On January 5, 2023, President Biden signed the Protecting American Intellectual Property Act into law. This law seeks to deter the theft of US intellectual property by non-US actors by threatening to impose economic sanctions on those engaged in trade secrets theft. This law adds to existing measures available under US law, such as criminal prosecution, civil lawsuits, and/or designation to a US restricted parties list such as the Entity List (maintained by the US Commerce Department’s Bureau of Industry and Security). (See our prior Video Chat here regarding Entity List designations related to trade secret theft.)
Specifically, the law requires the President to produce a report to Congress within six months of the enactment of the law and annually thereafter, identifying:
- Any foreign individual or entity that has knowingly engaged in, benefitted from, the significant theft of US trade secrets, if that theft (a) occurred on or after the law’s enactment, and (b) is reasonably likely to result in, or materially contributed, to a significant threat to the national security, foreign policy, economic health, or financial stability of the United States;
- Any foreign individual or entity that has provided significant financial, material, or technological support for, or goods or services in support of or to benefit significantly from such theft;
- Any foreign entity that is owned or controlled by or has acted for or on behalf of, directly or indirectly, any person identified under (i) or (ii); and
- The chief executive officers and board members of any foreign entity identified under (i) or (ii).
Once the report is compiled, the law requires the President to:
- Impose five or more sanctions from a comprehensive list against the entities identified in the report, including, among others, property blocking sanctions (i.e., designation as a Specially Designated National); inclusion on the Entity List; prohibitions on loans from US financial institutions; US Government procurement bans; and prohibitions on investments in the entities identified; and
- Impose property blocking sanctions and prohibit entry into the United States against the individuals identified in the report.
Under the law, sanctions may be waived if the President determines that the waiver is in the national interest of the United States and the President notifies Congress within 15 days of the waiver being issued. The law’s requirements are currently set to terminate after seven years.
The law provides another important enforcement tool for trade secrets owners who experience theft by foreign actors or theft that occurs abroad. There are numerous hurdles to securing relief for trade secret theft in such circumstances, including barriers to asserting jurisdiction, limitations on discovery that would otherwise be necessary to prove theft, and enforcing awards against foreign defendants (even if an IP owner is able to overcome the initial barriers and win in court). In imposing sanctions, the US Government will not have to contend with the same difficult evidentiary issues facing the private sector, which often faces difficulty in proving trade secret theft, particularly if it requires discovery on conduct that occurred outside the United States. The availability of economic sanctions is therefore a meaningful change in law with the potential to become a frequently-used mechanism.