.

Client Alert

Compliance Tips in Light of Tightened Enforcement against IP Leaks by U.S. Government 美国知识产权保护执法趋紧环境下的合规建议

June 18, 2019

by Catherine X. Pan-Giordano

Download as a PDF

Share this page

It was reported recently that certain universities and medical research centers in the U.S. made adverse employment decisions against several Chinese-American scientists who were suspected of disclosing confidential information regarding federal funded research to China.  Around the same time, it was also reported that the U.S. authorities had charged a Chinese-American engineer at a multinational company in the New York State and a Chinese businessman in Liaoning province with economic espionage. 
据报道，近期数位美籍华裔科学家因被怀疑向中国不当披露关于联邦政府所资助研究项目的保密信息，而遭到美国某些大学及医疗研究中心的解雇或劝退。另有报道称，美国执法部门近期对一名曾在纽约州某跨国公司任职的美籍华裔工程师及一名辽宁省的中国籍商人提起了“经济间谍罪”的刑事指控。

These news reports triggered significant concerns among Chinese and Chinese-American scientists, engineers and researchers working in the U.S.  It is a lose-lose situation for both employers and employees as the employers lost valuable talents and the employees lost their jobs and exposed themselves to potential civil and criminal charges.  
上述新闻报道引发了广大在美中国籍与美籍华裔科学家、工程师及研究人员的忧虑。上述情形对于雇主和雇员来说是一种双输的局面，一方面雇主失去了宝贵的人才，另一方面雇员不但丢了工作还可能面临民事乃至刑事诉讼。

This article sets out to provide practical tips without engaging in a discussion on broader principles such as racial profiling and academic freedom.  For a discussion of these principles, please see the recent dialog between Chinese-American scientists and Francis S. Collins, Director of the National Institutes of Health (“NIH”), on Science.1  The article is structured as a Q&A to address some of the most common questions that concern scientists, engineers and researchers with regard to the confidentiality and ethical requirements under agreements, employment policies and U.S. law. 
本文旨在为工程、科研人员提供实务建议，并未对种族归纳（racial profiling）和学术自由等更广泛的原则进行讨论。对于该等原则的讨论，详见《科学（Science）》期刊中刊登的美籍华裔科学家与美国全国卫生研究院（NIH）院长Francis S. Collins的近期对话。本文将通过问答的形式，对部分科学家、工程师和研究人员所关注的，在协议、雇主政策和美国法律项下、关于保密和道德规范要求最为常见的问题进行讨论。

Question 1.  What information falls under the scope of “confidential information”?
问题1：哪些信息属于“保密信息”？

Answer: The term “confidential information” has a broad meaning and should be distinguished from “trade secrets.”  The term “trade secrets” is defined by state law.  Most of the states in the U.S. have defined trade secrets under some version of the Uniform Trade Secrets Act (“UTSA”).  The definition of “trade secrets” under the UTSA can be summarized as: any information that is (a) not known or available to the public; (b) of economic value; and (c) the subject of reasonable efforts to maintain its secrecy or confidentiality.
回答：“保密信息”的含义较为广泛，应与“商业秘密”相区分。美国州法律中规定了“商业秘密”的定义。美国大部分州在《统一商业秘密法》（UTSA）的基础上，对“商业秘密”作出定义。UTSA项下关于“商业秘密”的定义可以概括为：（a）不为公众所知或公众无法获得；（b）具有经济价值；且（c）信息所有人作出合理努力以维持其保密性的任何信息。

While the definition of “trade secrets” under UTSA is already very broad, the scope of “confidential information” can be even broader.  As the law does not clearly provide what information constitutes “confidential information,” parties are free to provide the definition of such term in a non-disclosure agreement (“NDA”).  Even if a certain type of information has no economic value, as long as it is not publicly available, the owner of such information may have such information protected by contract.  As a rule of thumb, if a certain type of information is not open to the public, such information may fall under the scope of “confidential information” as long as it is captured by the definition clause in an NDA. 
尽管UTSA项下“商业秘密”的含义已经非常广泛，但“保密信息”的范围往往更广。由于美国法律并未明确规定何种信息属于“保密信息”，当事人可以在保密协议中自由约定保密信息的定义。只要某类信息无法通过公共渠道获得，即便该信息不具备经济价值，信息所有人仍可通过合同对该信息予以保护。简言之，如果某类信息未被公开，只要各方在保密协议的定义条款中加入该类信息，该信息就可能成为“保密信息”。

