The Threat of Trade Secret Theft
At Stevens Law Group, we understand the immense value that intellectual property holds for businesses, especially in the fiercely competitive pharmaceutical and technology sectors. Trade secrets, in particular, are the lifeblood of many companies, representing years of research, development, and innovation. However, the threat of trade secret theft looms large, with foreign actors increasingly seeking to unlawfully obtain these valuable assets.
In response to this growing concern, the U.S. Congress and President Biden have taken a bold step with the enactment of the [Protecting American Intellectual Property Act of 2022 (PAIPA)]. This bipartisan legislation aims to combat the misappropriation of American trade secrets by foreign entities and individuals, providing a powerful new tool to protect the intellectual property rights of U.S. companies.
What is PAIPA?
PAIPA mandates the collection of data on international trade secret theft, enabling the U.S. Government to issue annual unclassified public reports listing foreign individuals and entities found to have knowingly engaged in, benefited from, or materially assisted in the theft of U.S. trade secrets that pose “a significant threat to U.S. national security, foreign policy, or economic health.”
The public reports will not only name the offenders but also provide details on the nature, objective, and outcome of the trade secret theft. Additionally, the names of executives and board members of listed entities will be disclosed, further increasing transparency and accountability.
Harsh Sanctions for Trade Secret Thieves
Perhaps the most significant aspect of PAIPA is the requirement for the President to impose harsh legal sanctions against listed offenders, including any entity owned or controlled by such a listed person. The President has the discretion to select from a menu of sanctions, which includes:
- Blocking property-related transactions and access to U.S. financial systems
- Denying access to U.S. exports and technology subject to export controls
- Barring listed individuals from entry into the United States
- Debarment from federal contracting and procurement opportunities
- Urging denial of loans from international financial institutions
The potential consequences for listed individuals and entities are severe. Reflecting the gravity of trade secret theft and its impact on U.S. economic and national security interests.
Implications for Businesses
While PAIPA primarily targets foreign actors, its implications extend to U.S. companies as well. Businesses must exercise heightened due diligence when conducting international transactions or collaborations, as the risks of inadvertently engaging with a listed entity or individual could be substantial.
At Stevens Law Group, we anticipate that PAIPA’s public listings will become an essential component of corporate due diligence processes, alongside existing lists such as OFAC’s Specially Designated Nationals (SDN) List, the [Department of Defense Section 1237 List], and the [BIS Entity List].
Furthermore, companies should expect increased scrutiny and potential legal challenges from listed entities or individuals contesting their designations. Robust trade secret protection measures, including comprehensive policies, employee training, and auditing functions, will be crucial to mitigating risks and avoiding potential sanctions.
Actions Required for Businesses:
| Actions Required for Businesses: | |
| Action | Description |
| Enhance Due Diligence | Regularly monitor PAIPA listings along with other relevant watch lists (SDN, Entity List, etc.) when conducting international business transactions or collaborations. |
| Implement Robust Policies | Develop and implement comprehensive trade secret protection policies and procedures within the organization. |
| Provide Employee Training | Conduct regular training for employees on trade secret requirements, PAIPA implications, and the organization’s policies and procedures. |
| Perform Audits | Regularly audit functions where trade secret theft is most likely to occur, such as cooperative agreements or hiring of competitor personnel. |
| Seek Legal Guidance | Consult with experienced legal counsel to ensure compliance with PAIPA and other relevant laws and regulations related to trade secret protection. |
Our Commitment to Protecting Your Intellectual Property
At Stevens Law Group, we remain steadfast in our commitment to safeguarding the intellectual property rights of our clients. As the implementation of PAIPA unfolds, our team of experienced attorneys will closely monitor developments and provide strategic guidance to help you navigate this evolving landscape.
We understand the complexities of trade secret law and the challenges businesses face in protecting their invaluable intellectual assets. Our comprehensive services encompass trade secret litigation, IP portfolio management, licensing negotiations, and the development of robust compliance programs tailored to your specific needs.
In the ever-changing world of intellectual property, staying ahead of the curve is essential. With PAIPA now in effect, businesses must remain vigilant and proactive in their approach to trade secret protection. At Stevens Law Group, we stand ready (do contact us) to be your trusted partner in this endeavor, safeguarding your innovations and ensuring your continued success in the global marketplace.
References:
- [Protecting American Intellectual Property Act of 2022](https://www.congress.gov/bill/117th-congress/senate-bill/1294)
- [Department of Defense Section 1237 List](https://www.morganlewis.com/blogs/sourcingatmorganlewis/2022/02/new-us-department-of-defense-list-that-all-companies-need-to-monitor)
- [BIS Entity List](https://www.bis.doc.gov/index.php/policy-guidance/lists-of-parties-of-concern/entity-list)
- [Morgan Lewis Article: “An Initial Look at PAIPA’s Scope and Legal Risks”](https://www.morganlewis.com/pubs/2023/08/an-initial-look-at-paipas-scope-and-legal-risks)
Leave a Reply