The Butch Lewis Act Takes Important Step Forward

By Holly Fechner and Peter Rechter on Posted in Congressional Action

This week, Congress took an important step forward to protect the benefits of retirees in multiemployer pension plans facing insolvency.  On Tuesday, June 11, 2019, the House Committee on Education and Labor marked-up the Rehabilitation for Multiemployer Pensions Act (H.R. 397), better known as the “Butch Lewis Act.”  Among other things, the bill would create a federal loan program within the Department of Treasury authorized to finance loans to certain multiemployer plans facing insolvency.  At the conclusion of the mark-up, members voted along party lines to move the bill out of Committee.

The Butch Lewis Act was introduced during the first week of the 116th Congress by Rep. Richard Neal (D-MA), Chairman of the House Ways and Means Committee, and Rep. Peter King (R-NY).  Proponents of the bill—which has bipartisan support and over 170 co-sponsors—seek to prevent the insolvency of certain plans in critical and declining status, thereby protecting retirees’ benefits without requiring cuts.  Opponents, however, have criticized the bill for not addressing structural problems in the multiemployer pension system.

During the mark-up, Education and Labor Committee Chairman Bobby Scott (D-VA) emphasized that the collapse of the multiemployer pension system would cost far more in taxpayer dollars than congressional intervention, as retirees who lose their benefits would be forced to rely on social safety net programs and employers would be pushed to cut jobs.  According to a fact sheet issued by the Committee, the cost of congressional inaction, in terms of lost tax revenue and increased social safety net spending, would be between $170.3 billion and $241.3 billion over a 10-year budget window—and between $332 billion and $479 billion over a 30-year time horizon.  The Congressional Budget Office has not yet scored the cost of H.R. 397, but the office issued preliminary estimates for versions of the bill last year that ranged from $34 billion to $100 billion.

Although the Butch Lewis Act advanced out of Committee, the mark-up evidenced the difficult path the bill will face if it is to become law.  Ranking Member Virginia Foxx (R-NC) strongly criticized H.R. 397 as a political “ploy” by Democratic members on the Committee, and opined that it would “meet certain death” if it reaches the Senate.  This sentiment was echoed by Rep. Tim Walberg (R-MI), the Ranking Member of the Subcommittee on Health, Employment, Labor, and Pensions.  The Republican response to H.R. 397 likely stems, in part, from the fact that a draft proposal by the Joint Select Committee on Solvency of Multiemployer Pension Plans—a special bipartisan Committee convened last year—did not include a loan program, indicating a lack of bipartisan consensus around such an option.

The Butch Lewis Act cleared an important procedural hurdle this week, but the process revealed the challenging road ahead—both for the bill, and for other proposals to reform the multiemployer pension system.  In the near term, the House Ways and Means Committee likely will hold its own mark-up of H.R. 397 in the coming weeks.  Covington will continue to monitor these developments closely.

Senate Committee Holds Hearings on New Bipartisan, Bicameral Proposal to Reform Section 101 of the Patent Act

By Holly Fechner, Ashley Kwon and Matthew Shapanka on Posted in Congressional Action, Intellectual Property Protection

This week, the Senate Judiciary Subcommittee on Intellectual Property held the first two of a three-part series of hearings on “The State of Patent Eligibility in America.”  The hearings are part of an ongoing bipartisan congressional effort to reform section 101 of the Patent Act to address confusion over patent eligibility wrought by more than a decade of Supreme Court decisions. Each hearing includes three panels of five witnesses, for an impressive total of 45 witnesses over three days.

The first hearing, held on June 4th, featured former government officials and academics, including former Federal Circuit Chief Judge Paul Michel, former USPTO directors Q. Todd Dickinson and David Kappos, and Mark Lemley of Stanford University.  The second hearing, held on June 5th, included testimony from a number of trade associations and coalitions, such as AIPLA, IPO, Innovation Alliance, and Pharmaceutical Research and Manufacturers of America (PhRMA). A third hearing is scheduled for June 11th.