Question 2.  Why am I subject to confidentiality obligations?
问题2：我为什么负有保密义务？

Answer: An individual’s confidentiality obligation may originate from his/her NDA with the data-owner, such as his/her employer or a research program sponsor.  In addition, the individual also needs to comply with any confidentiality requirements set forth in the internal policies and regulations of his/her employer.  Moreover, applicable state and federal laws also provide protections to certain types of confidential information, which the individual must abide by.  For example, most states have statutes or common law prohibiting misappropriation of trade secrets; the Economic Espionage Act (“EEA”) outlaws intentional theft or misappropriation of trade secrets to benefit foreign countries or a party other than the owner; the Export Administration Regulations (“EAR”) and International Traffic in Arms Regulations (“ITAR”) impose strict control over export of information that has military (or civil-military dual use) applications.
回答：个人的保密义务可能源于其与数据所有人（如其雇主或研究项目的资助方）所签署的保密协议。此外，个人不仅需遵守雇主内部规章制度中的保密要求，还需遵从适用的州法律及联邦法律关于保护特定类型保密信息的规定。例如，多数州的成文法或普通法禁止盗用商业秘密；美国《经济间谍法》（EEA）禁止为他国或信息所有人以外第三方的利益窃取或盗用商业秘密；美国《出口管理条例》（EAR）及美国《国际武器贸易条例》（ITAR）对于军用（或军民两用）信息的出口实施严格控制。

Question 3.  What will be my liabilities if I violate applicable confidentiality requirements?
问题3：如违反适用的保密义务，我需要承担何种法律责任？

Answer: The liability could be multifold depending on the circumstances.  The owner of the confidential information may file a civil lawsuit against you for remedies.  In addition, such violation may be regarded as a material misconduct under the employment policies, which might entitle the employer to unilaterally terminate your employment.  If you participate in a research program funded by a federal government agency (such as NIH, Department of Health and Human Services, Department of Defense, and Department of Agriculture), your non-compliance of the confidentiality (and other) requirements under such program may result in, among others, withholding of a continuation award, suspension or termination of the grant in whole or in part, or debarment by the federal agency.
回答：根据具体情形，您可能面临多重法律责任。保密信息的所有人可能对您提起民事诉讼以寻求救济。此外，您违反保密义务的行为可能构成雇主政策项下的重大不当行为，雇主有权据此单方解除您的劳动关系。如您参与一项联邦政府机构（如NIH、卫生与公共服务部、国防部、农业部等）资助的研究项目，您违反该项目下保密（及其他）要求的行为可能导致一项持续性研究经费被停发，部分或全部暂停或终止资助，或禁止参与联邦政府项目等不利后果。

Under certain circumstances, you may also be subject to criminal liabilities.  For example, according to Section 1831 of the EEA and its amendment in 2013, the theft or misappropriation of a trade secret with the intent or knowledge that such offence will benefit a foreign government, foreign instrumentality or foreign agent constitutes economic espionage, which could subject the individual offender to a maximum sentence of 15 years in prison and/or a fine of up to USD 5 million.  A person who discloses controlled technical data to a foreign country in violation of the EAR and ITAR may also be subject to a fine and/or imprisonment depending on the circumstances.  There might be further penalties if the offender destroys evidence or lies to an investigator.
在特定情形下，您可能还需承担刑事责任。例如，根据EEA第1831条及其2013年修正案，明知窃取或盗用商业秘密将使外国政府、组织或代理获益而从事该行为或故意从事该行为的，构成经济间谍罪，相关犯罪人可能面临最高15年的刑期和/或最高500万美元的罚款。违反EAR及ITAR向他国披露受管控技术数据的个人，根据情形可能被处以罚款和/或监禁。如果相关违法者毁灭证据或欺骗调查人员，可能还将受到其他处罚。

Question 4. Can I engage in research, business or other activities unrelated to my employment if I keep the confidential information of the employer in strict confidence?
问题4：如果我对雇主的保密信息予以严格保密，是否可以从事与我的劳动关系无关的研究、商业或其他行为？

