France & UK Continue Corporate Criminal Enforcement: SFO Issues New Corporate Guidance
Foreign regulators continue to intensify their efforts to combat bribery and corruption. France’s Anti-Corruption Agency (L’Agence française anticorruption or AFA) recently published its year-in-review for 2024, which showed a nearly ten percent increase in corruption enforcement actions. Half of the offenses involved fraud or deception and 41 percent involved “active” or “passive” corruption. More recently, on April 24, 2025, the UK Serious Fraud Office (“SFO”) issued new corporate guidance, outlining factors it will consider when determining whether to prosecute a company or enter into Deferred Prosecution Agreement (“DPA”) negotiations. Together, these developments further underscore the growing commitment of international enforcement agencies to prioritize bribery and corruption in the corporate context.
The Guidance
The Guidance identifies those factors that the SFO will weigh – including when and how a company should self-report suspected misconduct as well as what constitutes “full” cooperation – when deciding whether a DPA is appropriate. SFO DPA agreements effectively suspend prosecution for a certain period so long as the company satisfies specified conditions and requirements. SFO DPAs are available only to companies, not individuals. Benefits of DPAs and why companies prefer DPA outcomes include avoiding long and expensive trials as well as minimizing the reputational damage of a conviction while still accounting for the relevant criminal behavior.
When considering the importance of self-reporting suspected misconduct, the Guidance states that the SFO does not expect for a company to “fully investigate the matter before self-reporting.” Therefore, companies should be aware that the Guidance makes clear the SFO’s expectation that a company promptly self-report “soon after learning of that evidence” of the suspected criminal conduct. According to the Guidance, when self-reporting, a company should include: (1) “all relevant known facts and evidence concerning the suspected offences”; (2) “the individual(s) involved (both those inside and outside the organization)”; and (3) “the relevant jurisdiction(s).” Ultimately, through self-reporting, the SFO seeks information allowing it “to understand the nature and extent of the suspected offending.”
The Guidance also elaborates on what the SFO considers as constituting “full” cooperation, with cooperation being identified as a “key factor” when determining the outcome of a case as well as the fines and penalties levied. Specifically, the Guidance states that a company that self-reports, but does not exhibit the level of cooperation the SFO expects may not be eligible for a DPA, while a company that does not self-report, but “provide[s] exemplary cooperation” may still be eligible for DPA negotiations. Key indicators of meaningful cooperation include, for instance, preservation of both digital and hard copy materials, disclosure of relevant documents and information, as well as providing a comprehensive account of the suspected misconduct along with identifying all individuals involved. Importantly, even if a company opts to conduct its own internal investigation, the Guidance indicates that early engagement with the SFO is critical when establishing eligibility for a DPA negotiation.
Proactive Steps for Companies
When describing “genuine cooperation” efforts, the Guidance includes “[p]resenting a thorough analysis of the corporate’s compliance programme and procedures in place at the time of offending and how the corporate has remediated, or plans to remediate, any ongoing deficiencies.” In line with previous messaging from both U.S. and foreign enforcement authorities, the Guidance reinforces the expectation that companies maintain a robust, well resourced, and effective compliance program, including proactively evaluating and documenting their compliance efforts both before and after any potential misconduct is identified.
As companies review the Guidance and determine next steps, a strong compliance framework not only helps prevent misconduct but can also significantly mitigate the consequences in the event misconduct should occur, potentially impacting both the outcome of an investigation and the severity of fines or penalties sought. More broadly, effective and robust compliance programs help to mitigate not only bribery and corruption risks, but also money laundering, sanctions issues, human rights violations, and financial fraud risks, among others. Companies with strong compliance programs are better positioned to negotiate favorable outcomes in the event enforcement actions arise, making proactive investment in compliance crucial. To that end, in today’s dynamic regulatory and enforcement landscape, maintaining a well-designed and effective compliance program is critical for companies seeking to mitigate corruption risks.
Takeaways
The SFO’s Guidance signals a greater willingness to resolve corporate cases through DPAs provided that companies timely self-report and demonstrate meaningful cooperation.
Both the Guidance and the UK’s new Failure to Prevent Fraud Offense, emphasize the SFO’s commitment to combating corporate bribery, fraud, and corruption.
While there are similarities between the SFO’s Guidance and existing DOJ guidance around, for instance, cooperation, it will be important for companies to monitor whether further alignment or divergence emerges between UK and US enforcement practices following the current 180-day pause on FCPA enforcement.
Multinational companies should continue to evaluate, assess, and address any potential gaps regarding their compliance programs as foreign regulators, including the SFO, AFA, and the Office of the Attorney General of Switzerland to name a few, ramp up enforcement efforts around corporate bribery and corruption.
SAP NetWeaver Visual Composer Requires Urgent Patch
SAP Netweaver Visual Composer users are urged to patch a critical vulnerability that attackers are actively exploiting. According to ReliaQuest, which detected the vulnerability, the attacks allow full system compromise through unauthenticated file uploads. Although SAP has issued an emergency patch, security researchers report that the vulnerability is being exploited throughout critical industries, and is therefore “immediate and severe,” and designated a 10 out of 10 for criticality.
Urgent patching is required and available through SAP.
Top Ten Regulatory and Litigation Risks for Private Funds in 2025
Confession: writing this in May 2025, we cannot predict with confidence what the rest of 2025 will bring. The year has already seen four months of change and upheaval – political, regulatory, and economic. The new US administration has touted a business-friendly regulatory environment, with actual and promised tax cuts and deregulation. However, geopolitical tensions, tariff trade wars and political instability have introduced new risks and created a climate of extreme unpredictability. We should expect 2025 to hold several surprises still, whether that is a breakout of peace or new political themes obtaining prominence in one or more jurisdictions.
Against this backdrop, it can be tempting to adopt the view of legendary film writer William Goldman declaring that “nobody knows anything” and that publishing our annual “Top Ten Litigation and Regulatory Risks for Private Funds” is simply a fool’s errand. We have, after all, already rewritten this introduction multiple times before new developments make it out of date again. However, whatever happens, sponsors with strong foundations and nimble mindsets will be best placed to take advantage of any new opportunities that arise and be able to pivot as needed in new, more promising directions.
We have therefore focused on two sub-themes to support those strong foundations:
Topics to ensure “your house is in order” to give those strong foundations (e.g., how to navigate ESG in 2025, the use of insurance products by sponsors, best practice with MNPI, dealing with whistleblowers and global anti-corruption compliance)
Risks arising now from the trends of 2024 (e.g., risks from the growth of the private credit market, the rise in earn out disputes in portfolio companies and navigation of end-of-life funds)
To complete our list of ten, we will engage in some tentative crystal ball gazing, including the role of the SEC in a non-regulatory environment and outward investment restrictions and tariffs, but will, like our clients and readers, seek to remain “nimble” to ensure we remain relevant.
With this backdrop, we are pleased to present the Top Ten Regulatory and Litigation Risks for Private Funds in 2025.
ESG in 2025: Finding the Sweet Spot in a Complex World
Regulatory Scrutiny on Potential MNPI in the Credit Markets
SEC Regulation in a Non-Regulatory Environment
Global Trade in 2025: Tariffs and Outbound Investment Restriction
Three Risks to Monitor in Private Credit
End Of (Fund) Life Issues and Zombies
Navigating Earn-Out Disputes: Key Considerations for Portfolio Companies
Why the DOJ’s New Whistleblower Program Remains Relevant
Protecting Sponsors from Emerging Portfolio Company Risks through Insurance
FCPA & Anti-Corruption Enforcement: Shifting Global Dynamics in Light of New US Regime
Additional Authors: Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Robert Pommer, Seetha Ramachandran, Nathan Schuur, Bryan Sillaman, Robert Sutton, John Verwey, Jonathan M. Weiss, William D. Dalsen, Rachel Lowe, Adam L. Deming, Adam Farbiarz and Hena M. Vora
IRS Roundup April 1 – April 17, 2025
Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for April 1, 2025 – April 17, 2025.
April 4, 2025: The IRS issued Notice 2025-19, inviting the public to submit recommendations for items to include in the IRS’s 2025-2026 Priority Guidance Plan. The IRS uses the Priority Guidance Plan to identify and prioritize the tax issues that should be addressed via regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. A list of factors the IRS considers when selecting projects for inclusion is outlined in the notice.
