Key Takeaways:

• The Protecting American Intellectual Property Act of 2022 requires the President to report annually to Congress foreign entities and individuals who engage in trade secret theft that poses a threat to the U.S. economy or national security.
• The new law also requires the President to sanction those entities and individuals by imposing at least 5 of the sanctions available to the President under existing laws. The President has discretion to impose the most onerous of those sanctions such as blocking financial transactions involving the entity in the U.S.
• The law raises questions about how U.S. companies can report foreign trade secret thefts to the White House, the process that the President will use to make these determinations, and how foreign companies can challenge their inclusion on the list.

On January 5, 2023, President Biden signed the Protecting American Intellectual Property Act of 2022 (“PAIP Act”) into law. The law is designed to shield American businesses from trade secret theft by foreign actors.

The law requires the White House to identify and report to Congress foreign companies and foreign individuals who:

• Have knowingly engaged in significant theft of trade secrets of a U.S. person that creates a “significant threat to the national security, foreign policy, or economic health or financial stability of the United States”;
• Have provided significant financial, material, or technological support for, or goods or services in support of, such trade secrets theft;
• Are owned or controlled by a foreign entity identified under the first two bullets; or 
• Are the CEO or board member for any foreign entity identified under the first two bullets. 

PAIP § (2)(a)(1)(A). The list must also describe the “nature, objective, and outcome of the theft of trade secrets” for each listed person or entity. § (2)(a)(1)(B). The determination of whether an entity or individual engages in trade secret theft is an executive determination by the President, not a finding of fact in court. The process to make these determinations is not set forth in the law.

After this list is established, the law requires the White House to sanction foreign entities and individuals. § (2)(b). The sanctions can include property-blocking sanctions, export-import prohibitions, the prohibition of loans from U.S. and international financial institutions, procurement sanctions, and the prohibition of banking transactions. § (2)(b)(1). For foreign individuals named in the report, the White House may block all property and interests in the property of that individual, prohibit transactions related to that property, and block them from entering the U.S. § (2)(b)(2).

This new law has important implications for businesses throughout the world. Once released, the list should be a component of any business’s due diligence before engaging with a foreign entity. In cases of significant theft of key technologies, U.S. companies must consider this additional incentive to report trade secret theft by foreign entities to the government. Foreign businesses included in the list must consider how to challenge their inclusion. The new law could become an important factor in legal efforts to protect trade secrets from theft by international actors.