Trade Secrets to Be Subject to Export Controls Under House-Passed Bill

At a Glance

• The House passed legislation expanding the scope of the Export Control Reform Act of 2018 (ECRA) to include the protection of trade secrets.
• If enacted into law, the legislation could broaden regulators’ power to control information not currently governed by U.S. export control laws.
• U.S. companies may need to seek government approval before sharing trade secrets, even in transactions that do not involve traditional exports, and to implement more stringent controls to protect trade secrets.

On September 9, 2024, the U.S. House of Representatives passed legislation that would expand the scope of the Export Control Reform Act of 2018 (ECRA) to include the protection of trade secrets. The one-sentence bill, which passed the House Foreign Affairs Committee unanimously and by voice vote in the full House, adds to ECRA a statement of policy that U.S. export control laws are intended to protect trade secrets related to controlled items or when the subject of economic espionage.

If signed into law, the legislation could have several notable impacts on U.S. companies doing business abroad. First, the bill would broaden the coverage of U.S. export control laws. Currently, ECRA primarily focuses on controlling the export of technologies, software and other items that have national security implications. Expanding it to include trade secrets could lead to broader oversight, including areas such as intellectual property (IP) theft and the unauthorized transfer of sensitive business information. As a consequence, U.S. companies may need to seek government approval before sharing trade secrets, even in transactions that do not involve traditional exports. This could complicate international partnerships and collaboration, especially in industries reliant on sensitive IP.

Second, U.S. companies may also face increased compliance costs because businesses would need to implement more stringent controls to protect trade secrets. This would likely lead to greater investments in security measures, legal advice and monitoring systems. Further, this increased regulatory oversight could introduce delays in business operations, particularly for companies that need to share trade secrets across borders.

Third, including trade secrets under ECRA could help protect U.S. businesses from foreign competitors who may attempt to steal valuable IP.

The expansion of ECRA will also introduce practical challenges for regulators. The legal definition of what constitutes a trade secret can be complex and context-specific. On the one hand, including trade secrets under ECRA may lead to legal ambiguities, making enforcement more difficult. On the other hand, many trade secrets are already covered under the definition of “technology,” the export of which is restricted under the Export Administration Regulations (EAR). It remains to be seen how regulators would develop new enforcement mechanisms to regulate trade secrets that currently do not meet the definition of technical data.

The bill now awaits consideration in the U.S. Senate. We expect House negotiators to try to attach the measure to an end-of-year spending bill or to the National Defense Authorization Act (NDAA).