April 9, 2025: The US Department of the Treasury (Treasury), along with the IRS and the Financial Crimes Enforcement Network, eliminated 15 rules and guidance materials, in addition to two rules already rescinded by the Office of the Comptroller of the Currency. The stated purpose of these actions was to remove rules that the government says are now obsolete and hamper the growth of US small businesses. These actions were some of the many that the Treasury says it will take over the next several months to eliminate unnecessary IRS rules and to “unleash the regulated banking sector.”
April 10, 2025: US President Donald Trump signed legislation blocking an IRS reporting rule that would have required decentralized digital asset platforms to report statistics showing customers’ gross sales on their platforms.
April 11, 2025: The IRS issued Notice 2025-24, providing penalty relief under Section 6707A(a) of the Internal Revenue Code to participants in micro-captive reportable transactions that fail to timely file (i.e., by April 14, 2025) certain disclosure statements as required under Section 6011; Treas. Reg. §§ 1.6011-10(h)(2) or 1.6011-11(h)(2); Section 6111; and Treas. Reg. §§ 1.6011-10(h)(3) or 1.6011-11(h)(3)). Participants will only qualify for relief if they file the required disclosure statement with the Office of Tax Shelter Analysis by July 31, 2025.
April 14, 2025: The IRS issued Notice 2025-22, providing for the elimination of extraneous and unnecessary Internal Revenue Bulletin guidance. This notice was prompted by the issuance of Executive Order 14219 on February 19, 2025. The purpose of Executive Order 14219 is to focus the IRS’s limited enforcement resources on regulations “squarely authorized by constitutional Federal statutes” while eliminating “overbearing and burdensome” regulations and “ending Federal overreach.” In Notice 2025-22, the IRS eliminated several current sources of guidance and stated that it anticipates revoking or obsoleting hundreds of similar guidance documents in the near future.
April 15, 2025: The IRS issued Notice 2025-21, providing updates on the corporate bond monthly yield curve, spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Code. This notice also provides guidance on the interest rates for 30-year Treasury securities and the 30-year Treasury weighted average for plan years beginning before 2008.
April 17, 2025: The IRS issued Notice 2025-23, announcing its intent to publish a notice of proposed rulemaking, proposing the removal of Treas. Reg. § 1.6011-18 (Basis Shifting TOI Regulations) from the Income Tax Regulations. As of January 14, 2025, the Basis Shifting TOI Regulations identified certain partnership-related-party basis adjustment transactions as transactions of interest. Since becoming effective in January, taxpayers have criticized the Basis Shifting TOI Regulations as imposing complex, burdensome, and retroactive disclosure obligations on ordinary activities, rendering compliance costly and creating uncertainty for business activities. Thus, pursuant to Executive Order 14219, directing agencies to remove certain regulations through the Department of Government Efficiency initiative, the Treasury identified this as a burdensome regulation that should be removed. Moreover, given the Treasury’s intent to remove the Basis Shifting TOI Regulations, Notice 2025-23 states that the IRS will waive penalties under § 6707A(a) for any failure to file a Form 8886, § 6707(a) for any failure to file a Form 8918, and § 6708 for any failure to maintain a list under § 6112.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
Inferential Leaps and Conclusory Kickback Allegations Remain Verboten in False Claims Act Complaints
Earlier this month, the Eleventh Circuit (the “Court”) issued a decision in a False Claims Act (“FCA”) case against a medical supplier that offers welcome clarity for companies facing whistleblower allegations. In Vargas ex rel. Alvarez v. Lincare, Inc., 2025 U.S. App. LEXIS 9084 (11th Cir.), the Court emphasized high pleading requirements FCA plaintiffs must satisfy to survive a motion to dismiss. Specifically, the court held that it is not enough to allege a general scheme; the FCA plaintiff must also plead, with detail, how the scheme caused the actual submission of false claims to the government. The decision is especially significant in the healthcare context with respect to Anti-Kickback Statute (“AKS”) based FCA cases. The court made clear that the plaintiff must do more than include conclusory allegations that one purpose of the payment was to induce referrals—it must include details as to the defendant’s intent.
In Vargas ex rel. Alvarez v. Lincare, Inc., the relators, former employees of medical supplier Lincare, Inc. and its subsidiary Optigen, Inc., alleged that defendants violated the FCA by: (1) improperly billing CPAP accessories under codes for ventilator accessories, or “upcoding”; (2) improperly waiving co-payments through inclusion of a waiver form with every CPAP set-up shipment; (3) automatically shipping CPAP replacement supplies without the required patient or provider request; and (4) making payments to set-up technicians called “CFTs” who were also employees of prescribers and whose payments were tied to referrals of patients, in violation of the AKS. The relators alleged that these schemes resulted in false claims for payment being submitted to TRICARE, the U.S.’s healthcare program for service members.
The District Court for the Middle District of Florida previously dismissed relators’ complaint under all four theories, holding that it failed to meet Federal Rule of Civil Procedure 9(b)’s standard for pleading fraud with particularity. The Eleventh Circuit reversed the District Court as to only the upcoding theory, finding that relators’ examples of specific patients whose supplies were allegedly upcoded, their claim numbers, and the amount TRICARE reimbursed for the supplies satisfied Rule 9(b). The Eleventh Circuit affirmed the District Court’s holding for the remaining three theories.
For these remaining three theories, the Eleventh Circuit found that relators had generally alleged fraudulent schemes, but without enough detail or particular examples—specifically, examples of how the alleged fraud resulted in false claims being submitted to the government. The Court declared that “[w]ithout a clear link between the alleged scheme and actual claims, the complaint failed. … In the end, an FCA claim must do more than sketch out a theory. It must allege facts showing that a false claim was actually submitted to the government.”
In regard to the copay waiver scheme, for example, the relators alleged that a waiver form was provided with each CPAP set up, but did not identify any specific claims or patients whose copays were improperly waived and who subsequently had their devices billed to TRICARE. The Court refused to make the “inferential leap” that the alleged conduct must have resulted in false claims. In dismissing this theory, the Court also noted that the relators did not allege any direct knowledge of the defendants’ billing activity or claims data.
The Court also included firm language in upholding the District Court’s dismissal of the AKS claim. Relators alleged that the defendant paid Contract Field Technicians (“CFTs”), who installed the CPAP devices and often had influence over which supplier’s device was installed, “setup fees” of $50 per setup but would pay the more prolific CFT referrers $225 per installation. Beyond setup fees, Optigen allegedly courted referring providers with meals, gifts, and other incentives. The Court held that this claim was properly dismissed because the relators again failed to plead causation: relators failed “to tie the CFTs’ payments to any actual referrals. They identify no patient referred by a CFT, no instance in which a CFT influenced a prescribing decision, and no facts showing that CFTs played any role in the referral process (whatever that may be). They point to CFTs who purportedly received high fees and made many referrals, but they offer no detail—no conversations, no meetings, no influence over any prescriber’s decision.” As a result:
what the complaint does show is that Optigen paid CFTs to do a legitimate job: set up CPAP equipment in patients’ homes. That work likely included travel, equipment setup, training, and follow-up support. Merely paying people for doing that work—even if the rates vary—does not violate the law.
The upshot is that the relators never pleaded how CFTs induced referrals or why the compensation—paid for services rendered—should be viewed as anything other than payment for work done. And without facts bridging payment and referral, the complaint fails to sufficiently plead a kickback scheme.
The Court noted that a “barebones” and conclusory allegation “that the payments were made—‘in part’—to induce referrals” also fails to meet the Rule 9(b) standard.
This decision serves as a reminder that the False Claims Act targets false claims—not regulatory violations, not internal misconduct, and not abstract theories of fraud. A complaint cannot simply allege a fraudulent scheme and assume the scheme resulted in the submission of false claims for payment by the government. The complaint must, instead, spell out the alleged fraud in detail—including when, where and how it occurred—and specifically allege how the actions alleged actually caused the submission of false claims. The Eleventh Circuit found that speculative and unsupported allegations, including those related to causation, are insufficient, and District Courts should dismiss complaints containing such allegations.
