The United States federal government keeps ratcheting up its seriousness around protecting American trade secrets.
The previous major shot across the bow of potential trade secret theft was 2016’s Defend Trade Secret Act (“DTSA”). The DTSA provided a federal cause of action for theft of trade secrets. Plaintiffs can seek remedies such as injunctions, damages, attorneys’ fees, and even seizure orders under DTSA. Before the DTSA, trade secret owners had to rely on inconsistent state laws for protection.
In January 2023, President Biden enacted the “Protecting American Intellectual Property Act of 2022” (“PAIPA”). This represents the next evolution of deterrence, and a sign of trade secrets’ growing importance to the nation.
The President must annually notify Congress of a list of any “foreign person” that has engaged in, supported, or benefited from theft of trade secrets from “United States persons” (individuals or businesses) which could be a significant threat to the national security, foreign policy, economic health, or financial stability of the United States. The President is also required to report on which entities and people benefited from the trade secret theft, and how they did so.
The PAIPA further requires that the President issue sanctions from a long list including blocking visas, preventing loans, prohibiting contracts with the US government, and other economic restrictions and penalties.
There are a number of procedural open questions that will have to be resolved fairly soon. It is currently unclear when and how someone named on the list can challenge their inclusion if they believe it to be incorrect. It is also unclear how a trade secret owner can suggest inclusion of an alleged misappropriator onto the President’s list. These open questions will likely be addressed in regulations or in litigation.
PAIPA represents the latest arrow added to the quiver protecting American trade secrets. Trade secret holders have multiple ways to strike back – state court actions, DTSA, ITC Section 337 investigations, and now PAIPA to keep their secrets safe.