ZTE Theft Act

I 116TH CONGRESS 1ST SESSION H. R. 2841 To amend title 35, United States Code, with respect to actions for patent infringement, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 20, 2019 Mr. CHABOT introduced the following bill; which was referred to the Com- mittee on the Judiciary, and in addition to the Committee on Foreign Af- fairs, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend title 35, United States Code, with respect to actions for patent infringement, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Zero Tolerance for 4 Electronics Theft Act’’ or the ‘‘ZTE Theft Act’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 2 •HR 2841 IH (1) The Federal Bureau of Investigation (FBI) 1 has determined that certain foreign actors pose a se- 2 rious threat to the telecommunications supply chain. 3 (2) Through cyber espionage and other delib- 4 erate acts, billions of dollars in trade secrets, intel- 5 lectual property, and technology are stolen each year 6 from the Federal Government, corporations, and 7 academic institutions. 8 (3) The People’s Republic of China (China) is 9 one of the two largest participants in cyber espio- 10 nage. 11 (4) A 2012 report by the Permanent Select 12 Committee on Intelligence of the House of Rep- 13 resentatives found that China exerts cyber espionage 14 capabilities through telecommunications components 15 and systems marketed directly to businesses and 16 other entities in the United States. 17 (5) A 2018 report by the Office of the United 18 States Trade Representative found that Chinese gov- 19 ernment-owned entities were responsible for a sub- 20 stantial number of patent infringements. 21 (6) ZTE Corporation, based in China, dem- 22 onstrates the risks associated with doing business in 23 countries sanctioned by the United States and pro- 24 vides a model, as well as advocates for, the use of 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 3 •HR 2841 IH shell companies to subvert the export control laws of 1 the United States, explicitly stating that ‘‘[t]he big- 2 gest advantage of [this model] is that it is more ef- 3 fective, [because it’s] harder for the U.S. Govern- 4 ment to trace it or investigate the real flow of the 5 controlled commodities.’’. 6 (7) United States businesses provide an esti- 7 mated 25 to 30 percent of the components used in 8 products of ZTE Corporation, including smart- 9 phones. 10 (8) The FBI determined that ZTE Corporation 11 sold banned technology to Iran and used the meth- 12 ods discussed in paragraph (6) to mask its trans- 13 action history in an effort to undermine investiga- 14 tions of the Department of Commerce. 15 (9) Since 2008, ZTE Corporation has been the 16 defendant, counterclaimant, or respondent in 722 17 court actions. 18 (10) On March 23, 2017, the Department of 19 Justice stated that ‘‘ZTE Corporation has agreed to 20 enter a guilty plea and to pay a $430,488,798 pen- 21 alty to the United States for conspiring to violate 22 the International Emergency Economic Powers Act 23 by illegally shipping U.S.-origin items to Iran, ob- 24 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 4 •HR 2841 IH structing justice and making a material false state- 1 ment.’’. 2 (11) ZTE Corporation has also previously 3 reached settlement agreements with the Bureau of 4 Industry and Security of the Department of Com- 5 merce and the Office of Foreign Assets Control of 6 the Department of the Treasury. 7 (12) The Bureau of Industry and Security sub- 8 sequently found ZTE Corporation in violation of the 9 settlement agreement with the Bureau due to— 10 (A) falsification of reports and correspond- 11 ence with the Bureau; and 12 (B) failure to discipline all individuals 13 named in the settlement agreement. 14 (13) On March 13, 2018, the Bureau of Indus- 15 try and Security notified ZTE Corporation that the 16 agency would activate a conditionally suspended de- 17 nial order, due to the determination by the agency 18 that ZTE Corporation had continuously made false 19 statements to the United States Government. 20 (14) On June 7, 2018, Secretary of Commerce 21 Wilbur Ross announced that ZTE Corporation— 22 (A) agreed to additional penalties and com- 23 pliance measures which would supplant a prior 24 order of the Bureau; and 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 5 •HR 2841 IH (B) would be removed from the Depart- 1 ment of Commerce’s Denied Persons List, a list 2 of individuals and entities that have been de- 3 nied export privileges. 4 SEC. 3. SENSE OF CONGRESS. 5 It is the sense of Congress that— 6 (1) ZTE Corporation poses a significant risk to 7 the economy and national security of the United 8 States; and 9 (2) ZTE Corporation engages and will continue 10 to engage in the theft of intellectual property to the 11 detriment of businesses in the United States. 12 SEC. 4. INJUNCTION. 13 Section 283 of title 35, United States Code, is 14 amended— 15 (1) by striking ‘‘The several courts’’ and insert- 16 ing the following: 17 ‘‘(a) IN GENERAL.—The several courts’’; and 18 (2) by adding at the end the following: 19 ‘‘(b) SPECIAL RULE.— 20 ‘‘(1) PRELIMINARY INJUNCTION IN CERTAIN 21 CASES.—Notwithstanding any other provision of law, 22 when a covered entity is a party to a civil action for 23 patent infringement brought under this title, an op- 24 posing party, if seeking a preliminary injunction 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 6 •HR 2841 IH against such covered entity, need not demonstrate 1 that irreparable harm would result from the failure 2 to grant such injunction. 3 ‘‘(2) COVERED ENTITY DEFINED.