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USPTO Launches Task Force to Combat Patent Fraud and Protect the Patent System
The U.S. Patent and Trademark Office (USPTO) recently announced the creation of the Patent Fraud Detection and Mitigation Working Group. The working group is designed to identify and address threats to the patent system as well as to weed out improper activity in patent applications and reexamination proceedings. USPTO officials believe that these efforts will reduce pendency time for patent applications and preserve USPTO resources.
In particular, the working group is tasked with:
Addressing mistakes in fee certifications and assertions. To date, the USPTO has mailed more than 2,200 fee deficiency notices in patent applications in response to false micro entity certifications as well as 68 notices responding to false small entity certifications. Patent Applicants and practitioners are reminded that only entities that meet certain requirements can claim fee discounts as a small entity or micro entity, and an incorrect claim of small entity status or micro entity status can jeopardize the validity of a patent. Details regarding the requirements for establishing small entity status and micro entity status can be found here.
Identifying and reviewing potential misrepresentations to the USPTO, including for false signatures, and using the administrative sanctions process to address misrepresentations where appropriate. Since June 2023, the USPTO has terminated more than 3,300 applications due to false signatures. Patent Applicants and practitioners are reminded that, pursuant to 37 CFR 1.4, a signer’s signature on any paper submitted to the USPTO must be personally made or inserted by the signer and cannot be made by another at the signer’s direction. This applies to both handwritten signatures and S-signatures.
Preventing non-practitioners from engaging in the unauthorized practice of law. Except for pro se representation, a patent Applicant can only be represented in a patent matter before the USPTO by individuals specifically authorized to do so. 37 CFR 11.10(a). With some exceptions, this generally requires a registered patent practitioner who has, among other things, passed the patent registration examination. 37 CFR 11.7. Representing another before the USPTO regarding a patent matter is not limited to signing and filing papers in a patent application, but can also include drafting the patent application, drafting amendments and replies to communications from the USPTO, and giving advice to a client in contemplation of filing a patent application or an amendment or reply in a patent application. 37 CFR 11.5(b)(1). Patent Applicants are encouraged to obtain representation regarding patent matters only from authorized patent practitioners.
Monitoring and investigating otherwise suspicious filings.
Serving as the main point of contact within the USPTO for reporting potential threats to the patent system.
The USPTO has introduced a new webpage serving as a centralized hub to keep the public informed about emerging threats in patent applications and reexamination proceedings. Additionally, the USPTO will share data outlining its mitigation efforts.
Click here to visit the new USPTO Patent Fraud Detection and Mitigation website.
China’s Supreme People’s Court and Supreme People’s Procuratorate Issue Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Intellectual Property Infringement
On April 24, 2025, China’s Supreme People’s Court (SPC) and Supreme People’s Procuratorate (SPP) jointly issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Intellectual Property Infringement (关于办理侵犯知识产权刑事案件适用法律若干问题的解释). The Interpretation clarifies trademark crimes, patent counterfeiting, copyright crimes, trade secret misappropriation, and common issues arising in IP crimes (e.g., heavier or reduced sentences). The Interpretation is effective as of April 26, 2025.
A translation follows. The original text is available here (Chinese only).
In order to punish crimes of infringement of intellectual property rights in accordance with the law and maintain the socialist market economic order, in accordance with the relevant provisions of the Criminal Law of the People’s Republic of China, the Criminal Procedure Law of the People’s Republic of China and other laws, and in combination with judicial practice, we hereby explain several issues concerning the application of law in handling criminal cases of infringement of intellectual property rights as follows:
Article 1: Where a person uses a trademark identical to a registered trademark on the same kind of goods or services without the permission of the registered trademark owner, any of the following circumstances shall be deemed to be “the same kind of goods or services” as provided for in Article 213 of the Criminal Law:
(1) The names of the goods actually produced and sold, or the names of the services actually provided by the actor are the same as the names of the goods or services approved for use by the right holder’s registered trademark;
(2) The commodity names are different, but the functions, uses, main raw materials, consumers, sales channels, etc. are the same or substantially the same, and the relevant public generally believes that they are the same kind of commodities;
(3) The service names are different, but the purpose, content, method, object, location, etc. of the services are the same or substantially the same, and the relevant public generally believes that they are the same type of services.
To determine “the same kind of goods or services”, a comparison should be made between the goods or services approved for use by the right holder’s registered trademark and the goods or services actually produced and sold, or the services actually provided, by the actor.
Article 2 A trademark that is identical to a counterfeited registered trademark, or that is substantially indistinguishable from a counterfeited registered trademark and sufficient to mislead the relevant public, shall be deemed a “trademark that is identical to its registered trademark” as provided for in Article 213 of the Criminal Law. A trademark that is substantially indistinguishable from a counterfeited registered trademark and sufficient to mislead the relevant public shall be deemed to be a trademark that is substantially indistinguishable from a counterfeited registered trademark and sufficient to mislead the relevant public if any of the following circumstances exists:
(1) Changing the font, uppercase and lowercase letters, or the horizontal and vertical arrangement of the characters of a registered trademark, which is basically indistinguishable from the registered trademark;
(2) Changing the spacing between words, letters, numbers, etc. of a registered trademark, which is basically indistinguishable from the registered trademark;
(3) Changing the color of a registered trademark does not affect the distinctive features of the registered trademark;
(4) merely adding to a registered trademark elements that lack distinctive features, such as the common name of the goods or model number, which do not affect the distinctive features of the registered trademark;
(5) There is basically no difference between the three-dimensional signs and the two-dimensional elements of the three-dimensional registered trademark;
(6) Other marks that are basically indistinguishable from the registered trademark and are sufficient to mislead the relevant public.
Article 3: Where a person uses a trademark identical to a registered trademark on the same kind of goods without the permission of the registered trademark owner, any of the following circumstances shall be deemed to be a “serious circumstance” as provided for in Article 213 of the Criminal Law:
(1) The amount of illegal income is RMB 30,000 or more, or the amount of illegal business is RMB 50,000 or more;
(2) counterfeiting two or more registered trademarks, with illegal gains exceeding RMB 20,000 or illegal business volume exceeding RMB 30,000;
(3) Having been subject to criminal or administrative punishment for committing an act specified in Articles 213 to 215 of the Criminal Law within two years, he commits the act again, and the amount of illegal gains is more than RMB 20,000 or the amount of illegal business is more than RMB 30,000;
(4) Other circumstances of a serious nature.
If a person uses a trademark identical to a registered trademark on the same kind of service without the permission of the registered trademark owner, any of the following circumstances shall be deemed to be a “serious circumstance” as provided for in Article 213 of the Criminal Law:
(1) The amount of illegal gains is RMB 50,000 or more;
(2) counterfeiting two or more registered trademarks, with the amount of illegal gains exceeding RMB 30,000;
(3) Having been subject to criminal or administrative punishment for committing an act specified in Articles 213 to 215 of the Criminal Law within two years, he commits the act again, and the amount of illegal gains is RMB 30,000 or more;
(4) Other circumstances of a serious nature.
Where a person counterfeits both a registered trademark for goods and a registered trademark for services, and the amount of illegal gains from the counterfeit registered trademark for goods is less than the standard prescribed in the first paragraph of this Article, but the total amount of illegal gains from the counterfeit registered trademark for services reaches the standard prescribed in the second paragraph of this Article, it shall be deemed as “serious circumstances” as prescribed in Article 213 of the Criminal Law.
If the amount of illegal gains or illegal business operations reaches ten times or more the standards specified in the first three paragraphs of this article, it shall be deemed as “particularly serious circumstances” as stipulated in Article 213 of the Criminal Law.
Article 4 Anyone who sells goods bearing counterfeit registered trademarks shall be deemed to have “knowingly” done so as provided for in Article 214 of the Criminal Law if any of the following circumstances exists, unless there is evidence proving that the person was truly unaware:
(1) Knowing that the registered trademark on the goods he sells has been altered, replaced or covered;
(2) Forging or altering a trademark registrant’s authorization document or knowing that the document has been forged or altered;
(3) A person who has been subject to criminal or administrative penalties for selling goods bearing counterfeit registered trademarks and then sells the same goods bearing counterfeit registered trademarks;
(4) purchasing or selling goods at prices significantly lower than the market price without justifiable reasons;
(5) after being discovered by administrative law enforcement agencies or judicial agencies to be selling goods bearing counterfeit registered trademarks, transferring or destroying infringing goods, accounting documents and other evidence, or providing false certification;
(6) Other circumstances that may be regarded as knowing that the goods are counterfeit registered trademarks.
