By Josh Rich —

On Tuesday, the U.S. Intellectual Property Enforcement
Coordinator, Victoria Espinel, published a notice in the Federal Register "requesting
any recommendations for legislative changes that would enhance enforcement
against, or reduce the risk of, the misappropriation of trade secrets for the
benefit of foreign competitors or foreign governments."  78 Fed. Reg. 16875 (Mar. 19, 2013).  Submissions are due by April 22, 2013.  The request for public submissions is one of the
first steps in the implementation of the "Administration Strategy on
Mitigating the Theft of U.S. Trade Secrets," issued on February 20, 2013 (see ""Obama Administration Reports on Efforts to Prevent Trade Secret Misappropriation").

The Administration Strategy is a
five-pronged approach, coordinated by the U.S. IP Enforcement Coordinator and
involving many of the executive branch departments.

First, the strategy calls for the White
House to focus diplomatic efforts to protect trade secrets overseas.  Although the Administration Strategy does not
expressly identify any specific countries on which it is focused, the examples
of misappropriation of trade secrets for the benefit of foreign companies and
countries are almost exclusively Chinese. 
Consistent with this focus on China, National Security Advisor Tom
Donilon later said that reports of cyber theft of confidential business
information from entities in China were occurring "on a very large scale"
and that the Chinese government "should take serious steps to investigate
and put a stop to these activities" ("US calls for 'serious' action by China to stop cybertheft," The Washington Post, March 11, 2013).  However, a private U.S.-based cybersecurity
firm had previously issued a report identifying the Chinese government
(specifically, a military unit based in Shanghai) as being one of the causes of
Chinese cyberattacks (see Mandiant Intelligence Center Report).  Thus, while the Strategy calls for sustained
and coordinated international engagement with trading partners, such as China,
it may be difficult for the Federal agencies charged with doing so (including
the Departments of Commerce, Defense, Homeland Security, Justice, State, and
Treasury, and the U.S. Trade Representative) to make much headway.  The Administration may find more success in
the Department and PTO working with other countries through Intellectual
Property Rights (IPR) working groups to fashion rules and policies to
discourage trade secret theft.  The
Strategy also calls for domestic law enforcement agencies to leverage
international law enforcement cooperative agreements and arrangements to pursue
investigations both in the U.S. and abroad.

Second, the Strategy calls for the U.S. IP
Coordinator to promote voluntary best practices by private industry to protect
trade secrets.  While the IP Enforcement Coordinator
will work with the Departments of Justice and State (among other agencies) to
encourage companies and industry groups to develop and implement voluntary best
practices, the Administration Strategy expressly indicates that those best
practices must be consistent with antitrust laws.  Among the areas in which the Strategy
suggests focus are R&D compartmentalization, information security, physical
security, and human resources policies. 
But the Strategy makes it clear that compliance with best practices must
be voluntary, and any identified best practices may not be suitable for all
companies.

Third, the Strategy calls for the
enhancement of domestic law enforcement operations.  Spearheaded by the Attorney General's Task
Force on Intellectual Property and the FBI, the Department of Justice is making
the investigation and prosecution of corporate and state-sponsored trade secret
theft a higher priority.  The Office of
the Director of National Intelligence will also coordinate the sharing of
intelligence among the intelligence and law enforcement communities in order to
monitor foreign government activity and prevent international trade secret
misappropriation, and will also work with the private sector to warn of
potential threats.

Fourth, the Strategy calls for the
Administration to improve domestic legislation. 
This is the prong to which the U.S. IP Coordinator's Federal Register notice is directed, and
one area where there has been concrete (although incremental) progress in
recent months.  The Strategy highlighted
two acts passed at the conclusion of the last Congress.  First, the "Theft of Trade Secrets
Clarification Act of 2012" was intended to reverse the outcome of cases
like United States v. Aleynikov, 676
F.3d 71 (2d Cir. 2012), in which the defendant stole the source code for a
proprietary high-frequency trading system from his former employer to provide
it to a new employer, but was acquitted because the source code was intended to
remain secret and therefore not "related to or included in a product that
is produced for or placed in interstate or foreign commerce."  That Act modified the Economic Espionage Act
(EEA) to make it cover trade secrets "related to a product or service used
in or intended for use in interstate or foreign commerce."  Second, the "Foreign and Economic
Espionage Penalty Act of 2012" did exactly that: increased potential
sentences and fines for violations of the EEA. 
The U.S. IP Enforcement Coordinator is charged with coordinating an
initial review of existing Federal laws within 120 days of the release of the
Administration Strategy, by June 20, 2013.

Finally, the Strategy calls for various
departments in the Administration to increase efforts to develop public
awareness and engage in stakeholder outreach. 
For example, the FBI and Department of Commerce are to continue and
expand their efforts to inform the public about the threat and cost of trade
secret misappropriation, using existing public awareness programs.  In addition, the PTO will include discussion
of the economic implications of trade secret misappropriation in its "road
show" events.

All in all, the Administration Strategy
suggests a greater focus on protection of trade secrets against foreign
misappropriation, as well as a more coordinated effort than in the past.  But the next steps, both in discussions with
China and shaping of Federal legislation, may be critical in determining
whether that effort provides greater security for domestic companies.  We will continue to monitor developments and
will report back on suggested legislative changes.