16 July 2020Muireann Bolger

China raises stakes with new ‘foreign’ trade secret theft laws

The National People's Congress (NPC) of the People's Republic of China has unveiled amendments to its criminal law regarding trade secret theft, following a  surge in US IP suits against Chinese nationals in the US.

The US  announced yesterday, July 15, that it would impose sanctions on employees of Chinese technology company  Huawei, if they were found to be involved in surveillance on behalf of Beijing.

Earlier this week, the UK government supported the US’ stance against the tech company by announcing a scheduled withdrawal of Huawei’s components from the UK’s 5G network.

The NPC’s proposed clause is part of amendments to China’s criminal code and covers economic espionage by foreign businesses, a draft of which has been released for public review until August 16.

In China, a three-year jail sentence is the present penalty for economic espionage but if passed, the new clause is likely to lead to more severe sentences.

The proposed amendment will be added to the end of Article 219 of the Criminal Law, and states: “Whoever steals, spies, buys, or illegally provides commercial secrets to overseas institutions, organisations, and personnel shall be sentenced to fixed-term imprisonment of not more than five years or detention, in addition to being fined or with a single fine; if the circumstances are serious, the penalty shall be more than five years’ imprisonment with fines.”

The  official explanation of the draft criminal code revision notes that the changes are specifically designed to tackle “commercial spying”, while its definitions of a “foreign agent” or “foreign instrumentality” states that the individual or entity must be the agent of a foreign government”.

US fights China’s ‘state-sponsored IP theft’

Last year, the  US Department of Justice (DOJ) warned that Chinese “state-sponsored” theft of trade secrets is on the rise, as the two countries waged a bitter dispute over a  trade deal.

Speaking to  CNBC in Singapore, Adam Hickey, deputy assistant attorney general, said that recent DoJ prosecutions highlighted the threat that the Chinese government and Chinese companies pose to US trade secrets.

He said: “We expect other nations will want to become self-sufficient in critical technologies….part of [China’s] industrial policy, part of the way they try to accomplish that, is state-sponsored theft or creating an environment that rewards or turns a blind eye to it”.

The director of the US Federal Bureau of Investigation (FBI), Christopher Wray,  recently called Chinese IP theft the “greatest long-term threat” to the US economy.

In 2018, the US Department of Justice’s (DOJ)  launched its  China Initiative to investigate and prosecute Chinese companies for alleged trade secret theft, economic espionage, and other violations of American law.

According to the DOJ, about 80% of all its economic espionage prosecutions allege  conduct that would benefit the Chinese state, and “there is at least some nexus to China” in around 60% of all trade secret theft cases in the US.

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