For the past decade, there has been a rising chorus of stakeholders concerned with the Supreme Court’s decade-long narrowing of patent eligible subject matter under section 101, and the resulting unpredictability and confusion.  The scope of judicially created exceptions to patent eligible subject matter has grown, causing uncertainty as to what inventions are, and are not, eligible for patent protections.

Five years after the Court’s Alice v. CLS Bank decision, a bipartisan, bicameral group of senators and representatives recently unveiled a draft bill to reform section 101.

Senators Thom Tillis (R-NC) and Chris Coons (D-DE), Chair and Ranking Member of the Senate IP Subcommittee, along with Representatives Doug Collins (R-GA), Hank Johnson (D-GA), and Steve Stivers (R-OH), released the draft bill this spring in an effort to “restore predictability and stability to the patent eligible subject matter inquiry.”  This draft legislation comes after months of roundtable discussions and feedback from dozens of stakeholders, including industry representatives, inventors, and academics.

The draft text creates a presumption in favor of patent eligibility,  by providing that “provisions of section 101 shall be construed in favor of eligibility.”  It maintains the current categories of patent eligible subject matter (“any useful process, machine, manufacture, or composition of matter”) and eliminates all judicially created exceptions, including abstract ideas, laws of nature, or natural phenomena.  It also explicitly requires that patent eligible subject matter have utility through human intervention.

The draft bill specifically addresses a number of challenges with the way section 101 is currently applied, clarifying that (1) the claimed invention should be considered as a whole, not as discrete pieces, and (2) subject matter eligibility under section 101 is a distinct inquiry that should not be conflated with the other requirements for patentability under the Patent Act, including sections 102 (novelty), 103 (non-obviousness), and 112 (written description, enablement, and definiteness), all which of must be met for a valid patent.  Finally, the draft bill proposes an amendment to a different statutory provision—section 112(f)—that would broaden the scope of the application of section 112(f), which governs when structural limitations from the patent specification may be imported to the claimed invention.

The IP Subcommittee plans to hold a third hearing next Tuesday, June 11.  That hearing will feature company representatives.

Chairman Tillis and Ranking Member Coons have clarified that the proposal is subject to additional discussion and revision.  However, the bipartisan group of members has devoted significant time engaging stakeholders in an attempt to restore predictability and clarity to patent eligibility law.  How, and if, Congress reforms section 101 in this Congress remains to be seen, and Covington will continue to monitor the deliberations on this issue.

Florida FARA Case Leaves Troubling Precedent

By Brian D. Smith and Robert Kelner on Posted in International Strategy, Uncategorized

On May 7, 2019, a federal District Court in the Southern District of Florida ruled that an American company, RM Broadcasting, must register as a foreign agent under the Foreign Agents Registration Act (“FARA”) for its agreement to broadcast radio programming from Rossiya Segodnya (meaning “Russia Today”), a Russian state-owned news agency.  Although the decision has received some attention because it is the latest victory in the Department of Justice’s efforts to force Russian state-owned media organizations and their agents to register under FARA, it has much broader implications.  The FARA legal analysis underpinning the Court’s decision has significant shortcomings, reflecting RM Broadcasting’s failure to assert and brief perhaps its strongest legal defenses.

RM Broadcasting buys and sells radio airtime, including from WZHF 1390 AM in Washington, D.C.  In late 2017, RM entered into a services agreement to provide for the broadcasting and transmission of Rossiya Segodnya’s radio programs over WZHF.  Notably, RM agreed to sell essentially the entire broadcast schedule on WZHF, except for hourly station identifications, and to transmit Rossiya Segodnya’s programming in whole and unaltered.  In June 2018, the FARA Unit informed RM that the government concluded the company was required to register under FARA.  RM disagreed and brought an action for a declaratory judgment that it was not required to register.

RM raised a number of arguments that the Court found inapplicable or unpersuasive.  For example, RM argued that its services agreement did not give rise to an agency relationship under common law principal-agent theories.  Unfortunately, there is very clear precedent that FARA’s “agent of a foreign principal” is a statutory test that is wholly distinct from common law agency.  RM also argued that it was not broadcasting radio programs because the FCC licensee – from which RM bought airtime – did the actual broadcasting.  FARA, however, covers actions of an agent taken “directly or indirectly,” and the agreement required RM to provide broadcasting services to Rossiya Segodnya, which it did.

From a FARA perspective, RM failed to raise directly perhaps its strongest argument: the commercial exemptions to FARA.  Although RM made arguments that alluded to the commercial exemptions, such as stating that it simply buys and sells radio airtime in “an arms-length commercial business transaction,” it raised these issues in the context of its alleged agency relationship with Rossiya Segodnya, rather than as an exemption to registration.  RM never specifically cited and explained the commercial exemptions to FARA, their history and purpose, or the reasons that the exemptions could preclude registration.  The Department of Justice, which had no incentive to help RM strengthen its case, also failed to address the commercial exemptions in its briefs.  As a result, the Court’s opinion did not address these critically important issues. Continue Reading

Ranking the U.S. Economy:  “New Normal” or Room for Improvement?

By Constance Anne Pence on Posted in Uncategorized

For decades, the U.S. economy was the envy of the world.  With few, notable exceptions the U.S. economy was a consistent model for growth, innovation, diversification and job creation. The US economic engine, and the optimistic middle class it enabled, also has been a testament to the value of our democratic, rule-of-law-based governance system.

Unfortunately, the confidence of our middle-class, of young Americans, and of the international community, in the U.S. economic system – and by extension our political system –is weaker and more fractured than once it was.  For most, despite today’s historically low unemployment levels, real wages have stagnated since the 1970’s, even when productivity grew substantially.  And the rising costs of education and health care, which are core to U.S. progress, have far outpaced inflation (and trends in other high-income countries) even as technology created whole new industries and services.  U.S. economic and productivity growth have leveled off, and social mobility has seized up, compared to what it was and relative to other countries.

Recent reports find that 70 percent of all U.S. wealth is held by the top 10% of the population. The price of housing (a key middle class asset) in the U.S. just fell for the first time in seven years.  The U.S. population overall is aging and young people are marrying later and having fewer kids, creating demographic headwinds against higher growth and undercutting the power of consumer spending to drive growth.

Is this really a “new normal” as some argue, or is there still potential to unleash a U.S. economy that delivers measurably better living standards to a broad swath of America?  It is a crucially important question, especially at this time of deep economic uncertainty. To answer it, we might best start by asking how the U.S. economy stands up to others, and what are its strengths and weaknesses.  It is especially useful to be clear-eyed about where the U.S. economy falls short, as it points to opportunities for tangible improvement.  And based upon some useful indicators and analyses, there appears to be considerable upside potential for U.S. economic revitalization.  Realizing that potential, however, may require a broader understanding of and willingness to face concrete realities about the large and complex U.S. economy.

In results just released, the IMD Competitiveness Center reports that the U.S. has fallen from the first to the world’s third most competitive economy by its account, behind Singapore and Hong Kong.  Singapore, they say, benefits from advanced technological infrastructure, skilled labor, favorable immigration laws, and efficient ways to establish new businesses.  In the Heritage Foundation’s Index of Economic Freedom, the U.S. is currently ranked 12th, and is characterized as “mostly free,” in part because trade freedom and fiscal health have measurably declined.  Economic freedom is a hallmark of the U.S. system, and an approach we might expect to lead easily.  Not only do Canada, New Zealand and the UK do better, so too does the UAE. Continue Reading

Elections and Appointments in the European Union

By Jean De Ruyt, Sebastian Vos and Atli Stannard on Posted in EU Law and Regulatory

The EU elections began on Thursday, May 23, and run to Sunday, May 26.  These are likely to see a significant change in the make-up of the European Parliament, with the main center-left and center-right parties losing overall control.  It will also kick off formally the process for appointing a new European Commission – which, this year, comes alongside the appointment of a number of other senior European figures.

