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Privacy, Technology and Perspective

A New Trade-Secret Protection Act. This week, let’s look at the new “Protecting American Intellectual Property Act of 2022,” signed into law in January.

Overview.  This new Act, codified at 50 U.S.C. § 1709, is the latest in a long series of acts that authorize the President to move swiftly during emergencies to combat foreign threats against the United States. It authorizes the President to identify and sanction foreign entities and persons who:

(i)             Knowingly engage in, or benefit from, significant theft of trade secrets of United States persons, if the theft…is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States (emphasis added);

(ii)            Provide significant financial, material, or technological support for, or goods or services in support of or to benefit significantly from, such theft;

(iii)          Is an entity that is owned or controlled by, or that has acted or purported to act for or on behalf of, directly or indirectly, any foreign persons identified under clause (i) or (ii); or

(iv)          Is a chief executive officer or member of the board of directors of any foreign entity identified under clause (i) or (ii).

When the President so identifies such an entity or person(s), the President shall (our emphasis) impose any five or more of about a dozen enumerated sanctions, including, e.g., entering their names on the “Entity List” of persons with whom Americans may not do business, blocking property transactions, cutting them off from the U.S. banking system, blocking and/or revoking visas, prohibiting them from buying U.S. debt instruments, prohibiting U.S. investors from investing in them or buying their own debt instruments, cutting them off from loans of more than $10 million unless for humanitarian aid, and more.

Civil penalties of up to $250,000 or twice the amount of the transaction involved (whichever is greater) may also be available, and where the violation is committed “willfully,” criminal penalties of up to $1 million in fines and up to 20 years imprisonment may be imposed.

Context. The new Act is nestled within the International Emergency Economic Powers Act, ca. 1977, codified at 50 U.S.C. §§ 1701-07 (IEEPA). The IEEPA allows the President to invoke unusual (but defined) powers during an emergency, according to strict procedures. The new Act follows much of the IEEPA procedure, in that the President must report to Congress every 180 days about what emergencies have been declared, what entities and persons have been sanctioned, how, and why; and the Act will sunset in seven years.  (The IEEPA is an outgrowth of the National Emergencies Act, 50 U.S.C. §§ 1601-1651 (ca. 1976), which systematized presidential emergency powers as one of the post-Watergate reforms.)

In sum, the new Act updates long-existing “emergency-powers law” to bring foreign countries that have made the theft of American intellectual property part of their state policy – and the highest-level individuals responsible for directing or carrying out those attacks – directly within the mainstream of well-known, and very severe, economic-sanctions authority.

Our take:  The new Act does not provide a private right of action, though one could be found for most of this conduct under other acts. What the new Act does do is give the executive a powerful tool against foreign governments and persons who set out to steal American technology (and other intellectual property).

Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.