Article 5 Where a person knowingly sells goods that are counterfeit registered trademarks and the amount of illegal proceeds is more than RMB 30,000, it shall be deemed as “a relatively large amount of illegal proceeds” as provided for in Article 214 of the Criminal Law. If any of the following circumstances exists, it shall be deemed as “other serious circumstances” as provided for in Article 214 of the Criminal Law:
(1) The sales amount is RMB 50,000 or more;
(2) Having been subject to criminal or administrative punishment for committing an act specified in Articles 213 to 215 of the Criminal Law within two years, he commits the act again, and the amount of illegal gains is more than RMB 20,000 or the amount of sales is more than RMB 30,000;
(3) The value of the goods bearing counterfeit registered trademarks that have not yet been sold reaches three times or more the sales amount standards prescribed in the first two paragraphs of this paragraph, or the sales amount of the goods that have been sold is less than the sales amount standards in the first two paragraphs of this paragraph, but the total value of the goods and the sales amount of the goods that have not yet been sold reaches three times or more the sales amount standards prescribed in the first two paragraphs of this paragraph.
If the amount of illegal proceeds, sales amount, value of goods, or the total of sales amount and value of goods reaches ten times or more of the standard specified in the preceding paragraph of this Article, it shall be deemed as “the amount of illegal proceeds is huge or there are other particularly serious circumstances” as stipulated in Article 214 of the Criminal Law.
Article 6 Forging or unauthorized manufacturing of another person’s registered trademark or selling forged or unauthorized registered trademark shall be deemed to be a “serious circumstance” as provided for in Article 215 of the Criminal Law if any of the following circumstances exists:
(1) The number of labels is more than 10,000, or the amount of illegal income is more than 20,000 yuan, or the amount of illegal business is more than 30,000 yuan;
(2) Forging, manufacturing without authorization, or selling forged or unauthorized manufacturing of two or more registered trademarks, the number of which is more than 5,000, or the amount of illegal gains is more than RMB 10,000, or the amount of illegal business is more than RMB 20,000;
(3) Having been subject to criminal or administrative punishment for committing an act specified in Articles 213 to 215 of the Criminal Law within two years, and committing the act again, the number of labels is more than 5,000, or the amount of illegal income is more than RMB 10,000, or the amount of illegal business is more than RMB 20,000;
(4) selling registered trademark signs illegally manufactured by others, where the number of signs that have not yet been sold reaches three times or more the standards specified in the first three items of this paragraph, or the number of signs that have been sold is less than the standards specified in the first three items of this paragraph, but the total number of signs that have not yet been sold reaches three times or more the standards specified in the first three items of this paragraph;
(5) Other serious circumstances.
If the number of labels, the amount of illegal income, and the amount of illegal business reach more than five times the standards specified in the preceding paragraph of this article, it shall be deemed as “particularly serious circumstances” as stipulated in Article 215 of the Criminal Law.
Article 7 The term “two or more registered trademarks” as used in this interpretation refers to two or more registered trademarks that identify different sources of goods or services. Although the registered trademarks are different, if they are used on the same goods or services and point to the same source of goods or services, they should not be considered as “two or more registered trademarks”.
The term “piece” of a registered trademark logo as used in this interpretation generally refers to a logo with a complete trademark image. If several logo images are printed on a tangible carrier and the logo image cannot be used independently without the tangible carrier, it shall be deemed as one logo.
Article 8 Whoever commits the crime of counterfeiting registered trademarks as provided for in Article 213 of the Criminal Law and also sells goods bearing the counterfeit registered trademarks, and where such a crime is constituted, he shall be convicted and punished for the crime of counterfeiting registered trademarks in accordance with the provisions of Article 213 of the Criminal Law.
If a person commits the crime of counterfeiting registered trademarks as stipulated in Article 213 of the Criminal Law and sells goods that he knows are counterfeit registered trademarks of others, and the crime is constituted, he shall be punished for multiple crimes.
Article 9 Any of the following circumstances shall be deemed as “counterfeiting another’s patent” as provided for in Article 216 of the Criminal Law:
(1) Forging or altering another person’s patent certificate, patent document or patent application document;
(2) Marking the patent number of another person on the products or product packaging manufactured or sold without permission;
(3) Using another’s patent number in a contract, product manual, advertisement or other promotional materials without permission, causing others to mistakenly believe that the invention, utility model or design is that of another.
Article 10 Anyone who counterfeits another person’s patent shall be deemed to be a “serious circumstance” as provided for in Article 216 of the Criminal Law if any of the following circumstances exists:
(1) The amount of illegal income is more than RMB 100,000 or the amount of illegal business operations is more than RMB 200,000;
(2) causing direct economic losses of more than RMB 300,000 to the patentee;
(3) counterfeiting two or more patents of others, with illegal gains exceeding RMB 50,000 or illegal business volume exceeding RMB 100,000;
(4) Having been subject to criminal or administrative penalties for counterfeiting another person’s patent within two years, he again commits the act, and the amount of illegal gains is more than RMB 50,000 or the amount of illegal business is more than RMB 100,000;
(5) Other serious circumstances.
Article 11: Any act of infringing upon copyright or rights related to copyright without obtaining authorization from the copyright owner, producer of audio or video recordings, or performer, or forging or altering authorization documents, or exceeding the scope of the authorization, shall be deemed as “without the permission of the copyright owner”, “without the permission of the producer of audio or video recordings”, or “without the permission of the performer” as stipulated in Article 217 of the Criminal Law.
A natural person, legal person or unincorporated organization that signs a work or audio or video product in a usual manner as provided for in Article 217 of the Criminal Law shall be presumed to be the copyright owner or audio or video producer, and shall have corresponding rights in the work or audio or video product, unless there is evidence to the contrary.
In cases where there are many types of works, audio and video products involved and the rights holders are scattered, if there is evidence that the works, audio and video products involved were illegally published, copied and distributed, or disseminated to the public through information networks, and the publishers, copy distributors, and information network disseminators cannot provide relevant evidence materials for obtaining permission from the copyright owner, audio and video producer, or performer, it can be determined as “without the permission of the copyright owner”, “without the permission of the audio and video producer”, or “without the permission of the performer” as stipulated in Article 217 of the Criminal Law. However, this does not apply if there is evidence that the rights holder has waived his rights, the copyright of the works involved or the relevant rights of the audio and video products and performers are not protected by China’s Copyright Law, or the protection period of the rights has expired.
Article 12 The act of reproducing and distributing, or reproducing for the purpose of distributing, a work or audio or video recording without the permission of the copyright owner or the owner of rights related to the copyright shall be deemed as “reproduction and distribution” as stipulated in Article 217 of the Criminal Law.
Without the permission of the copyright owner or the owner of rights related to the copyright, providing works, audio and video products, or performances to the public by wired or wireless means so that the public can obtain them at a time and place of their choice shall be deemed as “dissemination to the public through an information network” as stipulated in Article 217 of the Criminal Law.
Article 13 Where an act of infringing upon copyright or copyright-related rights as provided for in Article 217 of the Criminal Law is carried out, and the amount of illegal proceeds is RMB 30,000 or more, it shall be deemed as “a relatively large amount of illegal proceeds” as provided for in Article 217 of the Criminal Law; where any of the following circumstances exists, it shall be deemed as “other serious circumstances” as provided for in Article 217 of the Criminal Law:
(1) The amount of illegal business operations is more than RMB 50,000;
(2) Having been subject to criminal or administrative punishment for committing an act specified in Articles 217 and 218 of the Criminal Law within two years, he commits the act again, and the amount of illegal gains is more than RMB 20,000 or the amount of illegal business is more than RMB 30,000;
(3) copying and distributing another person’s work or audio or video recording, where the total number of copies is 500 or more;
(4) disseminating to the public through information networks other people’s works, audio and video recordings or performances, the total number of which is 500 or more, or the number of which is downloaded more than 10,000 times, or the number of which is clicked more than 100,000 times, or disseminating through a membership system with more than 1,000 registered members;
(5) The amount or quantity does not reach the standards specified in Items 1 to 4 of this paragraph, but reaches more than half of two or more of the standards.
If a person knowingly provides others with devices or components mainly used to circumvent or destroy technical measures, or provides technical services for others to circumvent or destroy technical measures, and the amount of illegal gains or illegal business reaches the standards prescribed in the preceding paragraph, he shall be held criminally liable for the crime of copyright infringement.
If the amount or quantity reaches more than ten times the corresponding standards stipulated in the first two paragraphs of this article, it shall be deemed as “the illegal proceeds are huge or there are other particularly serious circumstances” as stipulated in Article 217 of the Criminal Law.
Article 14: If a person knowingly sells infringing copies as provided for in Article 217 of the Criminal Law, and the amount of illegal proceeds is RMB 50,000 or more, he shall be deemed to have committed the “huge amount of illegal proceeds” as provided for in Article 218 of the Criminal Law. If any of the following circumstances exists, he shall be deemed to have committed the “other serious circumstances” as provided for in Article 218 of the Criminal Law:
(1) The sales amount is more than RMB 100,000;
(2) Having been subject to criminal or administrative punishment for committing an act specified in Article 217 or Article 218 of the Criminal Law within two years, he commits the act again, and the amount of illegal gains is more than RMB 30,000 or the amount of sales is more than RMB 50,000;
(3) selling another person’s work or audio or video recording, where the total number of copies is more than one thousand;
(4) The value of the infringing copies that have not yet been sold or the number of infringing copies that have not yet been sold is more than three times the standards set forth in the first three items of this paragraph; or the value or number of infringing copies that have been sold is less than the standards set forth in the first three items of this paragraph, but the total value or number of infringing copies that have not yet been sold is more than three times the standards set forth in the first three items of this paragraph.
Article 15 Whoever commits the crime of copyright infringement as provided for in Article 217 of the Criminal Law and also sells the infringing copies, and this constitutes a crime, shall be convicted and punished for the crime of copyright infringement in accordance with the provisions of Article 217 of the Criminal Law.
If a person commits the crime of copyright infringement as provided for in Article 217 of the Criminal Law and knowingly sells the infringing copies of others’ works, and this constitutes a crime, he shall be punished for multiple crimes.
Article 16: Obtaining commercial secrets by means of illegal copying or other means shall be deemed as “theft” as provided for in Article 219, paragraph 1, item 1 of the Criminal Law; obtaining commercial secrets by means of unauthorized or unauthorized use of computer information systems or other means shall be deemed as “electronic intrusion” as provided for in Article 219, paragraph 1, item 1 of the Criminal Law.
Article 17: Infringement of trade secrets under any of the following circumstances shall be deemed to be a “serious circumstance” as provided for in Article 219 of the Criminal Law:
(1) causing losses of more than RMB 300,000 to the owner of the rights of the trade secrets;
(2) The amount of illegal gains from infringement of trade secrets is more than RMB 300,000;
(3) Having been subject to criminal or administrative punishment for committing an act specified in Article 219 or Article 219-1 of the Criminal Law within two years, he commits the act again, causing losses or illegal gains of more than RMB 100,000;
(4) Other circumstances of a serious nature.
If the infringement of trade secrets directly leads to the bankruptcy or closure of the rights holder of the trade secrets due to major operational difficulties, or the amount is more than ten times the standard specified in the preceding paragraph of this article, it shall be deemed as “particularly serious circumstances” as stipulated in Article 219 of the Criminal Law.
Article 18 The “amount of loss” for infringement of trade secrets as provided for in this Interpretation shall be determined in the following manner:
(1) Where the business secrets of the right holder are obtained by improper means and have not yet been disclosed, used or allowed to be used by others, the amount of loss may be determined based on the reasonable licensing fee for the business secrets;
(2) If a person obtains the right holder’s trade secrets by unfair means and then discloses, uses or allows others to use the trade secrets, the amount of loss may be determined based on the loss of profits caused by the right holder’s infringement. However, if the amount of loss is lower than the reasonable license fee for the trade secrets, it shall be determined based on the reasonable license fee;
(3) If a person violates the obligation to keep confidentiality or the right holder’s request to keep business secrets confidential and discloses, uses or allows others to use the business secrets in his possession, the amount of loss may be determined based on the loss of profits caused by the right holder due to the infringement;
(4) Where a person knowingly obtains, discloses, uses or allows others to use a trade secret by improper means or in violation of the obligation to keep the trade secret or the right holder’s requirement to keep the trade secret, but still obtains, discloses, uses or allows others to use the trade secret, the amount of loss may be determined based on the loss of profits caused by the right holder due to the infringement;
(5) If a trade secret has become known to the public or has been lost due to an act of infringing a trade secret, the amount of loss may be determined based on the commercial value of the trade secret. The commercial value of a trade secret may be determined based on a combination of factors such as the research and development costs of the trade secret and the benefits of implementing the trade secret.
The loss of profits caused by infringement of the rights holder specified in the second to fourth items of the preceding paragraph can be determined by multiplying the total number of product sales reductions caused by the infringement by the reasonable profit of each product of the rights holder; if the total number of product sales reductions cannot be determined, it can be determined by multiplying the sales volume of the infringing products by the reasonable profit of each product of the rights holder. If the trade secret is used for other business activities such as services, the amount of loss can be determined based on the reasonable profit reduced by the rights holder due to infringement.
The remedial expenses incurred by the right holder of the trade secret to mitigate the losses to business operations or business plans or to restore the security of computer information systems or other systems should be included in the losses caused to the right holder of the trade secret.
Article 19 The “amount of illegal gains” from infringement of trade secrets as provided for in this Interpretation refers to the value of property or other property benefits obtained by disclosing or allowing others to use trade secrets, or the profits obtained by using trade secrets. Such profits can be determined by multiplying the sales volume of the infringing products by the reasonable profit of each infringing product.
Article 20: If a foreign institution, organization or individual steals, spies on, buys or illegally provides commercial secrets and the circumstances specified in Article 17 of this Interpretation exist, it shall be deemed as “serious circumstances” as specified in Article 219 of the Criminal Law.
Article 21 In criminal proceedings, if a party, defender, litigation agent or non-party applies in writing for confidentiality measures to be taken with respect to evidence or materials concerning commercial secrets or other commercial information that needs to be kept confidential, necessary confidentiality measures shall be taken, such as organizing the litigation participants to sign a confidentiality commitment letter, based on the circumstances of the case.
Anyone who violates the requirements of the confidentiality measures in the preceding paragraph or the confidentiality obligations stipulated by laws and regulations shall bear corresponding responsibilities in accordance with the law. Anyone who discloses, uses or allows others to use commercial secrets accessed or obtained in criminal proceedings without authorization shall be held criminally liable in accordance with the law if a crime is constituted.
Article 22 Anyone who knowingly commits a crime of intellectual property infringement by another person and commits any of the following acts shall be treated as a co-offender, except where otherwise provided by law or judicial interpretation:
(1) Providing assistance in producing or manufacturing the main raw materials, auxiliary materials, semi-finished products, packaging materials, machinery and equipment, labels and logos, production technology, formulas, etc. for the production or manufacture of infringing products;
(2) Providing loans, funds, accounts, licenses, payment settlement and other services;
(3) Providing production or business premises or transportation, warehousing, storage, express delivery, mailing and other services;
(4) Providing technical support such as Internet access, server hosting, network storage, and communication transmission;
(5) Other circumstances of assisting crimes of infringement of intellectual property rights.
Article 23: Where any of the following circumstances exist in the commission of a crime of infringement of intellectual property rights, a heavier punishment shall generally be imposed as appropriate:
(1) Mainly engaged in infringement of intellectual property rights;
(2) counterfeiting registered trademarks of goods or services such as emergency and disaster relief supplies or epidemic prevention materials during major natural disasters, accidents, disasters, or public health incidents;
(3) Refusing to hand over illegal gains.
Article 24: Where a crime of infringement of intellectual property rights exists and any of the following circumstances exists, a lighter punishment may be given in accordance with law:
(1) Those who plead guilty and accept punishment;
(2) the right holder has obtained forgiveness;
(3) Obtaining the right holder’s business secrets by improper means but not disclosing, using or allowing others to use them.
If the circumstances of the crime are minor, prosecution may be waived or criminal punishment may be exempted in accordance with the law. If the circumstances are significantly minor and the harm is not serious, they shall not be treated as crimes.
