U.S. Probes Scientists and Academics with Overseas Ties, Targets Trade Secret Transfers
White Collar Update
Date: January 31, 2020
The United States recently filed a criminal complaint against the chair of Harvard University’s chemistry department, Charles Lieber, alleging that he made materially false and fraudulent statements to the Department of Defense and National Institutes of Health regarding his role as “Strategic Scientist” at China’s Wuhan University of Technology and his participation in China’s Thousand Talents Plan.
The government alleges that Lieber, a Harvard professor since 1991, was paid $50,000 per month in salary and $150,000 per year in living expenses between 2012 and 2017 by the Thousand Talents Plan, in addition to a lump sum payment of nearly $1.5 million to establish a research lab at the Wuhan University of Technology. The Thousand Talents Plan is part of a Chinese government program to attract and recruit high-level scientific talent to China. The United States alleges that the Chinese government designed the Thousand Talents Plan to facilitate the transmission of U.S. knowledge and research to China in exchange for salaries, research funding and other incentives. Receipt of foreign funding is not unlawful, but it must be disclosed by a person who applies for any funding supported by U.S. taxpayers. The government alleges that Lieber failed to disclose that he received funding from the Chinese government.
The criminal charges against Lieber are part of a larger effort over the past 18 months to criminally target forced intellectual property transfer, i.e., the dissemination of trade secrets, outside the United States. In announcing the charges against Lieber, the FBI stated that it is now investigating cases involving China in all 50 states. Last year, the Justice Department launched an investigation of multiple researchers at the University of Texas’s MD Anderson Cancer Center. No charges have been filed. According to media reports, investigations are ongoing at 71 institutions around the United States involving 180 individuals who are suspected of improperly transferring intellectual property outside the United States. The government, however, has not always been able to prove its allegations; in at least four instances since 2014, it has brought charges against scientists alleging theft of trade secrets, only to later dismiss those charges.
Although many of the government’s allegations implicate foreign nationals, American-born scientists are also under scrutiny, as the charges against Lieber demonstrate. Recently, the American-born CEO of the Moffitt Cancer Center in Tampa, Florida, resigned, along with the center’s director, after an internal investigation found their relationships with China violated conflict of interest rules. In response to these developments, the Association of American Universities and the Association of Public and Land-grant Universities have issued joint guidance to their member schools on steps they should take to protect intellectual property.
Although the most recent charges are directed at academic researchers, the United States has asserted that trade secret theft and forced technology transfers extend beyond academia into private industry. It is critical that companies have proper procedures in place to protect against trade secret theft and conflicts of interest. In addition to losing valuable intellectual property, a company and its employees may face criminal penalties and suffer reputational damage. The failure to disclose conflicts of interest, such as an employee accepting foreign funding, can result in a company’s debarment and a prohibition on receiving future U.S. government funding or government contracts.
How can academic institutions and research facilities respond to this growing problem? They can implement guidelines and procedures to combat the theft of trade secrets or other intellectual property:
- Establish a trade secret policy. At the outset, the institution must develop a policy regarding the handling of a trade secret, including how it is to be labeled, what group(s) will have access, where the trade secret will be maintained, and what procedures have been implemented to ensure its security. When something has been designated as a trade secret, specific procedures should be followed and all employees with access should be required to read and sign the protocol.
- Provide training. Faculty members and their subordinates should receive instruction on the policies pertaining to proper handling of the institution’s intellectual property and trade secrets; policies regarding accepting gifts or payment of expenses by foreign governments or institutions; and policies addressing potential conflicts of interests when faculty or research personnel are working with foreign entities. Employees should also be advised about prohibitions on allowing access to information housed on the institution’s computer networks.
- Require disclosure. Faculty members and their subordinates must disclose solicitation by, or any form of payment received from, a foreign government or entity. A payment can be in the form of salary, stipend, expenses, lab equipment, technology, travel and entertainment, educational opportunities, consulting work and other tangible benefits. In addition to requiring disclosure of a benefit at the time it is offered, university employees should be required to certify annually that they have not been offered or received a benefit in the preceding year.
- Perform ongoing due diligence. Most institutions maintain relationships with foreign counterparts and invite foreign scholars, students and teachers for temporary stays. Background checks should be performed for all foreign academic personnel or research assistants who may have access to trade secrets or other intellectual property. This should include screening for restricted or denied parties on U.S. sanctions lists. The institution should also create a compliance committee to monitor foreign scholars’ activities and ensure their compliance with all university protocols.
- Establish cybersecurity protocols. The institution should establish policies, access protocols, shared drive restrictions and emergency procedures in case of a data breach. Critical trade secret information may be treated differently than other data, including segmenting the information in different locations to provide added protection. The institution should employ data encryption, multifactor authentication and periodic scanning for improper access to make systems more secure. It should also consider hiring a firm that offers cybersecurity and threat assessment services to educational and research institutions, which may include periodic review of computer systems as well as screening laptops and other devices before employees travel internationally.
FOR MORE INFORMATION
For more information, please contact:
Matthew David Ridings, CCEP
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