On January 5, 2023, President Biden signed into law the "Protecting American Intellectual Property Act of 2022." Protecting American Intellectual Property Act of 2022 (“PAIPA”), Pub. Law 117-336, 88 Fed. Reg. 2229 (Jan. 13, 2023).
The law requires the President to send to Congress within 180 days a list identifying any “foreign person” the President determines has engaged in, supported, or benefited from significant theft of trade secrets of “United States persons” (businesses or people), which could be a significant threat to the national security, foreign policy, economic health, or financial stability of the United States. Id. at § 2(a)(1)(A). Those who may be included in the President’s list include parties and persons controlling the illegal actions, such as a parent company, chief executive officer, or board member. Id. at § 2(a)(1)(A)(iii),(iv). The statute also requires the President to report on what entities and people benefitted from the trade secret theft and how they did so. Id. at § 2(a)(1)(B),(C). The President must send this list annually after the initial list. Id. at § 2(a)(1).
PAIPA mandates that the President impose property- and visa-blocking sanctions on foreign individuals named in the report, as well as property- or export-blocking sanctions (including denial of certain financial assistance) on foreign persons and entities named in the report. Id. at § 2(b). At least five sanctions are to be chosen from a long list of economic measures that are available to prevent, stop, and penalize the illegal conduct. Most important, perhaps, is that the property of a foreign entity or person can effectively be frozen by United States authorities. Id. at § 2(b)(1)(A) (entities), Id. at § 2(b)(2)(A)(individuals). Individuals may also lose their visas and be ineligible for admission into the United States. Id. at § 2(b)(2)(B). PAIPA permits the President to waive sanctions when such waiver is in the national interest. Id. at § 2(c). Moreover, PAIPA itself lists a number of exceptions for both entities and individuals based on treaties and commitments to other countries, as well as their value, contributions, and/or ties to the United States. Id. at § 2(e).
PAIPA grounds the President’s authority to act in the International Economic Emergency Act, specifically 50 U.S. Code §§ 1701-1705, which permits the President during times of national emergency and war to exercise powers to control a range of economic activity and to pass regulations to facilitate this regulation. PAIPA explicitly references § 1705, which contains significant civil and criminal penalties for persons and entities who violate the terms of the economic sanctions or conspire to do so. However, 50 U.S. Code § 1701(b) limits the use of authority granted to the President by § 1702 (and hence §§ 1703-1705) to deal with an unusual and extraordinary threat with “respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose.” PAIPA, however, includes all of the powers under the International Economic Emergency Act, as well as its own delegation of additional powers, even if there is no national emergency.
Interestingly, PAIPA contains no provision for judicial review before or after the President adds a foreign entity or person to the list, invoking the mandatory sanctions in the Act. PAIPA incorporates 50 U.S. Code § 1704, which gives the President power to pass regulations. But unless regulations are passed that permit for meaningful due process commensurate with the sanctions in PAIPA, which pass judicial scrutiny, the lack of process in the Act may trigger constitutional challenges. Given the 180-day deadline for the President’s initial report to Congress, there does not seem to be much time to draft and implement regulations.
An open question surrounding PAIPA is how it will be integrated with other trade secret protection frameworks. The International Trade Commission has authority to adjudicate misappropriation of trade secrets in its fast-paced § 337 actions. The Defense of Trade Secrets Act, 18 U.S.C. § 1831-1832, permits for preliminary and permanent injunctions and damages for misappropriation of trade secrets. Further, the DTSA criminalizes economic espionage, including theft of trade secrets. Every state has a law on misappropriation of trade secrets. Other federal laws frequently come into play when computer access or code is in issue, such as the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the copyright laws in Title 17 of the United States Code. The United States Code also contains provisions, including criminal forfeiture, to address the matters purported to be the basis for the Act. Id. at § 1834. Since the DTSA, CFAA, and copyright laws require due process (including the right to trial), whether the PAIPA will satisfy substantive as well as procedural due process is likely to be questioned and addressed in the coming months.
In sum, this relatively short bill will doubtless attract significant attention from injured parties, government enforcers, and regulators, and also potentially raise questions as to how PAIPA fits into the existing federal trade secret protection framework.
