Intellectual property (IP) theft costs the United States hundreds of billions of dollars a year, a figure that has only grown since the passage of the Economic Espionage Act (EEA) in 1996.1 U.S. adversaries—especially the People’s Republic of China (PRC) and Russia—are repeat perpetrators, stealing secrets to undercut America’s national security. And yet, the U.S. Sentencing Commission Guidelines (“Sentencing Guidelines” or “Guidelines”) used to sentence those who steal secrets for transport outside of the U.S. have not caught up with this reality. Instead, the Guidelines emphasize pecuniary loss rather than national security costs.

After 9/11, Congress oriented the Sentencing Guidelines toward the terrorism threat by creating hefty enhancements.2 But the Guidelines have not yet been shaped to address strategic competition with the PRC, which poses the greatest overall economic and military threat to the United States.3 The PRC’s economic development strategy is premised in part on stealing U.S. research and technology.4 However, those who steal IP to the PRC’s benefit often do not receive a sentence commensurate with the national security impact of their crime.5

This paper will focus on prosecution of individuals who steal trade secrets in order to transport them to the PRC. While other countries also commit economic espionage, the PRC is the most significant offender.6 This paper will begin with an overview of the PRC’s economic espionage strategy, focusing on its objectives and methods to show that IP theft is a threat to U.S. national security interests. With this context in place, this paper will examine sentencing issues related to PRC-incentivized IP theft—namely, under-sentencing, uncertainty in sentencing, and a lack of focus on national security. These issues stem from several factors, but this paper will focus on the Sentencing Guidelines’ emphasis on pecuniary loss. Finally, this paper will briefly touch on charging problems in foreign incentivized trade secret theft cases. Defendants in these cases—who typically receive PRC funding or other benefits—are sometimes charged with theft of trade secrets (18 U.S.C. § 1832), rather than economic espionage (18 U.S.C. § 1831), and are thereby predisposed to receive lower sentences.7

After surveying these issues, this paper will propose a two-fold solution: first, amend the EEA to reflect the many methods the PRC uses for technology transfer—with the aims of aligning the statute and Guidelines and putting national security concerns at the forefront of PRC-incentivized trade secret theft cases—and second, implement a corresponding sentencing structure. This new structure will eliminate the loss calculation while creating a base offense level for transporting trade secrets abroad, an enhancement for intent to benefit a foreign power, and sector-specific enhancements that recognize the PRC’s military-civil fusion strategy.