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Trade Secret Theft Gets New Emphasis with DOJ Initiative, Case Seeking Export Ban

Thursday, November 08, 2018
Sandler, Travis & Rosenberg Trade Report

As part of an expanded effort against economic espionage, the Department of Justice recently filed its first-ever civil lawsuit seeking to prevent foreign companies from exporting to the U.S. goods manufactured using trade secrets stolen from the U.S. The DOJ also announced a new initiative to identify and prosecute more trade secret theft cases.

According to a DOJ press release, a federal grand jury has indicted a state-owned Chinese enterprise, a Taiwanese company, and three individuals on charges related to a conspiracy to steal, convey, and possess the trade secrets of a U.S. company for the benefit of a company controlled by the Chinese government. One of the individuals was president of a company acquired by the U.S. company who subsequently left for the Taiwan company, where he is alleged to have orchestrated the theft of trade secrets worth up to $8.75 billion. The Taiwan company then partnered with a Chinese state-owned company to produce goods that would compete against those made by the U.S. company in the global market. According to Assistant Attorney General for National Security John Rivers, these alleged actions took place “after the Chinese Central Government and the State Council publicly identified the development of that stolen technology as a national priority and funded a company to mass produce the cloned products.”

In response, the DOJ filed a civil action seeking an injunction that would prevent the China and Taiwan companies from transferring the stolen technology or exporting products based on it to the U.S. In addition, the Bureau of Industry and Security added the Chinese company to the Entity List to prevent it from buying goods and services in the U.S. in an effort to keep it from profiting from the stolen technology. The DOJ adds that the individual defendants face up to 15 years’ imprisonment and a $5 million fine for the economic espionage charges and 10 years imprisonment for the theft of trade secrets charges and that each company faces forfeiture and a maximum fine of more than $20 billion.

Federal Bureau of Investigation Director Christopher Wray said the conspiracy highlights that “no country presents a broader, more severe threat to our ideas, our innovation, and our economic security than China,” which “is determined to acquire American technology” using a variety of means, from “foreign investments, corporate acquisitions, and cyber intrusions to obtaining the services of current or former company employees to get inside information.”

As a result, U.S. Attorney General Jeff Sessions said he has ordered the creation of a China Initiative within the DOJ that will identify priority Chinese trade theft cases, ensure that the DOJ has enough resources dedicated to those cases, and make sure the cases are brought to an appropriate conclusion quickly and effectively. Sessions noted that the DOJ is already prosecuting five other cases where the theft or attempted theft of trade secrets was for the benefit of the Chinese government.

Sessions said the new initiative will focus on the fact that Chinese espionage is being directed against not only traditional targets like U.S. defense and intelligence agencies but also research labs and universities. If necessary, the initiative will recommend legislation to Congress. It will also address two major responsibilities of the department’s National Security Division: the Foreign Investment Review Staff’s review of investments and licenses in U.S. infrastructure and telecommunications and the Foreign Agent Registration Act Unit’s work to counter covert efforts to influence U.S. leaders and the general public.

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