AMENDMENT 771

Amendment: Section 2B1.1(b) is amended by striking paragraph (5) as follows:

“(5) If the offense involved misappropriation of a trade secret and the defendant knew or intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agent, increase by 2 levels.”;

by renumbering paragraphs (6) through (8) as (5) through (7); by renumbering paragraphs (13) through (18) as (14) through (19); by inserting after paragraph (12) the following:

“(13) (Apply the greater) If the offense involved misappropriation of a trade secret and the defendant knew or intended—

(A) that the trade secret would be transported or transmitted out of the United States, increase by 2 levels; or

(B) that the offense would benefit a foreign government, foreign instrumentality, or foreign agent, increase by 4 levels.

If subparagraph (B) applies and the resulting offense level is less than level 14, increase to level 14.”; and

in paragraph (16) (as so renumbered) by striking “(b)(15)(B)” and inserting “(b)(16)(B)”.

The Commentary to §2B1.1 captioned “Application Notes” is amended in Note 6 by striking “(b)(7)” both places it appears and inserting “(b)(6)”; in Note 10 by striking “(b)(13)” both places it appears and inserting “(b)(14)”; in Note 11 by striking “(b)(15)(A)” both places it appears and inserting “(b)(16)(A)”; in Note 12 by striking “(b)(15)(B)” and inserting “(b)(16)(B)”; in Note 12(A) by striking “(b)(15)(B)(i)” and inserting “(b)(16)(B)(i)”; in Note 12(B) by striking “(b)(15)(B)(ii)” and inserting “(b)(16)(B)(ii)”; in Note 13 by striking “(b)(17)” both places it appears and inserting “(b)(18)”; in Note 13(B) by striking “(b)(17)(A)(iii)” both places it appears and inserting “(b)(18)(A)(iii)”, and by striking “(b)(15)(B)” both places it appears and inserting “(b)(16)(B)”; in Note 14 by striking “(b)(18)” each place it appears and inserting “(b)(19)”; and in Note 19(B) by striking “(b)(17)(A)(iii)” and inserting “(b)(18)(A)(iii)”.

The Commentary to §2B1.1 captioned “Background” is amended by striking “(b)(6)”, “(b)(8)”, “(b)(14)(B)”, “(b)(15)(A)”, “(b)(15)(B)(i)”, “(b)(16)”, “(b)(17)”, and “(b)(17)(B)” and inserting “(b)(5)”, “(b)(7)”, “(b)(15)(B)”, “(b)(16)(A)”, “(b)(16)(B)(i)”, “(b)(17)”, “(b)(18)”, and “(b)(18)(B)”, respectively; and by inserting before the paragraph that begins “Subsection (b)(15)(B)” (as so amended) the following:

“ Subsection (b)(13) implements the directive in section 3 of Public Law 112–269.”.

Reason for Amendment: This amendment responds to section 3 of the Foreign and Economic Espionage Penalty Enhancement Act of 2012, Pub. L. 112–269 (enacted January 14, 2013), which contains a directive to the Commission regarding offenses involving stolen trade secrets or economic espionage.

Section 3(a) of the Act directs the Commission to “review and, if appropriate, amend” the guidelines “applicable to persons convicted of offenses relating to the transmission or attempted transmission of a stolen trade secret outside of the United States or economic espionage, in order to reflect the intent of Congress that penalties for such offenses under the Federal sentencing guidelines and policy statements appropriately reflect the seriousness of these offenses, account for the potential and actual harm caused by these offenses, and provide adequate deterrence against such offenses.” Section 3(b) of the Act states that, in carrying out the directive, the Commission shall consider, among other things, whether the guidelines adequately address the simple misappropriation of a trade secret; the transmission or attempted transmission of a stolen trade secret outside of the United States; and the transmission or attempted transmission of a stolen trade secret outside of the United States that is committed or attempted to be committed for the benefit of a foreign government, foreign instrumentality, or foreign agent.

The offenses described in the directive may be prosecuted under 18 U.S.C. § 1831 (Economic espionage), which requires that the defendant specifically intend or know that the offense “will benefit any foreign government, foreign instrumentality, or foreign agent,” and 18 U.S.C. § 1832 (Theft of trade secrets), which does not require such specific intent or knowledge. The statutory maximum terms of imprisonment are 15 years for a section 1831 offense and 10 years for a section 1832 offense. Both offenses are referenced in Appendix A (Statutory Index) to §2B1.1 (Theft, Property Destruction, and Fraud).

In response to the directive, the amendment revises the existing specific offense characteristic at §2B1.1(b)(5), which provides an enhancement of two levels “[i]f the offense involved misappropriation of a trade secret and the defendant knew or intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agent,” in two ways. First, it broadens the scope of the enhancement to provide a 2-level increase for trade secret offenses in which the defendant knew or intended that the trade secret would be transported or transmitted out of the United States. Second, it increases the severity of the enhancement to provide a 4-level enhancement and a minimum offense level of 14 for trade secret offenses in which the defendant knew or intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agent. The enhancement also is redesignated as subsection (b)(13).

In responding to the directive, the Commission consulted with individuals or groups representing law enforcement, owners of trade secrets, victims of economic espionage offenses, the United States Department of Justice, the United States Department of Homeland Security, the United States Department of State, the Office of the United States Trade Representative, the Federal Public and Community Defenders, and standing advisory groups, among others. The Commission also considered relevant data and literature.

The Commission received public comment and testimony that the transmission of stolen trade secrets outside of the United States creates significant obstacles to effective investigation and prosecution and causes both increased harm to victims and more general harms to the nation. With respect to the victim, civil remedies may not be readily available or effective, and the transmission of a stolen trade secret outside of the United States substantially increases the risk that the trade secret will be exploited by a foreign competitor. In contrast, the simple movement of a stolen trade secret within a domestic multinational company (e.g., from a United States office to an overseas office of the same company) may not pose the same risks or harms. More generally, the Commission heard that foreign actors increasingly target United States companies for trade secret theft and that such offenses pose a growing threat to the nation’s global competitiveness, economic growth, and national security. Accordingly, the Commission determined that a 2-level enhancement is warranted for cases in which the defendant knew or intended that a stolen trade secret would be transported or transmitted outside of the United States.

The Commission also received public comment and testimony that cases involving economic espionage (i.e., trade secret offenses that benefit foreign governments or entities under the substantial control of foreign governments) are particularly serious. In such cases, the United States is unlikely to obtain a foreign government’s cooperation when seeking relief for the victim, and offenders backed by a foreign government likely will have significant financial resources to combat civil remedies. In addition, a foreign government’s involvement increases the threat to the nation’s economic and national security. Accordingly, the Commission determined that the existing enhancement for economic espionage should be increased from 2 to 4 levels and that such offenses should be subject to a minimum offense level of 14. This heightened enhancement is consistent with the higher statutory maximum penalties and fines applicable to such offenses and the Commission’s established treatment of economic espionage as a more serious form of trade secret theft.

Consistent with the directive, the Commission also considered whether the guidelines appropriately account for the simple misappropriation of a trade secret. The Commission determined that such offenses are adequately accounted for by existing provisions in the Guidelines Manual, such as the loss table in §2B1.1(b)(1), the sophisticated means enhancement at §2B1.1(b)(10), and the adjustment for abuse of position of trust or use of special skill at §3B1.3.

Effective Date: The effective date of this amendment is November 1, 2013.