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 Trade Secrets and Forced Technology Transfer

The Special 301 Report again reflects an emphasis on the need to protect and enforce trade secrets. Companies in a wide variety of industry sectors – including information and communication technologies, services, biopharmaceuticals, manufacturing, and environmental technologies – rely on the ability to protect and enforce their trade secrets and rights in other proprietary information. Indeed, trade secrets are often among a company's core business assets, and a company's competitiveness may depend on its capacity to protect such assets.

Trade secret theft, including industrial and economic espionage, which imposes significant costs on U.S. companies and threatens the security of the United States, appears to be escalating. If a company's trade secrets are stolen, it may be extremely difficult, if not impossible, to recoup past investments in research and development, and future innovation may be compromised. Moreover, trade secret theft threatens to diminish U.S. competitiveness around the globe, and puts American jobs at risk. The reach of trade secret theft into critical commercial and defense technologies poses threats to U.S. national security interests as well.

For these reasons, the United States is concerned by gaps in trade secret protection and enforcement, and the apparent growth of trade secret theft, particularly in China, as reported by various sources, including the Office of the National Counterintelligence Executive (ONCIX). The ONCIX publication titled Foreign Spies Stealing U.S. Economic Secrets in Cyberspace, states that "Chinese actors are the world's most active and persistent perpetrators of economic espionage." Theft may arise in a variety of circumstances, including those involving departing employees, failed joint ventures, cyber intrusion and hacking, and misuse of information submitted to government entities for purposes of complying with regulatory obligations. In practice, effective remedies, including under Chinese law, appear to be difficult to obtain.

The United States urges its trading partners to ensure that they have robust systems for protecting and enforcing trade secrets, including the availability of deterrent criminal penalties for trade secret theft. USTR will monitor developments in this area.

On February 20, 2013, the U.S. Intellectual Property Enforcement Coordinator (IPEC) issued the Administration Strategy on Mitigating the Theft of U.S. Trade Secrets. The Strategy highlights U.S. efforts to combat the theft of trade secrets that could be used by foreign governments or companies to gain an unfair economic advantage by harming U.S. innovation and creativity, including:

 Focusing diplomatic efforts to protect trade secrets overseas, which include sustained and coordinated engagement with trading partners, the use of trade policy tools (including through the use of the Special 301 Report), cooperation, and training, among others;

Promoting voluntary best practices by private industry to protect trade secrets, including information security, physical security, and human resources policies;  16