United States: U.S. Trade Secret Prosecutions—Should Chinese Companies Be Worried?

Last Updated: July 16 2019
Article by Jonathan Faria and Yi-Chin Ho, P.C.

In Part 3 of a series of Insights on U.S. enforcement against China-based companies, Kirkland & Ellis attorneys focus on the increase in trade secret prosecutions, related civil litigation, and implications for Chinese companies.

This article is the third in a series exploring how U.S. enforcement activities affect Chinese companies. The first two Insights addressed the increase in prosecutions under the Foreign Corrupt Practices Act and recent U.S. sanctions, export controls, and anti-money laundering trends. This article focuses on the increase in trade secret prosecutions, related civil litigation, and implications for Chinese companies.

The ‘China Initiative’ and Rise in Trade Secret Prosecutions

“Chinese economic espionage against the United States has been increasing and it has been increasing rapidly. Enough is enough. We’re not going to take it anymore.”—Atty. General Sessions, November 2018.

As these words from the former attorney general make clear, allegations of trade secret theft have become part of the heated rhetoric surrounding the Trump administration’s broader economic hostilities with China. Prosecuting trade secret cases against Chinese companies has also become an increasingly prominent feature of those hostilities. In November of 2018, the Department of Justice announced a “China Initiative,” promising it would be “redoubling [its] efforts to aggressively investigate Chinese companies and individuals for theft of trade secrets[.]”

Prior to that announcement, there was already a marked increase in trade secret prosecutions in recent years, with many targeting Chinese companies. This included the corporate conviction in early 2018 of Sinovel Wind Group on charges that it stole trade secret software used to run wind turbines and electrical grids.

It also included several guilty pleas and convictions of Chinese nationals or agents employed in the United States on charges of trade secret theft of biotechnology, aerospace technology, software, manufacturing processes and materials for the benefit of China or Chinese companies.

In the seven months since the Initiative was announced, several more high-profile indictments have come down targeting Chinese companies, including a heavily-publicized case alleging that Huawei stole trade secret technology from T-Mobile used to test mobile phones, and other indictments alleging that Chinese nationals or agents stole trade secrets from General Electric and other American companies for the benefit of China or Chinese companies in the fields of energy, petroleum and manufacturing.

Others are likely to come down in the near future.

The consequences of a prosecution can be incredibly grave for Chinese companies and their employees. The DOJ has pursued the prosecutions noted above under the Economic Espionage Act (EEA). The EEA includes provisions addressing foreign “economic espionage,” i.e. the theft of a trade secret to benefit a foreign government or agent.

In 2012, Congress amended the EEA to increase the penalties for organizations and individuals, and the Sentencing Commission amended the Sentencing Guidelines (§ 2B1.1(b)(14)) to provide sentencing enhancements for trade secret thefts seeking to benefit a foreign government or agent.

The escalation of the penalties can result in huge fines and potentially prison sentences for officers, directors or employees of Chinese companies who are convicted.

Criminal filings often also trigger follow-on civil litigation. The incentive to file has increased since 2016 with the passage of the Defend Trade Secrets Act (DTSA), which created a private right of action in federal court for trade secret misappropriation. Civil trade secret litigation is notoriously burdensome and expensive, and DTSA provides for doubling of civil damages in cases of willful and malicious misappropriation of trade secrets.

Key Takeaways for Chinese Companies

Chinese companies should take specific steps to understand and mitigate risks surrounding allegations of trade secret theft:

1) Understand U.S. Trade Secret Laws. What qualifies as a trade secret, or misappropriation, under U.S. state and federal laws can be complex and uncertain. Civil trade secret litigation also can present challenging questions of preemption with other laws, and policies favoring employee mobility. It is important for Chinese companies to understand what material may be entitled to trade secret protection under U.S. laws, and how it should be treated, to ensure compliance.

2) Develop Strong Compliance Controls. It is also important for Chinese companies to develop strong internal compliance programs and controls to ensure appropriate steps are taken to mitigate the risk of non-compliance or the appearance of non-compliance to U.S. regulators. The Sentencing Guidelines expressly address the need for, and look favorably upon, an effective compliance and ethics program. Having consistent, well-documented, and enforced policies is an important risk mitigation measure.

3) Conduct Appropriate Diligence in Hiring. When hiring employees from the United States, particularly employees of competitors, it is important to understand their contractual obligations, and make clear that the company has no interest in unlawfully acquiring trade secret information that is protected from disclosure under U.S. laws. This is another area in which clarity and documentation are important.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
In association with
Practice Guides
by Mondaq Advice Centers
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions