Risk Assessment re: China’s Proposed Amendment to Its Espionage Law

China is amending its foreign trade secrets theft laws according to a recent news report. The proposed amendment is currently under public review until August 16^th.

Questions:

Should the U.S. and other Western nations be concerned about China’s proposed amendment to its Economic Espionage laws?

Is there potential for China to criminally charge (without justification) U.S. and Western business persons and entities under its proposed amendment?

What is the Amendment?

As reported, “The new clause will target any person or company that ‘steals, spies, buys, or illegally provides trade secrets to foreign institutions, organisations, and personnel…if passed…[the penalty will be] more severe than the current three-year jail sentence for general trade secret theft “

Why is China doing this?

The consensus is that China is doing this because of the U.S. Department of Justice’s (DOJ) vigorous pursuit of China-State-sponsored trade secrets theft since the November 2018 / DOJ announcement of the China Initiative.

The link below is a sampling of DOJ prosecutions since 2018:

China Initiative and Compilation of China-Related Prosecutions (Last updated on July 10, 2020)

Does China have a similar problem with bad foreign actors stealing their trade secrets?

According to China’s 2019 Supreme Procuratorate Criminal IP Rights Infringement report, they had two trade secrets theft prosecutions. All the bad actors involved were Chinese nationals that stole on behalf of Chinese companies.

See my May 11, 2020, post titled, “China Victim of Chinese IP Thieves Too: China Report Claims.”

So, it appears not.

It appears China is proposing this amendment to its economic espionage laws to address a problem that does not exist.

According to reports, the most recent charge against a foreigner for stealing trade secrets was an Australian citizen named Stern Hu, who was sentenced in 2010 to 7-14 years for stealing trade secrets from a Chinese firm that benefited an Australian company.

Would China use this law for political purposes?

Consider the recent indictment of two-Canadians detained by the Chinese 18 months ago on vague espionage charges days after the arrest of Huawei executive Meng Wanzhou in Canada at the request of the U.S.

Should persons and entities doing business with China be concerned?

As U.S. IP attorney Aaron Wininger, director of China Intellectual Property Law Practice at Schwegman Lundberg & Woessner, is quoted as saying, “…I would expect China would like to have some prosecutions under it once the law is passed.”

A word to the wise:

Foreign entities, primarily U.S. entities, should keep this anticipated amendment in mind as they move forward with their business and academic relationships in and with China.

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