July 23, 2017

Administration Calls for Comments on Reducing the Risks of Misappropriation of Trade Secrets

On March 19, 2013, the U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, published a notice in the Federal Register (Mar. 19, 2013) “requesting any recommendations for legislative changes that would enhance enforcement against, or reduce the risk of, the misappropriation of trade secrets for the benefit of foreign competitors or foreign governments. Submissions are due by April 22, 2013.  The request for public submissions is one of the first steps in the implementation of the “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” issued on February 20, 2013.  

The Administration Strategy is a five-pronged approach, coordinated by the U.S. IP Enforcement Coordinator and involving many  executive branch departments.

First, the strategy calls for the White House to focus diplomatic efforts to protect trade secrets overseas.  Although the Administration Strategy does not expressly identify any specific countries on which it is focused, the examples of misappropriation of trade secrets for the benefit of foreign companies and countries are almost exclusively Chinese. For example, a private U.S.-based cybersecurity firm’s Report identified the Chinese government as targeting U.S. companies.

Second, the Strategy calls for the U.S. IP Coordinator to promote voluntary best practices by private industry to protect trade secrets. Among the areas in which the Strategy suggests focus are R&D compartmentalization, information security, physical security, and human resources policies.   The Strategy makes it clear, however, that compliance with best practices must be voluntary, and any identified best practices may not be suitable for all companies.

Third, the Strategy calls for the enhancement of domestic law enforcement operations.   Spearheaded by the Attorney General’s Task Force on Intellectual Property and the FBI, the Department of Justice is making the investigation and prosecution of corporate and state-sponsored trade secret theft a higher priority.  The Office of the Director of National Intelligence will also coordinate the sharing of intelligence among the intelligence and law enforcement communities in order to monitor foreign government activity and prevent international trade secret misappropriation, and will also work with the private sector to warn of potential threats.

Fourth, the Strategy calls for the Administration to improve domestic legislation.  During the past year, Congress has enacted the “Theft of Trade Secrets Clarification Act of 2012,” which was intended to reverse the outcome of  United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012), in which the defendant stole the source code for a proprietary high-frequency trading system from his former employer, Goldman Sachs, to provide it to a new employer. The Second Circuit reversed his conviction on the ground that the source code was not “related to or included in a product that is produced for or placed in interstate or foreign commerce.”  That Act modified the Economic Espionage Act (EEA) to make it cover trade secrets “related to a product or service used in or intended for use in interstate or foreign commerce.”  Second, Congress also passed the “Foreign and Economic Espionage Penalty Act of 2012,” which increased potential sentences and fines for violations of the EEA.  The U.S. IP Enforcement Coordinator is charged with coordinating an initial review of existing Federal laws within 120 days of the release of the Administration Strategy, by June 20, 2013.

Lastly, the Strategy calls for various departments in the Administration to increase efforts to develop public awareness and engage in stakeholder outreach.  For example, the FBI and Department of Commerce are to continue and expand their efforts to inform the public about the threat and cost of trade secret misappropriation, using existing public awareness programs.  In addition, the PTO will include discussion of the economic implications of trade secret misappropriation in its “road show” events.

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