Article 25: Those who commit crimes of infringement of intellectual property rights shall be sentenced to a fine in accordance with the law by taking into account the amount of illegal gains from the crime, the amount of illegal business, the amount of losses caused to the right holder, the number of infringing and counterfeit goods and the social harm, etc.
The amount of the fine is generally determined to be between one and ten times the amount of the illegal income. If the amount of the illegal income cannot be ascertained, the amount of the fine is generally determined to be between 50% and one time the amount of the illegal business. If both the amount of the illegal income and the amount of the illegal business cannot be ascertained, if a sentence of less than three years of fixed-term imprisonment, criminal detention or a fine is imposed, the amount of the fine is generally determined to be between RMB 30,000 and RMB 1 million; if a sentence of more than three years of fixed-term imprisonment is imposed, the amount of the fine is generally determined to be between RMB 150,000 and RMB 5 million.
Article 26 If an organization commits any of the acts specified in Articles 213 to 219 of the Criminal Law, the organization shall be sentenced to a fine, and the directly responsible supervisors and other directly responsible persons shall be punished in accordance with the conviction and sentencing standards prescribed in these Interpretations.
Article 27 Except in special circumstances, goods with counterfeit registered trademarks, illegally manufactured registered trademark signs, infringing copies, and materials and tools mainly used to manufacture goods with counterfeit registered trademarks, registered trademark signs or infringing copies shall be confiscated and destroyed in accordance with the law.
If the above-mentioned items need to be used as evidence in civil or administrative cases, they may be destroyed upon application by the right holder after the civil or administrative case is concluded or after the evidence is fixed by means of sampling, photographing, etc.
Article 28 The “amount of illegal business” referred to in this interpretation refers to the value of the infringing products manufactured, stored, transported, and sold by the perpetrator in the process of committing an act of infringement of intellectual property rights. The value of the infringing products that have been sold shall be calculated according to the actual sales price. The value of the infringing products that have not yet been sold shall be calculated according to the actual sales average price of the infringing products that have been ascertained. If the actual average sales price cannot be ascertained, it shall be calculated according to the marked price of the infringing products. If the actual sales price cannot be ascertained or the infringing products have no marked price, it shall be calculated according to the market median price of the infringed products.
The “value of goods” referred to in this interpretation shall be determined in accordance with the value of the unsold infringing intellectual property rights products stipulated in the preceding paragraph.
The “sales amount” referred to in this interpretation refers to all illegal income obtained by and owed to the person from the sale of infringing products during the process of committing acts of infringement of intellectual property rights.
The “amount of illegal income” referred to in this interpretation refers to the total illegal income obtained by and owed to the perpetrator after selling products that infringe intellectual property rights, minus the purchase price of raw materials and products sold; if services are provided, minus the purchase price of products used in the service. If a person makes a profit by charging service fees, membership fees or advertising fees, the fees collected shall be deemed as “illegal income”.
Article 29: Where intellectual property rights infringement is committed multiple times and has not been dealt with but should be prosecuted according to law, the amounts and quantities involved in conviction and sentencing shall be calculated cumulatively.
For products that have been completed but have not yet been affixed with counterfeit registered trademark logos or have not yet been fully affixed with counterfeit registered trademark logos, if there is evidence that the product will counterfeit another person’s registered trademark, its value will be included in the amount of illegal business operations.
Article 30 Where a people’s court accepts a criminal private prosecution case involving infringement of intellectual property rights in accordance with law, and where a party is unable to obtain evidence due to objective reasons but is able to provide relevant clues when filing a private prosecution and applies to the people’s court for the evidence, the people’s court shall obtain the evidence in accordance with law.
Article 31 This interpretation shall come into force on April 26, 2025.
Maximizing Recovery in Trade Secret Cases: A Guide to Damages and Remedies
The landscape of trade secret damages has evolved dramatically in recent years, with courts awarding unprecedented sums in cases of proven misappropriation.
Recent verdicts, including the $604.9 million award in Propel Fuels v. Phillips 66 (over confidential data, proprietary strategies, and business intelligence regarding low carbon fuels) and the $452 million verdict in Insulet Corp v. EOFlow (involving tubeless insulin pump technology), demonstrate the potential for substantial recovery. However, securing such awards requires a sophisticated understanding of available remedies and a carefully planned approach to proving damages.
Understanding Available Damages Under the DTSA
The federal Defend Trade Secrets Act (DTSA) provides several distinct paths to monetary recovery, each serving different purposes and requiring different types of proof.
At the foundation are actual damages, which compensate for direct losses caused by misappropriation. These often begin with lost profits from sales diverted to competitor,s but can encompass much more. Companies frequently incur substantial costs developing their trade secrets, implementing remedial measures after theft, investigating the scope of misappropriation, and rebuilding damaged customer relationships.
All of these expenses may be recoverable as actual damages when properly documented and linked to the defendant’s misconduct.
The challenge in proving actual damages lies in establishing causation. Courts require evidence that specific losses resulted from the misappropriation rather than from other market factors or business conditions. This often necessitates careful analysis of historical performance data, market conditions, and customer behavior patterns to isolate the impact of the misappropriation.
Unjust enrichment provides an additional (or alternative) path to recovery by focusing on the defendant’s gains rather than the plaintiff’s losses. A plaintiff may recover damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for their actual loss.
This approach can be particularly valuable when the defendant’s use of the trade secret generated profits beyond what the plaintiff lost. For instance, a defendant might have reached new markets or customers that the plaintiff wouldn’t have served, making unjust enrichment damages potentially larger than lost profits alone.
The scope of unjust enrichment can be quite broad. Beyond direct profits from sales, courts recognize that defendants may benefit from reduced development costs, accelerated time to market, improved manufacturing efficiency, and enhanced customer relationships. These benefits can be quantified and recovered even when they haven’t yet translated into direct profits.
As an alternative to actual damages and unjust enrichment, courts may award a reasonable royalty. This approach attempts to determine what a willing licensee would have paid a willing licensor for the right to use the trade secret.
Courts examining a reasonable royalty award of damages typically consider numerous factors, including:
Comparable licensing arrangements in the industry;
The competitive relationship between the parties;
The value of the secret to both parties;
Development costs saved by the defendant;
The portion of profit attributable to the trade secret and
Expert analysis of market conditions and value.
Enhanced Recovery Options
Beyond compensatory damages, trade secret law provides for potential recovery of enhanced damages and attorney’s fees in cases of particularly egregious conduct. When misappropriation is willful and malicious, courts can award exemplary damages up to twice the amount of compensatory damages.
Evidence of deliberate theft, attempts to cover up misappropriation, violation of court orders, or continued use after receiving notice can support such awards.
Attorneys’ fees represent another important component of potential recovery.
These become available in cases involving willful and malicious misappropriation or bad faith litigation conduct. The availability of attorneys’ fee awards can significantly impact litigation strategy and settlement dynamics, particularly in cases where proving damages may be challenging but liability (misconduct) is clear.
Permanent Injunctive Relief and Alternative Remedies
While monetary damages often take center stage, injunctive relief remains a crucial remedy in trade secret cases.
Parties typically begin a trade secret case by seeking a temporary restraining order and then a preliminary injunction. These orders prohibit a defendant from using a trade secret while litigation is pending up through trial.
However, at the conclusion of a case, parties can also seek an injunction that will prohibit the disclosure of the trade secret permanently and/or the use of the trade secret. Courts typically will permanently enjoin a defendant from sharing a trade secret, but an injunction on use of the trade secret is normally less permanent. Courts structure “permanent” injunctions regarding the use of a trade secret around the concept of a “head start” period – the time it would have taken the defendant to independently develop the trade secret. This approach aims to eliminate any unfair advantage gained through misappropriation, while recognizing that trade secrets don’t confer perpetual monopolies.
In some situations, courts may order ongoing royalty payments instead of a permanent injunction. This usually occurs when completely barring use of the trade secret would be inequitable or against the public interest. For instance, if the defendant has incorporated the trade secret into products serving essential public needs, a court might prefer a royalty solution over an injunction.
