Final TPP Language on Trade Secret Protection Disclosed

On October 5, 2015, years of protracted negotiations of the Trans-Pacific Partnership Agreement (“TPP”) concluded. The TPP is a proposed trade agreement between 12 Pacific Rim nations that lowers trade barriers such as tariffs, establishes intellectual property protections, creates labor and environmental standards, and creates a framework for resolving disputes between member nations. The 12 nations participating in those negotiations are Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, Japan, Colombia, Philippines, Thailand, Indonesia, Taiwan, South Korea, and the United States. Conspicuously absent are the People’s Republic of China, Macao, Russia, and North Korea.

On October 9, 2015, WikiLeaks published a purported draft of the Intellectual Property Rights Chapter of the TPP. This recently leaked chapter is dated as of the last day of negotiations, has not been discredited, so it is likely the final agreed-upon text. While the entire chapter runs 61 pages, the text dedicated to trade secrets is approximately one page.

Civil Law Requirements

The text requires each member nation to “ensure that natural and legal persons have the legal means to prevent trade secrets lawfully in their control from being disclosed to, acquired by, or used by others (including state commercial enterprises) without their consent in a manner contrary to honest commercial practices.” Article QQ.H.8.1.

The U.S. currently does not meet this standard because as a nation it does not provide for a federal civil private right of action for misappropriation of trade secrets. Rather, U.S. citizens must rely on state laws, and predominately variations of the Uniform Trade Secret Act which has been adopted by all but three states. Currently pending before the House and Senate, however, are identical bills entitled “Defend Trade Secrets Act of 2015,” which, if enacted, would amend the Economic Espionage Act in order to create a federal private civil remedy for trade secret misappropriation claims. Both bills are currently pending in their respective judiciary committees.

Criminal Law Requirements

The treaty will also require member nations to “provide for criminal procedures and penalties for one or more of the following: (a) the unauthorized, willful access to a trade secret held in a computer system; (b) the unauthorized, willful misappropriation of a trade secret, including by means of a computer system; or (c) the fraudulent disclosure, or alternatively, the unauthorized and willful disclosure of a trade secret, including by means of a computer system.” Article QQ.H.8.2.

The TPP will require all participating nations to enact laws criminalizing the willful theft of trade secrets, including by means of cyber-theft, but can decide for themselves if they will also require that the thieves have a particular motive, or seek to benefit a specific party.

Each nation “may, where appropriate, limit the availability of such criminal procedures, or limit the level of penalties available, to one or more of the following cases: (a) the acts are for purposes of commercial advantage or financial gain; (b) the acts are related to a product or service in national or international commerce; (c) the acts are intended to injure the owner of such trade secret; (d) the acts are directed by or for the benefit of or in association with a foreign economic entity; or (e) the acts are detrimental to a Party’s economic interests, international relations, or national  defense or national security.” Article QQ.H.8.3.

While other TPP member nations (i.e., Australia, Canada, Malaysia, and Singapore) will need to enact new laws to meet the penal requirements, the U.S. already has laws criminalizing trade secret theft. The Economic Espionage Act of 1996, 18 U.S.C. §§ 1831 et seq., provides steep criminal penalties for trade secret misappropriation; however, unlike the TPP language above, criminal penalties are available only in those cases where the trade secret owner is harmed and someone else benefits from the misappropriation.

The TPP language therefore goes further than current U.S. law, punishing anyone who merely gains access to secret information with commercial value. The Electronic Frontier Foundation (a non-profit organization dedicated to “defending civil liberties in the digital world”) has criticized the language, noting that “[t]here are no safeguards to protect investigative journalists, security researchers or whistleblowers, who may obtain access to information without criminal or commercial intent. The inevitable result will be to chill the speech of those who might otherwise have a valid public interest justification for releasing information that had been kept secret.” “Cyber-Espionage and Trade Agreements: An Ill-Fitting and Dangerous Combination,” Jeremy Malcolm,, October 17, 2014.

The TPP is likely still years away from being passed by all the participating nations, and then it remains to be seen whether the participating members will enact the legislation required for compliance.

The TPP should impact the balance of trade between the member Pacific Rim countries in a positive way. It is unlikely to significantly affect the international trade secret landscape, however, until China adopts the TPP’s trade secret requirements, if not becomes a member nation, given that a significant number of trade secret theft from the Pacific Rim in recent years involves Chinese actors. Recently, the U.S. government had been threatening China with the imposition of significant economic sanctions due to China’s failure to adequately enforce cybersecurity measures. However, when Chinese President Xi Jinping visited the United States last month, he pledged that his country would not engage in commercial cyberespionage as part of a new broader agreement between the two countries. Also last month, for the first time, Chinese authorities arrested hacking suspects in China at the behest of the United States. These recent actions by the Chinese government may indicate China’s awareness that enforcement of intellectual property rights is in its best economic interests, and is consistent with its Pacific Rim neighbors.