U.S. Disruptive Technology Strike Force Brings First Cases

The relatively newly created Disruptive Technology Strike Force of the U.S. Department of Justice and U.S. Department of Commerce announced five new cases in May.  These are the first cases brought by the new multi-agency task force.  The press release, in part, states:

The Justice Department today announced criminal charges in five cases and four arrests from five different U.S. Attorney’s offices in connection with the recently launched multi-agency Disruptive Technology Strike Force.

The Disruptive Technology Strike Force is co-led by the Departments of Justice and Commerce to counter efforts by hostile nation-states to illicitly acquire sensitive U.S. technology to advance their authoritarian regimes and facilitate human rights abuses. The Strike Force’s work has led to the unsealing of charges against multiple defendants in five cases accused of crimes including export violations, smuggling and theft of trade secrets.

Two of these cases involve the disruption of alleged procurement networks created to help the Russian military and intelligence services obtain sensitive technology in violation of U.S. laws. In the Eastern District of New York, a Greek national was arrested on May 9 for federal crimes in connection with allegedly acquiring more than 10 different types of sensitive technologies on behalf of the Russian government and serving as a procurement agent for two Russian Specially Designated Nationals (SDNs) operating on behalf of Russia’s intelligence services. In the District of Arizona, two Russian nationals were arrested for their involvement in a procurement scheme to supply multiple Russian commercial airline companies – which were subject to bans from engaging in certain type of commercial transactions – with export-controlled parts and components, including braking technology.

Two of the other cases announced today charge former software engineers with stealing software and hardware source code from U.S. tech companies in order to market it to Chinese competitors. In the Central District of California, a senior software engineer was arrested on May 5 for theft of trade secrets for allegedly stealing source code used in metrology software which is used in “smart” automotive manufacturing equipment. The defendant then allegedly marketed the stolen technology to multiple Chinese companies. In the Northern District of California, a citizen of the People’s Republic of China (PRC) and former Apple engineer is accused of allegedly stealing thousands of documents containing the source code for software and hardware pertaining to Apple’s autonomous vehicle technology. This defendant fled to China and is believed to be working for a PRC-based autonomous vehicle competitor.

The fifth and final case involves a Chinese procurement network established to provide Iran with materials used in weapons of mass destruction (WMDs) and ballistic missiles. In the Southern District of New York, a PRC national is charged with allegedly participating in a scheme to use his employer to conduct transactions with a U.S. financial institution for the benefit of a purported Iranian entity, as part of an effort to provide isostatic graphite, a material used in the production of WMDs, to Iran.

“These charges demonstrate the Justice Department’s commitment to preventing sensitive technology from falling into the hands of foreign adversaries, including Russia, China, and Iran,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “We will not tolerate those who would violate U.S. laws to allow authoritarian regimes and other hostile nations to use advanced technology to threaten U.S. national security and undermine democratic values around the world.”

“Protecting sensitive American technology – like source code for ‘smart’ automotive manufacturing equipment or items used to develop quantum cryptography – from being illegally acquired by our adversaries is why we stood up the Disruptive Technology Strike Force,” said Matthew S. Axelrod, Assistant Secretary for Export Enforcement at the Department of Commerce. “The Strike Force actions announced today reflect the core mission of our Export Enforcement team – keeping our country’s most sensitive technologies out of the world’s most dangerous hands.” 

“The theft of technology and trade secrets from U.S. companies is a threat to our economic and national security,” said Assistant Director Suzanne Turner of the FBI’s Counterintelligence Division. “The charges announced today aren’t the only instances of foreign adversaries trying to steal our technology. Combating the illegal transfer of technology is one of the FBI’s highest priorities, and we will continue to work with our federal partners, including the Department of Commerce, to investigate those who steal U.S. technology to ultimately use it in weapons that threaten us and our allies.”

