Santa Clara, Calif. – Lax regulations in the United States are creating an avenue for foreign adversaries to access sensitive corporate information and American trade secrets, posing a threat to national security. Strong intellectual property protections are crucial for sectors like aerospace, defense, biotech, and energy. Therefore, it is imperative to address this oversight.
The issue revolves around mass tort litigations, which are personal injury legal actions involving large companies that allegedly caused harm to multiple plaintiffs. Attorneys specializing in mass torts can profit greatly from these cases, as they often receive a significant share of the awards or settlements. As a result, “patent monetization” firms have emerged, attracting investment interests.
Foreign nations often serve as third-party funders for mass tort litigations, providing the necessary capital for advertising and other costs related to these large-scale lawsuits. However, when these outside funders are from foreign countries, they can gain more than just financial benefits from the targeted companies.
The anonymity typically granted to financial backers allows foreign companies and their controlling governments to access sensitive data and trade secrets revealed during legal proceedings. This access poses a risk to U.S. national security and can give foreign state-backed businesses an unfair advantage over American counterparts.
China, known for industrial espionage, may employ such tactics to launch new attacks on American intellectual property. It is no longer solely seeking to catch up with advanced American technologies; the objective now is to eliminate global competition by displacing American companies. Funding mass tort litigations could become a new tool in China’s arsenal.
This threat is not hypothetical. Last March, China upgraded its National Intellectual Property Administration to a top-level agency, indicating its commitment to strengthening intellectual property rights. Moreover, in a U.S. District Court case, it was revealed that a Chinese firm was funding intellectual property lawsuits against Samsung and its subsidiary.
These revelations, combined with the disruptive potential of foreign third-party litigation funders, have prompted Florida senators to advocate for disclosure requirements for foreign financiers. They emphasized that these foreign funders can exploit American institutions, undermine critical infrastructure sectors, and undermine national interests.
Enforcing clear disclosure requirements would prevent foreign funders from gaining access to sensitive information that could be used against the United States. Additionally, it would prevent domestic third-party funders from covertly influencing mass tort settlements for their benefit. Some states, including New York, California, and Florida, have already implemented third-party litigation funding disclosure rules. The European Union is considering similar requirements. The United States as a whole should follow suit to mitigate the risks of foreign-funded litigation.
In conclusion, addressing lax regulations surrounding mass tort litigations and implementing disclosure requirements for foreign financiers is essential to safeguard American intellectual property and critical industries. Failure to do so could potentially delay technologies vital for national security, posing a significant risk.