Key Takeaways:
- The Protecting American Intellectual Property Act of 2022 requires the President to report annually to Congress foreign entities and individuals who engage in trade secret theft that poses a threat to the U.S. economy or national security.
- The new law also requires the President to sanction those entities and individuals by imposing at least 5 of the sanctions available to the President under existing laws. The President has discretion to impose the most onerous of those sanctions such as blocking financial transactions involving the entity in the U.S.
- The law raises questions about how U.S. companies can report foreign trade secret thefts to the White House, the process that the President will use to make these determinations, and how foreign companies can challenge their inclusion on the list.
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On January 5, 2023, President Biden signed the Protecting American Intellectual Property Act of
2022 ("PAIP Act") into law. The law is designed to
shield American businesses from trade secret theft by foreign
actors.
The law requires the White House to identify and report to Congress
foreign companies and foreign individuals who:
- Have knowingly engaged in significant theft of trade secrets of a U.S. person that creates a "significant threat to the national security, foreign policy, or economic health or financial stability of the United States";
- Have provided significant financial, material, or technological support for, or goods or services in support of, such trade secrets theft;
- Are owned or controlled by a foreign entity identified under the first two bullets; or
- Are the CEO or board member for any foreign entity identified under the first two bullets.
PAIP § (2)(a)(1)(A). The list must also describe the
"nature, objective, and outcome of the theft of trade
secrets" for each listed person or entity. §
(2)(a)(1)(B). The determination of whether an entity or individual
engages in trade secret theft is an executive determination by the
President, not a finding of fact in court. The process to make
these determinations is not set forth in the law.
After this list is established, the law requires the White House to
sanction foreign entities and individuals. § (2)(b). The
sanctions can include property-blocking sanctions, export-import
prohibitions, the prohibition of loans from U.S. and international
financial institutions, procurement sanctions, and the prohibition
of banking transactions. § (2)(b)(1). For foreign individuals
named in the report, the White House may block all property and
interests in the property of that individual, prohibit transactions
related to that property, and block them from entering the U.S.
§ (2)(b)(2).
This new law has important implications for businesses throughout
the world. Once released, the list should be a component of any
business's due diligence before engaging with a foreign entity.
In cases of significant theft of key technologies, U.S. companies
must consider this additional incentive to report trade secret
theft by foreign entities to the government. Foreign businesses
included in the list must consider how to challenge their
inclusion. The new law could become an important factor in legal
efforts to protect trade secrets from theft by international
actors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.