Indeed, the five most important institutional leaders of the EU – the presidents of the European Commission, the European Parliament, the European Council and the European Central Bank, as well as the High Representative for Foreign Policy – will be replaced in the months to come.  None of the current incumbents will remain in post.

This change of guard will shape the future of the continent for years to come.  The main player in the appointment process, which will start at the end of May 2019, is the European Council made up of Heads of State and Governments.  The 28 EU leaders will have appoint four of the five most senior EU positions almost simultaneously.  As usual, they will need to respect a subtle balance between political groups, larger and smaller countries, Eastern and Western, Northern and Southern candidates, and a gender balance.

A dinner of the European Council has been planned for May 28, just after the Parliamentary elections.  The Council’s president, Donald Tusk, hopes to arrive at a “package deal” in the regular European Council on June 20-21.  Considering the difficulty of the task, as outlined below, this objective is ambitious.  But the EU leaders have a clear interest in not postponing the decision until after the summer, when other challenges will await them – notably, the decision on the new seven-year financial framework, and Brexit.

After a brief overview of the likely results of the European Parliament election, we will examine what is at stake for each of the five positions to fill.

The Election of the European Parliament

Elections take place simultaneously in the 28 Member States between May 23 and 26.  The turnout is expected, as previously, to be lower than for national elections – for the 2014 elections, it was an average of 42,54%.

In the European elections, fringe and populist parties tend to get more votes than at the national level, this election being seen by many as an opportunity to cast a protest vote with fewer consequences.  In the current political context, this phenomenon will probably be amplified.

It is thus expected that, this year, the two main political groups combined (the center-right Christian Democrats of the EPP and the center-left Socialists of the S&D), will no longer have the absolute majority.  They will therefore lose control of Parliamentary proceedings and major committee appointments.  This time, they will have to take into account the centrist Liberals, who will likely be boosted by the arrival of Emmanuel Macron’s party, “La République en Marche” (campaigning for the European elections as “Renaissance”), which will want to reproduce in the Parliament the influence their leader exerts on the European Council.

Contrary to what some believe, the “Eurosceptic” wing is unlikely to dominate the Parliament and will almost certainly not be able to influence the appointment of the leaders of the institutions.  But if some of the larger populist parties manage to assemble in one political group, they might have a sizeable “nuisance” value.  Indeed, it is expected that Salvini’s Lega, Le Pen’s “Rassemblement National” and the “Alternative für Deutschland” (perhaps joined by UKIP or Farage’s Brexit party) will assemble in a new right-wing block, dubbed the “European Alliance of Peoples and Nations” political group, which could secure more than 80 seats (out of 751). Continue Reading

ABSCA Confirms Contractors May Challenge Unfavorable CPARS Ratings

By Alex Sarria and Kevin Barnett on Posted in Compliance Issues, Uncategorized

While you might not be able to fight City Hall, you can fight your CPARS rating. In a short opinion published last week, the ASBCA confirmed it has jurisdiction to annul an inaccurate and unfair government evaluation of a contractor’s performance. Cameron Bell Corporation d/b/a Government Solutions Group, ASBCA No. 61856 (May 1, 2019).  Though the ASBCA cannot require the government to issue a specific rating, it can remand the matter to the contracting officer with instructions to redo the evaluation ─ a perhaps imperfect, yet still potent form of relief available to contractors who believe the government has improperly rated their contract performance.By regulation, contractors are entitled to rebut a negative evaluation of their performance in the Contractor Performance Assessment Reporting System, or CPARS. FAR 42.1503(d).  A contractor’s rebuttal submission typically is due within 14 calendar days of the date the agency invites the contractor to respond. See id. If this proves unsuccessful, a contractor may challenge the CPARS rating by submitting a claim with the contracting officer under the Contract Disputes Act (CDA).  See, e.g., Cameron Bell, ASBCA No. 61856, 2019 WL 2067642 (May 1, 2019).  Then, if the contracting officer denies the claim, the contractor can appeal the decision to an appropriate Board of Contract Appeals or the United States Court of Federal Claims.