“The protection of sensitive U.S. technologies has been and continues to be a top priority for HSI,” said Assistant Director James Mancuso of Homeland Security Investigations. “HSI and the partners of the Strike Force will ensure that the U.S. maintains its technologic edge to protect the economic and national security interests of the United States. The Strike Force will be relentless in its pursuit of bad actors that attempt the theft of any sensitive U.S. technologies.”

. . .

Today’s actions were coordinated through the Disruptive Technology Strike Force, an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains, and prevent critical technology from being acquired by authoritarian regimes and hostile nation-states. Under the leadership of the Assistant Attorney General for National Security and the Assistant Secretary of Commerce for Export Enforcement, the Strike Force leverages tools and authorities across the U.S. Government to enhance the criminal and administrative enforcement of export control laws.

An indictment, complaint or criminal information is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

 

Proposed U.S. Sensible Classification Act of 2023

U.S. Senators John Cornyn and Mark Warner have proposed an act as part of the National Defense Authorization Act which would update the U.S. government’s classification system.  The press release from Senator Cornyn’s office states:

WASHINGTON – U.S. Senator John Cornyn (R-TX) and Senate Select Committee on Intelligence Chairman Mark Warner (D-VA) released the following statements after their Sensible Classification Act of 2023, which would increase accountability and oversight of the classification system, limit overclassification, and direct federal agencies to justify security clearance requirements, passed the Senate as part of the Intelligence Authorization Act included in the National Defense Authorization Act:

“Sensitive information helps the U.S. stay one step ahead of our adversaries, but it’s also important for the federal government to be transparent with the American people and our allies,” said Sen. Cornyn. “By streamlining and modernizing the declassification process, this bill would help strike the delicate balance between transparency and secrecy, and it is critical it be included in the final defense authorization legislation.”

 “The government systematically overclassifies too much information, at a dangerous cost to both the nation’s security and the public trust.  At the same time, we too often fail to protect the nation’s most important secrets.  As chairman of the Senate Intelligence Committee, I think it is clear that our security classification system is badly in need of change,” said Sen. Warner. “Given the explosion in digital records, the status quo is no longer tenable. We’ve got too many people with access to a system that is devoid of accountability and has grown increasingly byzantine, bureaucratic, and outmoded. We need to protect our national security secrets, and then declassify those secrets when protections are no longer necessary.  I’m glad that Congress is taking some action to establish accountability.”

The legislation is also cosponsored by Senators Jerry Moran (R-KS), Ron Wyden (D-OR), Susan Collins (R-ME), Angus King (I-ME), Mike Rounds (R-SD), Martin Heinrich (D-NM), James Lankford (R-OK), and Bob Casey (D-PA).

Background:  

The classification system is in urgent need of reform. Technology has made it easier to classify files, but greater accountability and oversight is needed to ensure appropriate and timely declassification to rebuild trust between the government and the American people. Too many people have access to classified information, which contributes to rampant overclassification and lack of accountability.

The Sensible Classification Act of 2023 will codify classification authority, streamline the processes for declassification, direct training focused on sensible classification, invest in new technology to modernize the classification system, and direct a review regarding the necessity of existing security clearances to identify potential areas for additional reforms. This legislation:

• Codifies classification authority as the President, Vice President, head of an agency, or the individual to whom such authority has been delegated in line with current practice pursuant to Executive Order 13526 and specifies how the authority is delegated and the training required to receive it;
• Promotes efficient declassification for records under the Freedom of Information Act or Mandatory Declassification Review;
• Requires training to promote sensible classification;
• Improves the Public Interest Declassification Board (PIDB) by allowing for additional staff to be hired and allowing members to serve until a successor is appointed;
• Directs the federal government to develop a federated and integrated technology solution to the issue of classification and declassification;
• And directs federal agencies to conduct a study on the necessity of number and types of security clearances with sufficient justification.