—In this sub- 4 section, the term ‘covered entity’ means an entity (or 5 subsidiary or affiliate thereof) that— 6 ‘‘(A) is providing or producing tele- 7 communications, software, or electronics equip- 8 ment; 9 ‘‘(B) has a headquarters or a principal 10 place of business located in a region adminis- 11 tered or governed by the People’s Republic of 12 China (excluding Taiwan); 13 ‘‘(C) was, on or after March 8, 2016, de- 14 nied export privileges; and 15 ‘‘(D) was, subsequent to such denial, re- 16 moved by the Secretary of Commerce from the 17 List of Denied Persons maintained by the Bu- 18 reau of Industry and Security of the Depart- 19 ment of Commerce upon the restoration of such 20 privileges.’’. 21 SEC. 5. EXPORT PRIVILEGES ELIGIBILITY. 22 (a) IN GENERAL.—Beginning on and after the date 23 that is 180 days after the date of enactment of this Act, 24 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 7 •HR 2841 IH a covered entity may only be eligible for export privileges 1 if such covered entity— 2 (1) certifies to the Attorney General that such 3 covered entity— 4 (A) with respect to patents in use by the 5 covered entity, has entered into license agree- 6 ments with the United States persons that own 7 such patents; 8 (B) will abide by the laws of the United 9 States; and 10 (C) will not engage in cyber espionage, or 11 the theft or misappropriation of intellectual 12 property or trade secrets, on behalf of them- 13 selves or a state actor; and 14 (2) maintains an export eligibility account in 15 accordance with subsection (b). 16 (b) EXPORT ELIGIBILITY ACCOUNTS.— 17 (1) ESTABLISHMENT.—The Secretary of the 18 Treasury, at the request of a covered entity, shall es- 19 tablish and manage an export eligibility account for 20 the covered entity in accordance with this sub- 21 section. 22 (2) ACCOUNT BALANCE.—To establish eligi- 23 bility for export privileges under subsection (a), an 24 account established under paragraph (1) shall— 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 8 •HR 2841 IH (A) at the time such account is established, 1 include an amount equal to $2,500,000,000 2 provided by the covered entity; 3 (B) have a balance accessible only— 4 (i) by the Secretary of the Treasury 5 for payments described in paragraph (3); 6 and 7 (ii) by the covered entity— 8 (I) upon closure of the account; 9 and 10 (II) for purposes of making de- 11 posits to maintain the account in ac- 12 cordance with subparagraph (C); and 13 (C) at all times after establishment, in- 14 clude a minimum of $600,000,000. 15 (3) USE OF ACCOUNT.—Amounts in an account 16 established under paragraph (1) may be used by the 17 Secretary of the Treasury for payments— 18 (A) made to a United States person; and 19 (B) that— 20 (i) relate to final judgments in a pat- 21 ent infringement action against the appli- 22 cable covered entity (including interest, at- 23 torney’s fees, and any other costs specified 24 in such judgments); and 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 9 •HR 2841 IH (ii) the covered entity failed to make. 1 (4) CERTIFICATION.—The Attorney General, in 2 consultation with the Secretary of the Treasury and 3 the Secretary of Commerce, shall review and certify 4 the account status of covered entities for purposes of 5 eligibility for export privileges at least once every 7 6 years. 7 (5) NOTIFICATION.—The Attorney General 8 shall notify United States Customs and Border Pro- 9 tection and the Bureau of Industry and Security of 10 the Department of Commerce of the identities of 11 covered entities without an account providing eligi- 12 bility for export privileges. 13 (c) DEFINITIONS.—In this section: 14 (1) COVERED ENTITY.—The term ‘‘covered en- 15 tity’’ means an entity (or subsidiary or affiliate 16 thereof) that— 17 (A) is providing or producing telecommuni- 18 cations, software, or electronics equipment; 19 (B) has a headquarters or a principal place 20 of business located in a region administered or 21 governed by the People’s Republic of China (ex- 22 cluding Taiwan); 23 (C) was, on or after March 8, 2016, denied 24 export privileges; and 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 10 •HR 2841 IH (D) was, subsequent to such denial, re- 1 moved by the Secretary of Commerce from the 2 List of Denied Persons maintained by the Bu- 3 reau of Industry and Security of the Depart- 4 ment of Commerce upon the restoration of such 5 privileges. 6 (2) EXPORT PRIVILEGES.—The term ‘‘export 7 privileges’’ means, with respect to items subject to 8 the Export Administration Regulations (as codified 9 in subchapter C of chapter VII of title 15, Code of 10 Federal Regulations, or any successor regulations)— 11 (A) the ability to engage in export and re- 12 export transactions involving such items; and 13 (B) the access to such items. 14 (3) UNITED STATES PERSON.—The term 15 ‘‘United States person’’ means— 16 (A) a United States citizen or national; 17 (B) an alien lawfully present in the United 18 States who has lawful status under the immi- 19 gration laws (as such term is defined in section 20 101(a) of the Immigration and Nationality 21 Act); 22 (C) a partnership, corporation, or other 23 legal entity organized under the laws of the 24 United States; or 25 VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS 11 •HR 2841 IH (D) a partnership, corporation, or other 1 legal entity that is organized under the laws of 2 a foreign country and is controlled by entities 3 described in subparagraph (C) or a United 4 States citizen. 5 Æ VerDate Sep 11 2014 04:41 May 31, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\H2841.IH H2841 kjohnson on DSK79L0C42 with BILLS