That is precisely what the contractor did in Cameron Bell.  There, a contractor challenged a less-than “Satisfactory” rating of its performance in a CDA claim.  After the contracting officer denied the claim, the contractor appealed to the ASBCA seeking various forms of injunctive relief.  The government moved to dismiss the appeal for lack of jurisdiction.  But the Board denied the government’s motion in part, finding that the ASBCA has jurisdiction to “assess whether the contracting officer acted reasonably in rendering the disputed performance rating or was arbitrary and capricious and abused his discretion.”  Id. The Board also noted, that while it lacks authority to “order the government to revise a CPARS rating,” the ASBCA “may remand to require the contracting officer to follow applicable regulations and provide [a contractor] a fair and accurate performance evaluation.” Id.

The Cameron Bell decision provides a few helpful reminders to contractors who are considering whether to challenge a negative CPARS rating.  First, the governing regulations provide contractors a basis for establishing that the government has issued a CPARS rating in an arbitrary and capricious manner.  The FAR includes definitions of each rating (i.e., Exceptional, Very Good, Satisfactory, Marginal, Unsatisfactory) and outlines the information the government must provide to justify the rating it assigns.  See FAR 42.1503 and Table 42-1 (Evaluation Ratings Definitions).  These objective guidelines allow contractors to challenge a negative CPARS rating if, for example, the government’s determination is based upon inaccurate, incomplete, inconsistent or otherwise unsupported information or statements.

Second, contractors should be aware that, while the ASBCA cannot order an agency to issue a higher CPARS rating, the Board can direct the government to conduct a “fair and accurate” evaluation of the contractor’s performance in accordance with law and regulation. In many cases, an order remanding a CPARS rating for reevaluation will result in only partial relief for the contractor ─ e.g., where the agency must simply do a better job of explaining why it assigned a low rating. But in other cases, such an order will require the agency to meaningfully reexamine the rating in light of the contractor’s record of performance, the objective guidelines in FAR Subpart 42.15 and the particular challenges raised by the contractor on appeal.  See, e.g., DOD OIG, “Summary of Audits on Assessing Contractor Performance: Additional Guidance and System Enhancements Needed,” (May 9, 2017) at 11 (criticizing the assignment of a “marginal” rating where the agency did not explain the contractor’s purportedly “significant” performance failure and where the evidence showed the alleged failure had no impact on the agency).

Third, contractors also should keep in mind that, in certain circumstances, they may be entitled to recover monetary damages if they can show the government’s arbitrary and capricious performance evaluation “constituted bad faith and a breach of the [agency’s] duty of good faith and fair dealing.”  See, e.g., Government Services Corp., ASBCA No. 60367, 16-1 BCA ¶ 36,411.   Though it can be challenging to prevail on a claim for breach of the duty of good faith and fair dealing, it undoubtedly is a viable theory of recovery in many CPARS rating cases, particularly those where there is clear evidence of government bias or overreach that can be developed further through discovery.  Cameron Bell, 2019 WL 2067642 (“We also have jurisdiction to determine whether the government breached the implied contractual duty of good faith and fair dealing, an issue that [the contractor] raised in its claim to the contracting officer”).

 At bottom, the ASBCA’s decision in Cameron Bell is a helpful reminder that contractors have recourse when they are assigned a less-than positive CPARS rating. Contractors should familiarize themselves with the CPARS process ahead of time so that they can quickly identify the evidence needed to rebut a negative rating and, if necessary, challenge the rating in a CDA claim.

