Despite continued trade talks with China, the federal government continues to aggressively pursue efforts to prevent and hold Chinese companies accountable for trade secret theft and economic espionage. As described below, in the last month alone, the U.S. Government has taken three very decisive actions in combating the threat.

  1. The Senate Judiciary Subcommittee announced the creation of a subcommittee on Intellectual Property. The subcommittee will focus, among other intellectual property matters, on the theft of trade secrets by state supported actors such as China. According to Chris Coons (Ranking Member of the subcommittee), one of the major challenges for the U.S.’s intellectual property system in recent years is “rampant theft from state actors like China,” which among other issues is “causing our nation’s economy to lose billions of dollars annually and threaten our country’s long-term technological dominance.”
  2. Lawmakers continue to scrutinize Huawei, which was charged with stealing trade secrets from T-Mobile. Two members of the new IP subcommittee, John Cornyn and Ben Sasse, joined several other senators  in sending a letter to the U.S. Departments of Energy and Homeland Security, expressing “concern over the national security threat” posed by Huawei solar inverters to U.S. electrical systems and infrastructure. The senators believe that due to the vulnerability of American energy systems to cyberattacks, the federal government should “consider a ban on the use of Huawei inverters in the United States and work with state and local regulators to raise awareness and mitigate potential threats.” This is in addition to Congress’s recent ban of Huawei from the U.S. telecommunications equipment market due to concerns with the company’s links to China’s intelligence services.
  3. Earlier this month, two individuals, Xiaorong You and Liu Xiangchen, were indicted for conspiracy to steal trade secrets worth more than $119 million. The indictment alleges that You stole trade secrets relating to BPA-free coatings for beverage cans from two American companies where she was employed. You allegedly conspired to provide stolen information to a Chinese company, in exchange for payment, and an ownership stake in a new Chinese company that would own and use the trade secrets. Liu also allegedly agreed to help You obtain awards sponsored by the Chinese government to “induce individuals with advanced technical education, training, and experience residing in Western countries to return or move to China and use their expertise to promote China’s economic and technological development.” You is alleged to have carried out the conspiracy through numerous overt acts. These include photographing trade secrets on one employer’s computer screen, photographing equipment in her other employer’s secure and restricted laboratories, and transferring the stolen trade secrets from both companies to an external hard drive and her Google Drive account.

These preemptive and enforcement actions by Congress and the Department of Justice are indicative of the U.S.’s continually increasing efforts to protect the trade secrets of American companies from overseas threats, namely China.

In West Virginia, legislators are moving forward a bill that would criminalize trade secret theft. On February 26th 2019, the West Virginia House of Delegates passed H.B. 2014 with a 98-1 approval that would create criminal penalties for stealing trade secret or other intellectual property. The bill is now headed to the West Virginia Senate where President Mitch Carmichael has already indicated he approves and plans to move it forward. Legislators are hoping to drive tech and corporate investment in West Virginia by imposing more stringent protections for trade secrets and according to Senate President Carmichael, “[t]his bill would make sure [these companies] are protected” from intellectual property theft. If passed, the bill would apply to violations occurring after July 1st and could make West Virginia an attractive forum for companies looking to protect valuable intellectual property assets.

Applying the trade secret label to diversity initiatives is growing in popularity in recent years.

This issue has arisen in the context of public records requests, as companies with government contracts are subject to the Labor Department’s anti-discrimination arm and are required to provide diversity information in the form of EEO-1 reports. Several companies have argued that detailed, government mandated figures on the number of women and people of color they employ is not only confidential but warrants trade secret protection because releasing these numbers to the public would give rival competitors an opportunity to steal the company’s hiring initiatives, recruit its diverse employees away, or be used against it in litigation. Some people have pushed back on this effort, arguing that this is nothing more than a new tactic for companies “to hide gender and race disparities and interfere with the advancement of civil rights law and workplace equity.”

This argument has also arisen in the context of more traditional employment disputes. As discussed in an earlier blog post on this issue, just last year, IBM sued its former chief diversity officer on the basis that she would take confidential data on its diversity initiatives and strategies with her to Microsoft. This case was ultimately settled out of court, meaning courts have yet to weigh in on this issue. Time will tell whether this argument will survive court scrutiny.