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New Law Will Punish US Trade Secret Theft

by Chris Brook on Tuesday January 10, 2023

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The Protecting American Intellectual Property Act, signed into law last week, authorizes sanctions for organizations and individuals who carry out trade secret theft that harms the United States.

After winding its way through Congress for two years, a bill designed to protect American companies from IP theft and secure U.S. trade secrets has finally been signed into law.

The Protecting American Intellectual Property Act, first introduced back in 2020, later reintroduced in 2021, passed both the Senate and the House unanimously in December 2022. It was signed into law by President Biden on January 5.

The goal of the bi-partisan bill, co-authored by Senators Ben Sasse (R-Neb) and Chris Van Hollen (D-Md), is to ensure that firms and industries caught stealing American IP incur strong economic penalties.

Specifically, the law will hand down sanctions to organizations and individuals identified in a report to Congress who have benefited from the theft of US trade secrets if they constitute a major threat to the national security, foreign policy, economic health, or the financial stability of the United States.

President Biden will be required to submit the report to Congress within 180 days and annually after that.

It doesn't just apply to companies; CEOs and board members of firms can be called out in reports as well. Under the Act, the President can impose property-blocking sanctions and prohibit the individual’s entry into the United States as well. 

Under the law, the President can impose at least five sanctions from a law previously passed by President Trump, the Countering America’s Adversaries Through Sanctions Act. That law was designed to impose sanctions on Iran, North Korea, and Russia but also detailed a handful of sanctions that can be handed out by the President, including the ability to prohibit exports, loans from U.S. and international financial institutions, and the prohibition of banking transactions.

The full list includes:

  • Block and prohibit all transactions relating to US property and property interests.
  • Designation to the Entity List.
  • Prohibit the US Export-Import Bank from taking part in the financing of any exports to the entity.
  • Prohibit any US financial institution from making a loan in excess of $10 million to the entity in any given year.
  • Instruct US representatives at international financial institutions to oppose any loan from the international institution that benefits the entity.
  • If the entity is a financial institution: (1) prevent the entity from becoming or continuing as a primary dealer in US government debt instruments; and/or (2) prevent the entity from serving as an agent of the US government or repository for government funds.
  • Prevent the US government from procuring any goods or services from the entity.
  • Prohibit transactions in foreign exchanges subject to US jurisdiction.
  • Prohibit transfers of credit or payments between financial institutions to the extent those transactions are subject to US jurisdiction.
  • Ban US persons from investing in or purchasing significant amounts of equity or debt instruments of the entity.
  • Deny visas to and exclude entry of corporate officers, principals, or shareholders with controlling interests in the entity.
  • Impose any sanctions included in the act on corporate officers or individuals performing similar functions.

Trade secrets - intellectual property rights on confidential information – can be immensely valuable to an organization. An oft cited statistic from the Commission on the Theft of American Intellectual Property estimates that annual costs from IP losses range from $225 billion to $600.

Given they can take years to develop and in many scenarios form the backbone of companies, some could argue they’re priceless.

The passage of the Protecting American Intellectual Property Act should help organizations, especially those who work with the government or in critical infrastructure, better defend against trade secret theft.

There have been a handful of other IP theft-centric bills introduced lately - the Stop Theft of Intellectual Property Act, the Protecting America from Spies Act, the Stopping and Excluding Chinese Rip-offs and Exports with United States Trade Secrets Act of 2021, etc. – but Van Hollen and Sasse's bill, which actually passed the Senate in December 2020 but got waylaid in the House, is one of the first in recent years to make it to law.

While the Department of Justice ended its China Initiative - which focused on Chinese espionage and intellectual property theft - in February 2022, Van Hollen and Sasse's bill, while no doubt driven by allegations of intellectual property theft carried out by China, is more broadly focused on fighting back against those who steal American technology.

“In China and other countries across the globe, foreign corporations are working – often in coordination with authoritarian regimes – to steal our cutting edge technologies to gain unfair advantages at America’s expense. This also results in the off-shoring of American jobs and causes harm to our economy and our national security. We must act to deter these predatory practices by imposing high costs. That’s why I worked with Senator Sasse to write bipartisan legislation that creates clear consequences for the theft of U.S. intellectual property. With President Biden’s signature of our bill today, those who seek to steal American technology are officially on notice,” Senator Van Hollen said last week.

Tags:  IP theft

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