House Financial Services Committee Passes BSA/AML Overhaul Legislation

By Jenny Konko on Posted in Bank Regulation, Congressional Action

On May 9, 2019, the House Financial Services Committee (“HFSC”) unanimously approved an amendment in the nature of a substitute to H.R. 2514, the Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act (the “COUNTER Act” or the “Act”).  The COUNTER Act, introduced by Representative Emanuel Cleaver (D-MO) would be the first major reform of the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq. (“BSA”) and related anti-money laundering (“AML”) regulations since 2001.  The COUNTER Act will now move to the House floor for debate.  The HFSC postponed a vote on a related bill that is aimed at combating illicit financial activity in anonymous shell companies and that would require most corporations and limited liability companies to disclose beneficial ownership information at the time of incorporation. Continue Reading

Department of Defense Releases Annual Report to Congress on the Military and Security Developments Involving the People’s Republic of China

By Samantha Clark, Zachary Mears and Jeff Bozman on Posted in China, Defense Issues

The Department of Defense (“DoD” or “the Department”) released its annual report to Congress on the Military and Security Developments Involving the People’s Republic of China (“PRC”) on May 2, 2019. This annual report details DoD’s assessment of Chinese security strategy and military strategy over the next 20 years, with a particular focus on China’s future course of military-technological developments. The Secretary of Defense sends both a classified and unclassified version of the report to Congress each year to fulfill the requirements of Section 1202 of the National Defense Authorization Act for Fiscal Year (“FY”) 2000, as amended by Section 1260 of the NDAA for FY 2019. Notably, the 2019 amendments refined the scope of the reporting requirements to include elements regarding emerging efforts by the PRC on espionage, technology transfer, economic pressure, political coercion, information operations, and predatory lending under its Belt and Road initiative.

The report highlights significant strategic challenges presented by Chinese foreign and military policy.  Its tone underscores sharp differences with several recent policy decisions and comments that take a more accommodating view of Chinese policy.  The UK defense minister, for example, was recently ousted over a leak concerning Britain’s proposed decision to allow Huawei to participate in certain parts of its 5G network.  The DoD report, by contrast, describes serious threats from China’s coercive military-civilian strategy.  China is taking major steps to modernize its military capabilities and can force cooperation under its laws from all potential sources of innovation within its borders.

Industry leaders in the United States should take note of this approach.  As they engage with U.S. government leaders and policy makers, it will be important to look for ways to continue building on key innovation efforts in the United States, and with allies and partners, to harness dual-use emerging technologies for future capabilities. The report also makes clear that cybersecurity and counter-espionage protocols will be key to thwarting efforts of the Chinese government – acting either through governmental agencies or through Chinese companies – to gain insight into the military and industrial capabilities of the United States. Continue Reading

China Amends Trade Secret Law to Further Favor Rights-Holders

By Ruixue Ran, Robert Williams, Sheng Huang, Alexander Wang and Andrew Wang on Posted in China

On April 23, 2019, the Standing Committee of the National People’s Congress of China passed a bill amending China’s Anti-Unfair Competition Law (“AUCL”). Changes made by the amendment bill took effect on the same day. Further to the last amendment to the AUCL in 2017, the newly introduced burden-of-proof shifting and punitive damages rules will significantly enhance the protections for trade secret right holders.

New burden-of-proof shifting provision will substantially favor trade secrets rights-holders

The most significant change in the amendment is a new burden-of-proof shifting provision with respect to right holder’s establishment of (1) the existence of a trade secret, and (2) the existence of misappropriation. Under the new rules, the burden on the plaintiff is lowered to require only prima facie evidence on these two elements, after which the burden shifts to the defendant to disprove the existence of a trade secret or misappropriation.

