investigation into carbon steel and alloy steel products exported from China to the United States. If the Section 337 investigation succeeds, the USITC can prohibit the entry of the respondents' related products.

The allegations included three points: First, conspiring to fix prices and manipulate production and export volumes. Second, misappropriating and illegally using U.S. Steel's trade secrets. Third, using false origin and producer marks. One month later, the USITC announced the formal initiation of a Section 337 investigation against a total of 40 Chinese steel companies, including Baosteel, Wuhan Iron and Steel, Ansteel, and Shougang.

The lawsuit that U.S. Steel has now dropped is the second of the three allegations, namely the misappropriation and illegal use of U.S. Steel's trade secrets.

Specifically, U.S. Steel believes that the trade secrets of high-strength steel it had spent millions of dollars developing were stolen in 2011 due to attacks by hackers from China. Before the cyber attack, Chinese steel companies did not possess this technology, but after the theft, Baosteel Group quickly succeeded in developing commercially producible high-strength steel products, with a technological breakthrough speed far exceeding the time required for the original development of related technology in the United States. Therefore, U.S. Steel suspects that it is Chinese steel companies that stole its trade secrets to produce high-strength steel and export it to the United States.

In response to U.S. Steel's allegations, the former Baosteel Group issued a statement on the second day after the USITC formally initiated the Section 337 investigation. It specifically mentioned that Baosteel has always attached importance to independent research and development and technological progress, and that the development of related technologies is the result of the company's continuous investment in R&D projects and the long-term efforts of Baosteel's R&D personnel. In 2009, Baosteel built a dedicated production line for multi-functional ultra-high-strength steel, laying the foundation for Baosteel's development and production of dual-phase steel, and passed material certification from multiple automotive OEMs and component manufacturers.

As of now, the USITC has also terminated the investigations into the first and third allegations.

In November 2016, an administrative law judge of the USITC made a preliminary ruling, finding that the U.S. applicant failed to prove that it suffered harm from monopolistic conduct as required by U.S. antitrust law, and also failed to provide factual evidence of predatory pricing behavior, and therefore decided to terminate the first investigation.

Subsequently, in January 2017, the U.S. International Trade Commission terminated the investigation into the third allegation, namely the investigation into the allegation of forging certificates of origin, for lack of direct evidence. In the dismissal statement, it was mentioned that Chinese steel producers "illegally evaded U.S. anti-dumping and countervailing duties by changing certificates of origin through transit trade." However, the petitioner (U.S. Steel) did not provide any evidence to prove that Chinese steel producers forged origin.

The so-called Section 337 investigation is based on Section 1337 of the current U.S. Tariff Act of 1930 (originally Section 337, commonly known as Section 337). The USITC conducts this investigation to prohibit all unfair competition acts or any unfair trade acts in exporting products to the United States, especially to protect the rights and interests of U.S. intellectual property owners from infringing imported products.

In practice, the Section 337 investigation has become one of the important trade protection tools of the United States. According to statistics, China has been the country most involved in Section 337 investigations for 13 consecutive years. From 2007 to April 2016, the United States initiated a total of 392 Section 337 investigations, of which as many as 169 cases involved China, accounting for 43%. However, it was the first time for the Chinese steel industry to encounter a Section 337 investigation.