ZTE Theft Act

To amend title 35, United States Code, with respect to actions for patent infringement, and for other purposes. 1. Short title This Act may be cited as the Zero Tolerance for Electronics Theft Act ZTE Theft Act 2. Findings Congress finds the following: (1) The Federal Bureau of Investigation (FBI) has determined that certain foreign actors pose a serious threat to the telecommunications supply chain. (2) Through cyber espionage and other deliberate acts, billions of dollars in trade secrets, intellectual property, and technology are stolen each year from the Federal Government, corporations, and academic institutions. (3) The People’s Republic of China (China) is one of the two largest participants in cyber espionage. (4) A 2012 report by the Permanent Select Committee on Intelligence of the House of Representatives found that China exerts cyber espionage capabilities through telecommunications components and systems marketed directly to businesses and other entities in the United States. (5) A 2018 report by the Office of the United States Trade Representative found that Chinese government-owned entities were responsible for a substantial number of patent infringements. (6) ZTE Corporation, based in China, demonstrates the risks associated with doing business in countries sanctioned by the United States and provides a model, as well as advocates for, the use of shell companies to subvert the export control laws of the United States, explicitly stating that [t]he biggest advantage of [this model] is that it is more effective, [because it’s] harder for the U.S. Government to trace it or investigate the real flow of the controlled commodities. (7) United States businesses provide an estimated 25 to 30 percent of the components used in products of ZTE Corporation, including smart­phones. (8) The FBI determined that ZTE Corporation sold banned technology to Iran and used the methods discussed in paragraph (6) to mask its transaction history in an effort to undermine investigations of the Department of Commerce. (9) Since 2008, ZTE Corporation has been the defendant, counterclaimant, or respondent in 722 court actions. (10) On March 23, 2017, the Department of Justice stated that ZTE Corporation has agreed to enter a guilty plea and to pay a $430,488,798 penalty to the United States for conspiring to violate the International Emergency Economic Powers Act by illegally shipping U.S.-origin items to Iran, obstructing justice and making a material false statement. (11) ZTE Corporation has also previously reached settlement agreements with the Bureau of Industry and Security of the Department of Commerce and the Office of Foreign Assets Control of the Department of the Treasury. (12) The Bureau of Industry and Security subsequently found ZTE Corporation in violation of the settlement agreement with the Bureau due to— (A) falsification of reports and correspondence with the Bureau; and (B) failure to discipline all individuals named in the settlement agreement. (13) On March 13, 2018, the Bureau of Industry and Security notified ZTE Corporation that the agency would activate a conditionally suspended denial order, due to the determination by the agency that ZTE Corporation had continuously made false statements to the United States Government. (14) On June 7, 2018, Secretary of Commerce Wilbur Ross announced that ZTE Corporation— (A) agreed to additional penalties and compliance measures which would supplant a prior order of the Bureau; and (B) would be removed from the Department of Commerce’s Denied Persons List, a list of individuals and entities that have been denied export privileges. 3. Sense of Congress It is the sense of Congress that— (1) ZTE Corporation poses a significant risk to the economy and national security of the United States; and (2) ZTE Corporation engages and will continue to engage in the theft of intellectual property to the detriment of businesses in the United States. 4. Injunction Section 283 of title 35, United States Code, is amended— (1) by striking The several courts (a) In general The several courts ; and (2) by adding at the end the following: (b) Special rule (1) Preliminary injunction in certain cases Notwithstanding any other provision of law, when a covered entity is a party to a civil action for patent infringement brought under this title, an opposing party, if seeking a preliminary injunction against such covered entity, need not demonstrate that irreparable harm would result from the failure to grant such injunction. (2) Covered entity defined In this subsection, the term covered entity (A) is providing or producing telecommunications, software, or electronics equipment; (B) has a headquarters or a principal place of business located in a region administered or governed by the People’s Republic of China (excluding Taiwan); (C) was, on or after March 8, 2016, denied export privileges; and (D) was, subsequent to such denial, removed by the Secretary of Commerce from the List of Denied Persons maintained by the Bureau of Industry and Security of the Department of Commerce upon the restoration of such privileges. . 5. Export privileges eligibility (a) In general Beginning on and after the date that is 180 days after the date of enactment of this Act, a covered entity may only be eligible for export privileges if such covered entity— (1) certifies to the Attorney General that such covered entity— (A) with respect to patents in use by the covered entity, has entered into license agreements with the United States persons that own such patents; (B) will abide by the laws of the United States; and (C) will not engage in cyber espionage, or the theft or misappropriation of intellectual property or trade secrets, on behalf of themselves or a state actor; and (2) maintains an export eligibility account in accordance with subsection (b). (b) Export eligibility accounts (1) Establishment The Secretary of the Treasury, at the request of a covered entity, shall establish and manage an export eligibility account for the covered entity in accordance with this subsection. (2) Account balance To establish eligibility for export privileges under subsection (a), an account established under paragraph (1) shall— (A) at the time such account is established, include an amount equal to $2,500,000,000 provided by the covered entity; (B) have a balance accessible only— (i) by the Secretary of the Treasury for payments described in paragraph (3); and (ii) by the covered entity— (I) upon closure of the account; and (II) for purposes of making deposits to maintain the account in accordance with subparagraph (C); and (C) at all times after establishment, include a minimum of $600,000,000. (3) Use of account Amounts in an account established under paragraph (1) may be used by the Secretary of the Treasury for payments— (A) made to a United States person; and (B) that— (i) relate to final judgments in a patent infringement action against the applicable covered entity (including interest, attorney’s fees, and any other costs specified in such judgments); and (ii) the covered entity failed to make. (4) Certification The Attorney General, in consultation with the Secretary of the Treasury and the Secretary of Commerce, shall review and certify the account status of covered entities for purposes of eligibility for export privileges at least once every 7 years. (5) Notification The Attorney General shall notify United States Customs and Border Protection and the Bureau of Industry and Security of the Department of Commerce of the identities of covered entities without an account providing eligibility for export privileges. (c) Definitions In this section: (1) Covered entity The term covered entity (A) is providing or producing telecommunications, software, or electronics equipment; (B) has a headquarters or a principal place of business located in a region administered or governed by the People’s Republic of China (excluding Taiwan); (C) was, on or after March 8, 2016, denied export privileges; and (D) was, subsequent to such denial, removed by the Secretary of Commerce from the List of Denied Persons maintained by the Bureau of Industry and Security of the Department of Commerce upon the restoration of such privileges. (2) Export privileges The term export privileges (A) the ability to engage in export and reexport transactions involving such items; and (B) the access to such items. (3) United States person The term United States person (A) a United States citizen or national; (B) an alien lawfully present in the United States who has lawful status under the immigration laws (as such term is defined in section 101(a) of the Immigration and Nationality Act); (C) a partnership, corporation, or other legal entity organized under the laws of the United States; or (D) a partnership, corporation, or other legal entity that is organized under the laws of a foreign country and is controlled by entities described in subparagraph (C) or a United States citizen.

Summary: Zero Tolerance for Electronics Theft Act or the ZTE Theft Act This bill requires certain telecommunications, software, or electronics companies headquartered in China that had previously been denied export privileges to certify to the Department of Justice that it will abide by all U.S. laws, not engage in cyber espionage, and not infringe intellectual property, to be eligible for such privileges. It also requires such a company to establish with the Department of the Treasury a $2.5 billion account to pay any patent infringement judgments against it.