According to the first paragraph of Article 32, when a trade secret rights-holder presents prima facie evidence reasonably demonstrating that it has taken confidentiality measures with respect to its alleged trade secret and it was nonetheless misappropriated, the burden then shifts to the defendant to disprove that the asserted information is a trade secret. This is a significant departure from the previous rules, which placed a heavy burden on a trade secret plaintiff to show that the asserted trade secret was not “known to the public.” This issue was frequently the most fiercely-litigated as it serves as a threshold objective defense. Typically proving this point would require the court to rely on a report from an independent judicial appraisal agency, at the plaintiff’s cost. This change is likely to allow plaintiffs to cement their evidence supporting trade secret status and require defendants to instead bear burden to refute claims of trade-secret status.

The second paragraph of Article 32 provides that a trade secret rights-holder can rest on prima facie evidence which reasonably shows that its trade secret has been misappropriated, and also provides evidence supporting that either (1) defendant has an opportunity to access the trade secret, and the information that defendant has used is substantially similar to the trade secret; or (2) the trade secret has been disclosed or used, or there is a risk of being disclosed or used, by defendant. When this prima facie showing has been made, a defendant then has the burden to prove that it has not misappropriated the trade secrets. Due to the lack of fulsome common law-style discovery, parties in trade secret litigation in China frequently find it difficult, if not impossible, to obtain evidence from a defendant to support a claim for misappropriation. By allowing the inference of misappropriation and shifting the burden-of-proof, the new AUCL will help remove this obstacle and compel an accused infringer to present evidence in its possession to try and defeat such a claim.

Enhanced monetary remedies by creating up to fivefold punitive damages and increasing statutory damages cap

Notably, the new AUCL provides for the court to amplify exemplary damages up to five times in cases of willful and malicious misappropriation. This is unprecedented in China’s Trade Secret Law and is intended to serve a punitive purpose. Article 17 of the new AUCL permits the court to exercise the discretion in granting punitive damages where willful misappropriation reaches a “serious degree”. How subsequent legislation and judicial interpretations will define “serious degree”, as well as the more general issue as to how the new willful misappropriation rules will change the legal landscape and parties’ litigation strategies, remains to be observed by practitioners and interested parties.

Article 17 also further increases the upper limit of statutory damages from RMB 3 million (approximately US$ 446,400) in the 2017 AUCL to RMB 5 million (US$ 744,000). As noted in our analysis of the 2017 AUCL amendment, courts in China frequently award statutory damages due to the inability of the injured party to acquire information on an infringer’s unjust gains. This further substantial increase can be expected to provide further relief to right-holders and encourage more right holders to assert trade secret claims that may have seemed too marginal under the old damages limits.

Stronger enforcement power granted to the administrative authority

The new AUCL also grants more enforcement powers to the administrative regulator under the AUCL, the State Administration for Market Regulation (“SAMR”) and its local branches. Previously the SAMR could pursue an administrative investigation into alleged trade-secret theft and was authorized to conduct on-site inspection and dawn raids, sealing and seizing property related to the alleged illegal acts, and further could obtain information on an alleged infringer’s bank accounts. The new AUCL further empowers the SMAR to forfeit the illegal gains from the misappropriation. In addition, the amendment further escalates the range of fines that can be imposed by SAMR. Previously the SAMR could levy a fine ranging from RMB 100,000 (approximately US$14,880) to RMB 500,000 (US$ 74,400), increased to RMB 500,000 (US$ 74,400) to RMB 3 million (US$ 446,400) for severe cases. Under the new AUCL the higher end of these ranges are increased to RMB 1 million (US$ 148,800) and RMB 5 million (US$ 744,000) respectively. These changes can be expected to increase the deterrence against trade secret theft in China.

 Industry Weighs In on Potential “Emerging Technologies” Export Controls

By Peter Lichtenbaum, Victor Ban and Lisa Ann Johnson on Posted in China, Congressional Action, International Strategy, Trade Agreements

The U.S. government is now considering how to define potential new export controls on “emerging technologies.” Our article in the China Business Review explains the legislative context informing the current rulemaking process, highlights key themes in public comments submitted by stakeholders in response to an initial request for input, and offers recommendations for companies and trade associations aiming to stay ahead of the curve.

A Chinese translation of the article is available here.

LexBlog