Bill to Extend ECRA to Trade Secrets Proposed

Among the China Week Legislation, the House of Representatives passed a bill amending the Export Control Reform Act of 2018 (ECRA) to include trade secret protections. If enacted, this would expand regulatory authority over information not currently covered by U.S. export control laws.

As a result, U.S. companies may need government approval before disclosing trade secrets, even in non-traditional export transactions, and may face stricter requirements for safeguarding such information.

The bill adds a policy statement to ECRA, specifying that U.S. export control laws are designed to protect trade secrets related to controlled items or in cases of economic espionage.

As poointed out in a note from Faegre Drinker, the bill could significantly affect U.S. businesses engaged in international operations.

First, it would broaden the scope of U.S. export control regulations, which currently focus on technologies, software, and other national security-related items.

Extending ECRA to cover trade secrets may increase oversight, particularly concerning intellectual property theft and the unauthorized disclosure of sensitive business information.

This could require companies to seek government approval before sharing trade secrets, complicating international collaborations and particularly affecting sectors that depend on sensitive intellectual property.

Businesses could incur higher compliance costs, as they would be required to adopt more stringent measures for protecting trade secrets. This may lead to greater investments in security, legal compliance, and monitoring systems.

Heightened regulatory oversight could also delay operations, especially for firms that need to share trade secrets across borders.

The expansion presents practical challenges. Defining "trade secrets" is complex and context-dependent, which may complicate enforcement. Although many trade secrets are already regulated as "technology" under the Export Administration Regulations (EAR), this legislative change may require new enforcement approaches for trade secrets not currently classified as technical data.

The bill now moves to the U.S. Senate for consideration, with expectations that House negotiators will seek to attach it to an end-of-year spending package or the National Defense Authorization Act (NDAA).