X US Steel Corp

By William Mauldin 

U.S. Steel Corp. is withdrawing a legal claim that hackers in China stole a key recipe for high-tech steel, a move that shows the challenges American firms face in fighting the growing threat of cyberespionage.

Pittsburgh-based U.S. Steel on Wednesday said that it will continue pressing claims on alleged antitrust violations in China and third-country shipment to avoid tariffs for various steel products, and that it reserves the right to refile charges of cybertheft.

But the move Wednesday to drop the intellectual property claim, at least for now, is a setback in a case that trade lawyers hoped would have set a precedent.

"When we filed the case, we highlighted the significant cyber threat every company faces, and we began a dialogue about the need to reform our antiquated laws," U.S. Steel said in a statement. "We have made strides in that arena, but we believe more cooperation and collaboration is needed between the federal government and the private sector to address the continued threat of malicious cyber crimes."

U.S. Steel said it faced an "unbearable burden" pursuing the complicated international case without sufficient help from the U.S. government.

The company's case was filed with the U.S. International Trade Commission in April, after the U.S. unveiled criminal indictments in 2014 against Chinese nationals for commercial hacking against U.S. Steel, Alcoa Inc., the United Steelworkers union and other entities.

China's Foreign Ministry has said the criminal indictment was based on "fabricated facts." The country's Commerce Ministry has said U.S. Steel's allegations of intellectual-property infringement "are completely without factual basis."

U.S. Steel alleged that one of its secret steel formulas was stolen in 2011 by hackers from China and that Chinese state-owned steel company Baosteel Group Corp. subsequently introduced a new line of products that included that type of high-strength steel, known as Dual-Phase 980, and shipped it to the U.S.

Baosteel has said it "consistently acted in accordance with regulations; respected intellectual property rights."

U.S. firms and labor groups complain that the low-cost imports they compete with were made using American research and development.

"If someone steals your trade secrets, makes it into a product, and ships it back to your country, you might think this is important for a lot of people," said Tom Conway, international vice president at United Steelworkers, on Wednesday. "We ought to have laws that are updated and deal with this potential now."

The trade case is overseen by a U.S. International Trade Commission administrative law judge. The ITC also handles more traditional cases involving international patent infringement, dumping of imported products and improper government subsidies provided to the overseas rivals of U.S. firms.

Write to William Mauldin at william.mauldin@wsj.com

(END) Dow Jones Newswires

February 15, 2017 13:43 ET (18:43 GMT)

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