China’s National People’s Congress has released a draft law for comment that would impose harsher criminal penalties for any trade secret theft from Chinese companies that benefits foreign companies.
China’s current law imposes a maximum sentence of 3 years imprisonment for “serious” instances and 10 years for “particularly serious” instances of trade secret theft. The proposed law would impose harsher sentences for trade secret theft benefiting a foreign entity, resulting in 5 years for “serious” instances and a minimum of 5 years with no maximum for “particularly serious” instances. The proposed law applies to any individual or company that “steals, spies, buys, or illegally provides trade secrets to foreign institutions, organisations, and personnel,” which can include electronic intrusion. The proposed change in the Chinese criminal code mirrors the U.S. Economic Espionage Act, which contains separate provisions for trade secret theft generally regardless of beneficiary and trade secret theft benefiting a foreign government, instrumentality, or agent. See 18 U.S.C. §§ 1831, 1832.
The proposed amendment is made against the backdrop of recent deteriorating relations between China and the United States and an exponential increase in Department of Justice prosecutions of Chinese individuals and entities for alleged trade secret misappropriation under the Economic Espionage Act. This latest development may signal a “tit-for-tat” approach to foreign relations and a desire to impose harsher penalties and increase prosecutions against foreign companies.
The deadline to comment on the proposed law is August 16, 2020.