On May 5, 2025, the U.S. House of Representatives passed H.R.1486, the Economic Espionage Prevention Act (EEPA). Introduced by Rep. Rich McCormick (R-GA), the EEPA seeks to bolster protections for U.S. trade secrets and proprietary information by authorizing the President of the United States to impose sanctions on foreign adversary entities that knowingly engage in economic or industrial espionage. The bill responds to heightened concerns about state-sponsored intellectual property (IP) theft, particularly those from countries such as China, Russia, Iran, North Korea, Cuba, and the Maduro regime of Venezuela, all of which are explicitly cited as foreign adversaries in the EEPA. The legislation aims to prevent misappropriation of U.S. technology and IP that could undermine national security or economic competitiveness, particularly in strategic sectors like technology, aerospace, and defense.

Background

H.R.1486 further builds on the framework established by the Economic Espionage Act of 1996. The 1996 Act criminalized the theft or misappropriation of trade secrets. This includes foreign economic espionage benefiting foreign governments (18 U.S.C. § 1831) and commercial theft (18 U.S.C. § 1832). The 1996 Act was enacted to address the growing threat to U.S. economic and security interests by theft of trade secrets, with notable cases like the conviction of a former Boeing engineer for stealing trade secrets valued at over $2 billion for China.

The current bill was introduced amid similar heightened concerns about state-sponsored espionage, especially amid concerns about China’s role in supporting Russia’s military efforts. As McCormick stated during the bill’s legislation:

“Since Russia invaded Ukraine in February 2022, it has depended on China for critical technology, including semiconductors and machine tools, which are vital to its war efforts. In March 2024, the U.S. State Department informed Congress that China’s semiconductor exports to Russia had significantly increased in the second half of 2023, likely aiding Russia’s military. We need to prevent U.S. technology and intellectual property from being used against allies and national security.”

This concern is reflected in the U.S. State Department’s March 2024 report, which noted a surge in China’s semiconductor exports to Russia, highlighting for the backers of this bill the need for stronger measures to protect U.S. technology.

Having passed in the House of Representatives, H.R.1486 is now being sent to the Senate for consideration and debate.

Implications for Clients

The passage of H.R.1486 has several potential implications for businesses, particularly those in industries heavily reliant on trade secrets and proprietary information:

• Enhanced IP Protection: The legislation could provide the U.S. government with additional tools to investigate and penalize foreign entities involved in IP theft, potentially reducing risks to U.S. companies’ trade secrets and deterring theft.
• Sanctions Risks: Companies with operations, partnerships, or supply chains involving China, Russia, Iran, North Korea, Cuba, or Venezuela should take extra care to impose compliance obligations, and be prepared for the possibility of investigations which, if not handled carefully, could lead to new sanctions that can significantly disrupt business activities.
• Due Diligence Requirements: Businesses may need to strengthen due diligence processes to ensure their technology and IP are not misappropriated by foreign adversaries, particularly in high-risk jurisdictions.
• Sector-Specific Impacts: Industries such as technology, aerospace, pharmaceuticals, and defense, which rely heavily on proprietary information, may face increased scrutiny and benefit from enhanced protections.

Proactive Steps to Protect Your Secrets and Defend Against Misappropriation Claims

Most trade secret lawsuits involve employees or business partners as alleged misappropriators. Thus, internal controls and due diligence are  crucial to not only reducing the risks of misappropriation but also to protecting  entities that have been accused of IP and trade secret misappropriation as they can help establish that no accused misappropriation had taken place.

While the EEPA may provide deterrence, businesses cannot rely on the government alone and still must mitigate risks through their own actions. Internal risk mitigation steps are especially important in industries where trade secrets are critical for a business’s own competitive advantage. Here are a few actions for your business to consider:

Identify and Catalog Trade Secrets:

• Clearly define and document what constitutes a trade secret within the organization, such as formulas, customer lists, or manufacturing processes.
• Maintain an up-to-date inventory of trade secrets, including descriptions and the specific measures taken to protect each.

Mark Trade Secrets:

• Clearly label documents, materials, and digital files containing trade secrets with express confidentiality notices to alert individuals of its sensitive nature.

Implement Layered Security Measures:

• Physical Security: Use locked cabinets or secure storage for physical documents, and restrict access to sensitive areas of the business.
• Technical Security: Employ encryption systems, secure networks, and robust access controls for sensitive digital information, including passwords and multifactor authentication for any electronic access.
• Administrative Security: Establish policies for handling trade secrets, require confidentiality agreements, and provide regular training to employees.

Use Effective Non-Disclosure Agreements (NDAs):

• Require all employees, contractors, and business partners to sign NDAs that explicitly cover trade secrets. Ensure they are comprehensive and they specify the types of information considered confidential.

Limit Access and Monitor Usage:

• Grant access to trade secrets only on a need-to-know basis and implement monitoring systems to log and track access to enable quick detection of unauthorized access or misuse.

Conduct Regular Audits and Training:

• Perform periodic audits of trade secret protection measures to identify and address any vulnerabilities.
• Provide ongoing training to employees to reinforce the importance of trade secret protection and proper handling procedures to address the risk of employee-related breaches.

Develop Supply Chain Procedures:

• Include trade secret protection measures as due diligence for third parties, such as joint ventures, suppliers, and customers, conduct ongoing reviews, and clearly communicate expectations.
• When sharing trade secrets with third parties, verify they have adequate protection measures in place, use confidentiality agreements, and limit the scope of information disclosed to only what is necessary.

Continually Improve Protection Measures:

• Regularly assess and update trade secret protection strategies based on emerging threats and lessons learned from past incidents, and conduct root-cause analyses to develop rapid response plans.

Conduct Exit Audits:

• Upon departure, conduct audits of each employee’s access to sensitive information and ensure they return all confidential materials to remind departing employees of their ongoing obligations under NDAs and non-compete agreements.

Establish Clear Personnel Records:

• It is often inevitable that companies will hire employees who had previously worked at their competitors. Such hires, however, can certainly raise the suspicion of trade secret and other IP misappropriation. As it is important to conduct thorough exit audits and interviews, it is just as important to establish a clear record of a new hire’s work history and prior responsibilities, including whether they had access to sensitive or proprietary information of their former employers. Be thorough in conducting interviews to ensure new hires do not pose risks of misappropriating their former employers’ IP.
•  Having such clear records will be critical in establishing an effective and cost-efficient defense should a competitor bring forward, or if the government investigates, any claim of potential misappropriation.

Develop a Response Plan for Trade Secret Theft:

• Create a detailed plan for responding to suspected or actual trade secret theft, including steps for internal investigation and reporting to appropriate authorities to ensure compliance with laws like the Defend Trade Secrets Act (DTSA).

Conclusion

Upon passing, the EEPA could bring a significant step toward protecting U.S. trade secrets from foreign adversaries. By authorizing sanctions against entities in countries such as China, Russia, and other foreign adversaries, the bill may deter economic espionage and safeguard national security and economic interests. Clients in all regions could be affected by this bill. They should take proactive measures to strengthen IP protections and prepare for potential sanctions-related challenges as the bill progresses through the legislative process.

For further insights or assistance, please contact Victor Johnson, Stephen Yang, Forrest Gothia, or any of our Intellectual Property team.