Regional Comprehensive Economic Partnership Agreement: Some IP Provisions

The Regional Comprehensive Economic Partnership Agreement (RCEP) between Australia, Brunei, Burma (Myanmar), Cambodia, China, Indonesia, Japan, Laos, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam recently became effective in the Philippines.  The U.S. Congressional Research Service has a short discussion paper concerning the treaty, here.  The RCEP has several interesting provisions concerning intellectual property.  The RCEP includes a provision concerning an experimental use exception to patents:

Article 11.40: Experimental Use of a Patent Without limiting Article 11.38 (Exceptions to Rights Conferred), each Party shall provide that any person may do an act that would otherwise infringe a patent if the act is done for experimental purposes [fn 34] relating to the subject matter of a patented invention.

[fn 34 provides: “For greater certainty, each Party may determine, consistent with Article 11.38 (Exceptions to Rights Conferred), what acts fall within the meaning of “experimental purposes”.”]

The RCEP also includes a provision concerning genetic resources, traditional knowledge and folklore.  According to WIPO Magazine, WIPO members have fast-tracked a treaty on the subject.  The RCEP provision states: 

SECTION G GENETIC RESOURCES, TRADITIONAL KNOWLEDGE, AND FOLKLORE[fn 41]

Article 11.53: Genetic Resources, Traditional Knowledge, and Folklore

1. Subject to its international obligations, each Party may establish appropriate measures[fn 42] to protect genetic resources, traditional knowledge, and folklore.

2. Where a Party has disclosure requirements relating to the source or origin of genetic resources [fn 43] as part of its patent system, that Party shall endeavour to make available its laws, regulations, and procedures with respect to such requirements, including on the internet where feasible, in such a manner as to enable interested persons and other Parties to become acquainted with them.

3. Each Party shall endeavour to pursue quality patent examination, which may include: (a) that when determining prior art, relevant publicly available documented information related to traditional knowledge associated with genetic resources may be taken into account; (b) an opportunity for third parties to cite, in writing, to the competent examining authority, prior art disclosures that may have a bearing on patentability, including prior art disclosures related to traditional knowledge associated with genetic resources; and if applicable and appropriate, the use of databases or digital libraries which contain relevant information on traditional knowledge associated with genetic resources.

[fn. 41: “For greater certainty, this Section is without prejudice to the position of any Party on genetic resources, traditional knowledge, and folklore, including in any bilateral or multilateral negotiations through any fora, such as the WIPO Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore.”]

[fn. 42: “For greater certainty, the Parties understand that such “appropriate measures” are a matter for each Party to determine and may not necessarily involve its intellectual property system.”]

[fn. 43: “The Parties recognise the fact that some Parties also require, if applicable, in their patent systems, evidence of prior informed consent and access and benefit sharing for genetic resources and associated traditional knowledge.”]

Professor Andrew Schwartz's "Investment Crowdfunding"

Professor Andrew Schwartz has published a book titled, "Investment Crowdfunding," and the University of Colorado, Law School, is hosting a symposium launching the book.  I look forward to reading it.  The symposium is on Friday, September 8, 2023, from 9:00 am to 4:00 pm MDT.  The details are below:

Investment crowdfunding is a new form of online venture capital market, open to the public, that was legally authorized less than a decade ago; it’s like Kickstarter, except you get a share of stock.

This symposium marks the launch of Investment Crowdfunding (Oxford University Press 2023), the debut book by University of Colorado Law Professor and Fulbright Scholar Andrew A. Schwartz.

Professor Schwartz will introduce the book and thought leaders from across the country, including Todd Zywicki (George Mason University) and Allison Herren Lee (former SEC commissioner), will offer comments and discussion over the course of two panels moderated by Colorado Law faculty.

Enjoy the plenary sessions as well as the hallway track experience during provided breakfast, lunch, dessert reception, and book signing with Professor Schwartz at Wolf Law Building, home of Silicon Flatirons at University of Colorado Law School.

Copies of Investment Crowdfunding will be made available for purchase and/or signing onsite by Boulder Book Store.