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Senate, House Pass Amended Bill To Stiffen Fines for Foreign Economic Espionage

Thursday, January 3, 2013

The Senate, in considering a House bill (H.R. 6029) that would stiffen penalties for foreign, economic espionage convictions, substituted in its own slightly different version, which passed Dec. 19. The House then debated the bill Dec. 29 and passed the legislation late on the evening of Jan. 1.

Unlike the House's version of the bill, the Senate's version does not directly increase the maximum jail time available for persons convicted of economic espionage. Rather, the bill that passed the Senate would require the U.S. Sentencing Commission to “review, and if appropriate, amend the Federal sentencing guidelines” with respect to convictions for economic espionage where the misappropriated trade secret is transferred, or attempted to be transferred, outside of the United States.

Senate, House Both Tackle Trade Secret Theft.

Over the last few years trade secret misappropriation, and in particular misappropriation on behalf of foreign companies, has gained considerable attention on Capitol Hill.

Just one day before the Senate action on H.R. 6029, the House on Dec. 18 passed a different bill seeking to close an apparent loophole in the federal trade secrets statute (245 PTD, 12/21/12). The Theft of Trade Secrets Clarification Act of 2012 (S. 3642) addresses a decision by the U.S. Court of Appeals for the Second Circuit regarding the taking of computer source code by a former employee.

S. 3642 was introduced Nov. 27 by Sen. Patrick J. Leahy (D-Vt.), the chairman of the Senate Judiciary Committee and approved by unanimous consent of the Senate on the same day (229 PTD, 11/29/12). That legislation was a reaction to United States v. Aleynikov, 676 F.3d 71, 102 USPQ2d 1458 (2d Cir. 2012) (71 PTD, 4/13/12). With the Dec. 18 House-passage of S. 3642, that measure is now cleared for President Obama's signature.

Penalty Enhancement Bill Goes Back and Forth.

Meanwhile, in an earlier attempt to curb economic espionage abroad, Sen. Herb Kohl (D-Wis.) in 2011 introduced a bill (S. 678) that would increase penalties for the international theft of U.S. trade secrets (63 PTD, 4/1/11).

That bill, the Economic Espionage Penalty Enhancement Act of 2011, would increase the criminal penalties available under the Economic Espionage Act of 1996, 18 U.S.C. §1831(a). Specifically, the bill sought to increase the from 15 to 20 years the maximum sentence that would be available for persons convicted of criminal economic espionage.

S. 678 would also direct the U.S. Sentencing Commission to consider amending its guidelines to provide for enhanced penalties if a person convicted for misappropriation “intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agency.” It also would urge the Sentencing Commission to set minimum sentences for transmission of trade secrets overseas or for economic espionage.

S. 678 was approved by the Senate Judiciary Committee on Dec. 8, 2011 (237 PTD, 12/9/11), but it progressed no further in the Senate. Instead, the Senate on Dec. 19 took up H.R. 6029, a House bill similar to S. 678 that was introduced by Rep. Lamar S. Smith (R-Texas) in July (127 PTD, 7/3/12).

The Foreign and Economic Espionage Penalty Enhancement Act of 2012 was favorably reported out of the House Judiciary Committee in July (132 PTD, 7/11/12), and was passed by the House in August (149 PTD, 8/3/12).

While Kohl's S. 678 called for a review by the U.S. Sentencing Committee, H.R. 6029, as introduced by Smith and passed by the House, would directly amend the relevant statute in two ways.

First, H.R. 6029 would increase the maximum fine for individuals convicted of economic espionage from $500,000 to $5 million.

Second, H.R. 6029 would also increase the maximum fine that could be assessed against organizations convicted of economic espionage. It would do this by amending the relevant statute by striking out the current maximum penalty of $10 million for such a conviction and inserting “not more than the greater of $10,000,000 or three times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has thereby avoided.”

Senate Passes Version Different From S. 678, H.R. 6029.

As H.R. 6029 moved to the Senate floor, the lawmakers considered and agreed to a substitute amendment proffered by Kohl and Sen. Mike Lee (R-Utah).

The Kohl-Lee amendment to H.R. 6029, which was passed by the Senate on a voice vote, dropped the sentencing enhancements--a provision that was in the House-passed version of H.R. 6029 and in S. 678. However, the Senate did adopt the House version's enhanced penalties for both individuals and organizations convicted under Section 1831. The Senate's version also included the requirement that the Sentencing Commission review the current penalties available for convictions under Economic Espionage Act.

House Debates, Passes Senate's Version.

The House took up debate on the Senate's amended version of H.R. 6029 Dec. 30. In floor remarks Smith expressed his support for the amended bill.

“I urge my colleagues to support H.R. 6029 as it was amended by the Senate,” Smith said. “The original bill was developed in a bipartisan manner and was unanimously reported by both the Judiciary Committee and this House. This is a commonsense and much-needed measure that deserves our full support.”

In his written remarks, Smith explained the reason for the Senate's amendment of H.R. 6029.

“Several Senators wanted to give further consideration to the proposed statutory maximum increase from 15 to 20 years imprisonment,” Smith said. “The Senate amended H.R. 6029 by deleting this single provision.”

No vote took place Dec. 30, however the House approved the bill under suspension of the rules by voice vote Jan. 1.

By Tamlin H. Bason  


H.R. 6029 at http://pub.bna.com/ptcj/HR6029Dec1912.pdf

Senate floor action at http://pub.bna.com/ptcj/HR6029FloorAction.pdf

House Dec. 30 floor remarks at http://pub.bna.com/ptcj/CR_HR6029Dec2012.pdf

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