Answer: It depends on the employer’s policies and the terms of the employment.  Often times, universities and other academic institutions have more lenient policies than private sector employers do.  In general, most employers have some level of internal policies prohibiting conflict of interests.  Under these policies, employees can be required to make report to and obtain approval from their employer in order to engage in activities outside of their employment, failure of which may constitute a violation of the employer’s policies and result in disciplinary actions against the employee, including termination of his/her employment.  Therefore, if you participate in a research program or other activities in China or other countries outside of your job without obtaining prior approval from your employer, the U.S. employer may take a disciplinary action against you regardless of whether you breach your confidentiality obligation.  Furthermore, if you fail to disclose such outside activities or misrepresent to a federal agency in connection with an application for a federal grant in violation of the grant rules, the program may be terminated, the funds may be withdrawn and you may be subject to civil or even criminal liabilities for grant fraud depending on the circumstances. 
回答：这取决于雇主的政策以及您的劳动合同条款。与私营企业雇主的内部政策相比，大学及其他学术机构的内部政策往往较为宽松。通常，大部分雇主的内部政策都会对禁止利益冲突作出一定程度的规定。在该等政策下，员工若想在劳动关系以外从事活动，必须向其雇主进行报告并获得其批准。如未能遵守该等要求，将构成违规，员工可能因此受到纪律处分（包括解除其劳动关系）。因此，如您在工作范围之外在中国或其他国家参与一项研究项目或从事其他活动并且事先未获得美国雇主的批准，您的雇主将有权对您进行纪律处分，不论您是否违反保密义务。此外，在申请联邦资助过程中，如果您未能依据资助规则向联邦政府机构披露您的外部活动或存在虚假陈述，则该项目可能会被终止，项目资金可能会被收回，并且您可能因资助欺诈而面临民事乃至刑事法律责任。

Question 5.  What should I do to avoid compliance risks?
问题5：我如何才能避免合规风险？

Answer: We recommend the following measures to avoid compliance risks:
回答：我们建议采取以下措施以避免合规风险：

  1. Carefully review relevant NDA, grant terms and conditions, and employment policies (including any code of conduct and ethical policies) to know your confidentiality and ethical obligations (or have a lawyer go through the requirements under these lengthy documents with you) and comply with such obligations;
    仔细审阅相关保密协议、资助条款和条件以及雇主政策（包括任何行为准则和道德规范）以了解您的保密义务和道德规范要求（或聘请律师为您梳理该等冗长文件项下的相关要求）并遵守该等义务；
  2. Follow the data owner’s guidelines and requirements when dealing with its confidential information;
    在使用保密信息时，应遵守数据所有人的指引和要求；
  3. Avoid disclosing confidential information outside the employing organization;
    避免向雇主以外的第三方披露保密信息；
  4. Store confidential information in designated system or device and avoid transferring such information to personal or third-party systems or devices unless approved or required by the data owner;
    应将保密信息存储在指定的系统或设备，并且在未经数据所有人批准或要求的情况下，应避免将该等信息转移到个人或第三方系统或设备；
  5. Obtain prior approval from the data owner/employer before disclosing confidential information to a third party or engaging in any outside activities; and
    在向第三方披露保密信息或在从事任何外部活动前，应从数据所有者/雇主处取得事先批准；并且
  6. Consult with a lawyer whenever you have a question regarding your obligation or feel you have been treated unfairly or unlawfully.
    当您对您的保密义务产生任何疑问或您认为受到不公正或非法对待时，应及时与律师联系。

Question 6.  What should I do when I find myself at risks of a violation?
问题6：当我发现已经存在违规风险时，应当怎么办？

Answer: Under such circumstances, we recommend that you take the following measures to mitigate compliance risks:
回答：在此种情形下，我们建议您采取以下措施以减小合规风险：

  1. DO NOT ignore such risks;
    切勿忽视该等风险；
  2. Immediately stop any questionable activities;
    立即停止任何可能存在问题的行为；
  3. If any confidential information has been provided to a third party that is not supposed to receive such information, request the third party to immediately return such information;
    如任何保密信息已被提供给不应掌握该信息的第三方，应要求该第三方立即归还相关信息；
  4. Immediately contact a lawyer for advice; and 
    立即联系律师以寻求专业意见；并且
  5. DO NOT delete or destroy any confidential information before receiving advice from the lawyer, because such actions might result in more serious liabilities.
    在获得律师的专业意见前，切勿删除或销毁任何保密信息，因为该行为可能会导致更严重的法律责任。

1 See “Racial profiling harms science,” Science 22 Mar 2019: Vol. 363, Issue 6433, pp. 1290-1292
参见《科学（Science）》期刊所载“种族归纳阻碍科学（Racial profiling harms science）”一文，2019年3月22日第363卷，第6433期，第1290-1292页

 