Building a Strong Damages Case
Successfully proving damages requires careful preparation from the earliest stages of the case. Early case assessment should examine potential damages theories and identify necessary evidence before critical information is lost. This initial analysis helps guide discovery requests, identify necessary experts, and make strategic decisions about settlement parameters.
Selection of expert witnesses proves crucial in most trade secret cases. Beyond technical expertise, damages experts need strong communication skills and the ability to present complex financial analyses in understandable terms.
Damages experts should be involved early enough to help shape discovery and document preservation efforts.
Documentation becomes particularly important in trade secret cases because of the need to establish both the secret’s value and the impact of its misappropriation.
Companies should maintain detailed records of development costs, efforts, and associated expenses to maintain secrecy, value derived from the secret, affected customer relationships, market impact, and remedial measures taken. This documentation helps demonstrate both the existence of damage and its quantum.
Strategic Considerations for Maximum Recovery
Several strategic considerations can significantly impact ultimate recovery in trade secret cases.
First, maintaining multiple theories of recovery throughout trial provides maximum flexibility. Courts typically allow plaintiffs to elect their preferred theory of recovery (actual damages vs. unjust enrichment vs. reasonable royalty) after all evidence is presented, so preserving all viable theories until that point maximizes potential recovery.
The international reach of trade secret claims presents another strategic consideration. The DTSA can reach conduct outside the United States when any act in furtherance of misappropriation occurs domestically. This allows recovery of damages from foreign sales or use when there’s a U.S. nexus, potentially expanding the scope of recovery significantly.
Timing considerations permeate trade secret damages analysis. Key questions include when misappropriation began, when it should have been discovered, the appropriate “head start” period, and the commercial life of the secret. These temporal factors can significantly impact the calculation of both damages and the scope of injunctive relief.
Looking Forward
The complexity of trade secret damages demands careful attention from the outset of any potential case. Success requires understanding available theories of recovery, maintaining necessary documentation, and building strong expert support.
While recent high-value verdicts demonstrate the potential for substantial recovery, achieving such results requires methodical preparation and strategic presentation of damages evidence.
Our final article will explore preventive measures and best practices for protecting trade secrets before misappropriation occurs, completing our comprehensive examination of trade secret protection and enforcement.
False Claims Act Whistleblowers Poised to Combat Customs and Tariff Fraud
As the Trump administration implements increased tariffs, U.S. authorities will continue to crack down on companies who seek to evade customs duties. In recent years, the Department of Justice (DOJ) has increasingly used the False Claims Act (FCA) to go after companies committing customs and tariff fraud, and, as with all areas of FCA enforcement, qui tam whistleblowers play a critical role in these efforts.
Customs Fraud and the False Claims Act
Companies can be liable under the FCA for so-called “reverse” false claims when they knowingly conceal and improperly avoid an obligation to pay or transmit money to the U.S. government. Thus, when an individual or company knowingly evades paying custom duties on goods it knowingly violates the FCA.
For example, on April 1, the DOJ reached a $8.1 million settlement with Evolutions Flooring Inc., an importer of multilayered wood flooring, and its owners over allegations that the company knowingly and improperly evaded customs duties on imports of multilayered wood flooring from China.
“Import duties provide an important source of government revenue and level the playing field for U.S. manufacturers against their global competitors,” said Acting Assistant Attorney General Yaakov M. Roth of the Justice Department’s Civil Division. “The department will pursue those who seek an unfair advantage in U.S. markets, including by evading the duties owed on goods imported into this country from China.”
Types of customs duties fraud which individuals and companies can be found liable for under the FCA include:
Underreporting of Value – importers may undervalue goods to reduce the amount of import duties or taxes payable. By declaring a value lower than the actual transaction value, they can evade the rightful amount of customs duties and taxes.
Misclassification – goods may be classified under a tariff code that attracts a lower rate of duty than the actual code applicable to those goods. For example, an importer might declare a luxury item as a basic item to benefit from a lower tariff rate.
False Country of Origin – importers may falsely declare the country of origin for goods to benefit from preferential duty rates or to avoid anti-dumping duties. This is especially pertinent when certain goods from particular countries are subjected to higher duties or restrictions.
Overstatement of Quantity – importers might declare a higher quantity of low-value items and hide high-value items among them, thereby evading the correct duty on the high-value items.
False Documentation – using forged or altered documents, like fake invoices or certificates of origin, to deceive customs officials.
Transshipment Deception – goods might be rerouted through third countries to conceal their true origin, especially if the goods’ actual country of origin faces trade restrictions or higher duties.
DOJ Promises Aggressive Enforcement on Trade and Tariffs
On February 20, Deputy Assistant Attorney General Michael Granston gave a keynote address at the Federal Bar Association’s annual qui tam conference. In addition to promising that under the Trump administration the DOJ “plans to continue to aggressively enforce the False Claims Act,” Granston specifically touched on aggressive enforcement of customs and tariff fraud.
“The False Claims Act has also proven to be a powerful tool for combatting those who seek to avoid the payment of customs duties on imported goods, including goods subject to anti-dumping or countervailing duties, which are intended to protect the American economy against illegal foreign trade practices,” Granston stated.
“You can therefore expect the department to continue to use the False Claims Act to help enforce these trade laws,” Granston added.
Tariffs are particularly vulnerable to fraud schemes. For example, where tariffs on products from countries, like China, are extremely high compared with other countries, there will be temptation for companies to cheat the system by claiming products were produced in a country with lower tariffs.
The Role of Whistleblowers
Under the False Claims Act’s qui tam provisions, whistleblowers with knowledge of customs fraud may file a lawsuit on behalf of the U.S. government. Regardless of whether the government decides to intervene and take over the suit, a whistleblower is eligible to receive between 15-30% of recoveries in a successful qui tam suit.
Whistleblowers have proven to be the bedrock of FCA enforcement. Since the FCA was modernized in 1986, it has allowed the government to recover over $78 billion from fraudsters. More than $55 billion of these recoveries stemmed from qui tam whistleblower lawsuits.
The need for insiders with direct knowledge of fraud is particularly acute in regards to customs duties fraud. A Government Accountability Office report details how Customs and Border Protection “faces several external challenges in attempting to gather conclusive evidence of evasion and deter parties from evading duties.”
A look at recent customs fraud settlements highlights the central role whistleblowers often play in successful enforcement actions. For example, the $8.1 million settlement with Evolutions Flooring stems from a qui tam whistleblower lawsuit filed by Urban Global LLC, who is set to receive $1.2 million of the settlement.
To prove tariff fraud, the government will depend on whistleblowers who have inside information about companies cheating the government out of tariff funds by, among other schemes, falsifying import and export forms and knowingly concealing the country of origin of products.
Conclusion
As tariffs become more widespread and tariff rates increase under the Trump administration, more and more individuals and companies will seek to evade payments through customs fraud. False Claims Act whistleblowers will thus be critical to ensure compliance with any tariffs.
Individuals considering blowing the whistle on customs or tariff fraud should first consult an experienced FCA whistleblower attorney to help ensure they file an effective qui tam suit and that they are protected from retaliation.
Geoff Schweller also contributed to this article.
Trade Secret Law Evolution Podcast, Episode 76: Two Circuit Cases on Trade Secret Identification, Proof of Misappropriation and Contractual Damages Waivers [Podcast]
In this episode, Jordan Grotzinger discusses a recent Fifth Circuit case that addressed trade secret identification and proof of misappropriation at trial, and an Eleventh Circuit case addressing whether and how trade secret misappropriation damages can be limited by contract.
DOJ Secures Its First-Ever Conviction in a Criminal Antitrust Labor Market Trial
On April 14, 2025, a federal jury convicted an executive in a wage-fixing conspiracy under the Sherman Act. This marks the first time, after many tries, that the US Department of Justice (DOJ) has secured a conviction in a criminal antitrust case alleging labor market harms. This case, coupled with Federal Trade Commission (FTC) Chairman Andrew N. Ferguson’s February announcement of a Joint Labor Task Force, indicates that antitrust enforcement in labor markets will continue to be a significant focus under the Trump administration.