Firm Highlights

News

Dorsey Recognized in Inaugural 2026 IAM/WTR Copyright 1000

Dorsey & Whitney LLP is pleased to announce its recognition in the inaugural edition of the Copyright 1000: The World’s Leading Copyright Professionals, published by IAM and World Trademark Review (WTR). Nine Dorsey attorneys were individually recognized, and the Firm’s Denver, Minneapolis, New York, Salt Lake City, and Seattle offices were recognized in the firm rankings. The following Dorsey attorneys were recognized in the inaugural guide: Lindsey Sadler Gregory Tamkin Charlene Krogh Evan Everist Jeffrey Cadwell Fara Sunderji Bruce Ewing Catherine Parrish Lake J. Michael Keyes The Copyright 1000 is the first dedicated ranking focused solely on the world’s leading copyright practitioners. The guide identifies leading copyright firms and practitioners across key jurisdictions worldwide. Dorsey’s intellectual property attorneys advise clients on a wide range of copyright matters, including protection, enforcement, licensing, litigation, transactions, and issues involving emerging technologies and digital content. The inaugural Copyright 1000 rankings are published by IAM and WTR.

Insights

EPA Limits Title V Re-Litigation of NSR Permits

Overview On September 25, 2026, the U.S. Environmental Protection Agency (“EPA”) published a final rule that significantly limits the ability of third parties to use the Clean Air Act (“CAA”) Title V permitting process to revisit New Source Review (“NSR”) permitting decisions years after those decisions were made. The rule establishes that NSR permitting determinations generally must be challenged during the original permitting proceeding, thereby providing regulated sources with greater permitting certainty and finality for major capital projects. Published in the Federal Register titled Clarifying the Scope of “Applicable Requirements” Under State Operating Permit Programs and the Federal Operating Permit Program (Docket ID No. EPA-HQ-OAR-2023-0401), the rule amends 40 C.F.R. Parts 70 and 71 to codify EPA’s interpretation regarding when requirements established under other CAA programs may be reviewed, modified, or implemented through the Title V operating permit program. The rule becomes effective 30 days after publication. The rule addresses two principal issues: (1) the relationship between NSR preconstruction permitting and Title V operating permits, and (2) the treatment of the General Duty Clause under CAA section 112(r)(1). Most significantly, the rule provides greater certainty for sources navigating the NSR permitting process. EPA’s amendments are intended to ensure that NSR permitting decisions made through an approved public process are generally not revisited later through Title V permit proceedings. The rule responds to a circuit split between the U.S. Courts of Appeals for the Fifth and Tenth Circuits. In Environmental Integrity Project v. EPA, 969 F.3d 529 (5th Cir. 2020), the Fifth Circuit upheld EPA’s interpretation, concluding that it was consistent with the text, structure, and purpose of Title V. In contrast, the Tenth Circuit reached the opposite conclusion in Sierra Club v. EPA, 964 F.3d 882 (10th Cir. 2020), finding that the then-existing regulatory definition of “applicable requirement” did not support EPA’s position. By amending the regulatory language on which the Tenth Circuit relied and codifying the interpretation approved by the Fifth Circuit, EPA has established a nationwide framework governing the interaction between NSR and Title V. NSR and Title V: EPA Establishes a Uniform Nationwide Framework At the core of the rule is EPA’s effort to define the respective roles of NSR and Title V. The rule codifies the approach EPA has applied since 2017: once a source obtains an NSR permit under an EPA-approved permitting program, and that permit was issued following public notice with an opportunity for comment and judicial review, the permit establishes the NSR-related “applicable requirements” of the State Implementation Plan (“SIP”) or Federal Implementation Plan (“FIP”) for Title V purposes. Under this framework, Title V is not a vehicle for re-examining underlying NSR permitting decisions. EPA does not intend to use the Title V process to revisit applicability determinations, emissions calculations, control technology determinations, permit conditions, or other issues resolved through the NSR permitting process. This principle applies regardless of the stage of the Title V proceeding; whether the NSR permit was issued pursuant to a SIP or FIP; the type of NSR issue involved; or whether the NSR permit is incorporated into Title V sequentially or concurrently. Limited Exceptions EPA recognizes several circumstances in which NSR issues may still be reviewed through the Title V program: No NSR permit was issued at all; The permit was issued without public notice and an opportunity for comment and judicial review; or The issue involves substantive overlap between Title V and NSR requirements, such as the adequacy of monitoring provisions. As a result, the rule does not insulate unpermitted projects or foreclose review of matters that independently arise under Title V. Key Regulatory Amendments The rule revises the definition of “applicable requirement” in 40 C.F.R. §§ 70.2 and 71.2. Paragraph (1): Where an NSR permit is issued with public notice and an opportunity