In Depth
WHY IT MATTERS
The DOJ and FTC announced, in 2016 guidelines, that they would treat labor market wage-fixing and no-poach agreements as per se illegal and subject to criminal prosecution. Until now, the DOJ had failed to secure a conviction in any of its criminal prosecutions brought under these theories, including:
United States v. DaVita Inc, Case No. 1:21-cr-00229 (D. Colo.): Acquittal
United States v. Surgical Care Affiliates LLC, et al., Case No. 21-cr-00011 (N.D. Tex.): Voluntary dismissal of the indictment
United States v. Patel, et al., Case No. 21-cr-00220 (D. Conn.): Judgement of acquittal
The continued focus on labor markets is broadly relevant, so all companies should ensure they review their antitrust compliance policies and procedures considering the DOJ’s and FTC’s 2025 guidelines to minimize their antitrust risk.
THE CONVICTION
In United States v. Lopez, Case No. 2:23-cr-00055 (D. Nev.), a federal jury convicted a home health agency (HHA) executive of conspiring to fix the wages for home healthcare nurses in Las Vegas and for fraudulently failing to disclose the investigation during the sale of the company. This is the DOJ’s first successful criminal prosecution in a labor market antitrust case and indicates that labor markets will continue to be a key focus for antitrust regulators, with Assistant Attorney General for the Antitrust Division Gail Slater stating, “nurses here deserved better and, under President Trump’s leadership, they will be protected.”
From the tail end of the first Trump administration, through the Biden administration, and into President Trump’s second term, momentum for criminal antitrust enforcement in labor markets has been building, and there are indications that this will be a continued focus for the antitrust agencies. In 2016, the DOJ and the FTC released guidelines for human resources (HR) professionals that stated for the first time that the DOJ and FTC would treat “naked” wage-fixing and no-poach agreements among competing employers as per se illegal and subject to criminal prosecution. This was the first time the DOJ indicated to HR and legal professionals that labor market issues would be a potential focus of criminal antitrust enforcement.
After the release of these HR guidelines, the DOJ initiated investigations focused on alleged no-poach and nonsolicitation agreements. The federal enforcers tried unsuccessfully to secure convictions alleging wage-fixing and no-poach conduct, including in the healthcare space, such as the 2022 acquittal of DaVita.[1]
The jury conviction last week was the first such labor market conviction and also indicates the type of conduct juries may find warrants criminal liability. The DOJ brought the case after a grand jury indicted Eduardo “Eddie” Lopez, the owner of an HHA, in March 2023 and filed a superseding indictment in September 2023. The conduct at the heart of the conspiracy was a mutual agreement between competing HHAs to “stay within the same hourly rate.” In other words, the DOJ prosecuted wage-fixing, rather than only an alleged no-poach or nonsolicitation agreement. The indictment relied on “hot” text exchanges between executives of the several competing HHAs discussing their “agreed rates” for hiring nurses at their facilities.
The future of antitrust enforcement in labor markets was uncertain going into the second Trump administration, but it appears after three months of observation that the issue has staying power and consensus among current leadership at the antitrust enforcement agencies. In the waning days of the Biden administration, the DOJ and FTC announced new “Antitrust Guidelines for Business Activities Affecting Workers.” Because these guidelines, which replaced the 2016 guidelines, were released just days before President Trump’s inauguration, the future of enforcement of antitrust in labor markets was uncertain. However, Lopez’s conviction and subsequent statements from DOJ leadership make clear that labor market enforcement will stay on the DOJ’s criminal enforcement radar, with Assistant Attorney General Abigail A. Slater stating, “[w]age-fixing agreements are nakedly unlawful attempts at unjustly profiting off American workers … The Antitrust Division will zealously prosecute those who seek to unjustly profit off their employees.” This win also comes shortly after FTC Chairman Ferguson’s directive regarding the labor markets task force, where he instructed the constituent bureaus of the FTC to “form a Joint Labor Task Force,” responsible for investigating and prosecuting “deceptive, unfair, or anticompetitive labor market conduct.”
Endnotes
[1] See also United States v. Surgical Care Affiliates LLC, et al., Case No. 21-cr-00011 (N.D. Tex.); United States v. Patel, et al., Case No. 21-cr-00220 (D. Conn.).
Reprieve Extended? DOL to Halt Efforts to Restore 2024 Minimum Salary Rule for Exempt Employees
Takeaways
The Trump DOL has officially notified the Fifth Circuit that it intends to reconsider the 2024 final rule raising the FLSA salary level for “white collar” exemptions.
It has asked for a litigation stay pending the agency’s further reconsideration of the rule.
District courts had enjoined the 2024 final rule, but the Biden DOL appealed the case to the Fifth Circuit.
Article
Employers were granted a reprieve last fall when a federal court invalidated the U.S. Department of Labor’s (DOL’s) final rule increasing the minimum salary requirements for the “white collar” or “EAP” exemptions (executive, administrative, and professional) from the minimum wage and overtime pay requirements of the Fair Labor Standards Act (FLSA).
The DOL under the Biden Administration, however, appealed the decision to the U.S. Court of Appeals for the Fifth Circuit, leaving room for uncertainty whether the final rule might be resurrected. Recently, though, the DOL asked the appeals court to hold the case in abeyance as it reconsiders its next move.
Minimum Salary Rule
The 2024 minimum salary final rule took effect July 1, 2024. It sharply increased in two stages the salary threshold an employee must be paid for a white-collar exemption to apply. The first increase took effect July 1, raising the threshold from $684 per week ($35,568 per year) to $844 per week ($43,888 annually). The second, more substantial increase was slated to take effect Jan. 1, 2025. That would have boosted the salary floor from $844 per week ($43,888 per year) to $1,128 per week ($58,656 annually).
In a decision issued in one of several legal challenges, the U.S. District Court for the Eastern District of Texas found the DOL exceeded its statutory authority when it issued the rule. The court vacated the final rule in its entirety. State of Texas v. U.S. Department of Labor, 2024 U.S. Dist. LEXIS 207864 (E.D. Tex. Nov. 15, 2024).
Another Texas federal court, in a separate legal challenge, issued a cursory order adopting the reasoning of State of Texas v. DOL and awarding summary judgment to the plaintiffs. Flint Avenue LLC v. United States DOL, No. 5:24-cv-130 (N.D. Tex. Dec. 30, 2024).
With the 2024 final rule vacated, the prior minimum salary floor of $684 per week ($35,568 per year) was restored and currently applies.
DOL Appeals
The district court’s decisions striking down the rule did not end the matter, however. On Dec. 4, 2024, the DOL filed an appeal of the district court’s decision in the State of Texas case in the U.S. Court of Appeals for the Fifth Circuit. But it was uncertain whether the DOL would continue to pursue the appeal after President Donald Trump took office on Jan. 20, 2025.
Many anticipated the new administration would withdraw the appeal or choose not to defend the 2024 rule on appeal. Alternatively, the Trump Administration could maintain the appeal for the purpose of defending its rulemaking authority but later withdraw the 2024 rule and undertake new rulemaking. (This was the approach the first Trump Administration took after an Obama-era minimum salary rule was likewise invalidated.)
The DOL filed a motion on April 24, 2025, to hold the pending appeals in abeyance, noting the agency is reconsidering the rule. The court filing is the first clear indication that the DOL will not likely seek to resurrect the minimum salary rule in its current form.
Other Litigation
The DOL also is defending the rule in an ongoing suit brought in the District of Columbia federal court. Assoc. of Christian Schools Int’l v. United States DOL, No. 1:24-cv-2618. Cross-motions for summary judgment are pending. The DOL has not yet moved to stay litigation in that case.
The Fifth Circuit already has ruled that the DOL has statutory authority to issue a minimum salary rule — provided that the DOL does not set a salary threshold so high that it effectively negates the duties test of exempt status, which appears in the text of the FLSA. Mayfield and R.U.M. Enterprises, Inc. v. United States DOL, 2024 U.S. App. LEXIS 23145 (Sept. 11, 2024). (See Fifth Circuit Holds DOL Can Set Salary Floor for White-Collar Exemptions.) That was the problem with the 2024 rule, the district court in State of Texas held.
In Mayfield, the plaintiffs were challenging the minimum salary requirement in effect prior to the 2024 final rule and, with the 2024 rule vacated, the current operative threshold. On Feb. 14, 2025, the Fifth Circuit denied the Mayfield plaintiffs’ petition for rehearing en banc. On Feb. 20, 2025, the Mayfield plaintiffs notified the appeals court that they intend to file a petition for certiorari with the U.S. Supreme Court.