for comment and judicial review, the permit establishes and defines the applicable SIP or FIP requirements for Title V purposes. Paragraph (2): All NSR permit terms, including terms contained in minor NSR permits, constitute applicable requirements that must be incorporated into Title V permits. Paragraph (4): CAA section 112(r)(1) (the General Duty Clause) is expressly excluded from the definition of “applicable requirement,” while section 112(r)(7) Risk Management Program requirements remain included. EPA also amended 40 C.F.R. §§ 70.8 and 70.12 to clarify that alleged defects in requirements established outside the Title V process generally do not provide a basis for EPA objection to a Title V permit or for a Title V citizen petition. General Duty Clause Exclusion The rule also codifies EPA’s longstanding position that the General Duty Clause in CAA section 112(r)(1) is not an “applicable requirement” for Title V purposes. EPA points to several considerations supporting that conclusion, including the distinction between the General Duty Clause and Title V permit terms, the provision’s origins in the Occupational Safety and Health Act’s general duty clause, and the different enforcement structures applicable to the General Duty Clause and Title V permit requirements. Importantly, excluding section 112(r)(1) from the definition of “applicable requirement” does not eliminate EPA’s authority to enforce the General Duty Clause independently of the Title V program. The final rule instead clarifies that the General Duty Clause need not—and should not—be incorporated into Title V permits as an applicable requirement. Practical Implications for Regulated Sources Greater Finality for NSR Permits  For projects requiring PSD, nonattainment NSR, or minor NSR permits, the permitting process becomes the primary forum for resolving disputes regarding applicability determinations, emissions calculations, control technology requirements, offsets, and permit conditions. Once an NSR permit is issued through a qualifying public process, regulated sources should face substantially reduced risk that those same issues will be challenged years later through Title V permit proceedings. Reduced Risk of Collateral Permit Challenges Stakeholders have sometimes sought to use Title V permit issuance, renewal, revision, or citizen-petition proceedings to challenge underlying NSR determinations. The final rule makes clear that Title V is not the appropriate vehicle for challenging whether an applicable requirement was correctly established in the first instance. This should reduce the risk of permit delays and uncertainty associated with collateral challenges to previously issued NSR permits. The rule does not, however, eliminate all Title V challenges relating to an NSR permit. Challenges concerning the Title V permit itself—including whether it appropriately incorporates applicable requirements or contains adequate compliance provisions—remain possible. Increased Importance of the Initial NSR Proceeding Because Title V generally will not provide a second opportunity to challenge the substantive validity of an NSR determination, the administrative record developed during the NSR process becomes increasingly important. Permit applicants should ensure that applicability analyses, emissions calculations, control technology evaluations, modeling demonstrations, and supporting technical documentation are thoroughly developed during the original permitting proceeding. For significant projects, applicants may therefore have an additional incentive to identify and resolve potential permitting issues before the NSR permit is issued rather than assuming that unresolved issues can be addressed during a subsequent Title V proceeding. Potential Incentive for Broader Public Participation EPA also notes that permitting authorities may choose to provide public notice and an opportunity for comment for a broader range of NSR permits because permits issued through a qualifying public process receive the benefit of the finality framework established by the rule. Some permitting authorities may conclude that greater public participation at the NSR stage is preferable to uncertainty during subsequent Title V proceedings. Conclusion The final rule is principally a permitting-certainty measure. For sources that obtain NSR permits through a public process, EPA has substantially limited the ability of third parties to revisit underlying NSR determinations through the Title V program. As a result, regulated entities should benefit from greater finality regarding key permitting decisions, reduced risk of collateral permit challenges, and increased certainty when planning and implementing capital projects.

Insights

Energy Law: Month in Review - September 2026

Welcome to Dorsey’s Energy Law: Month in Review. We provide this update to our clients to identify significant developments in the previous month. Please reach out to any of the authors, listed above, to discuss these issues. Regulatory Developments Massachusetts Ratchets Up State and Local Regulation of AI Data Centers In early September, Governor Maura Healey of Massachusetts signed an executive order requiring that artificial intelligence data centers secure the approval of local communities as a precondition to proceeding with a given project. According to the terms of the order, data center developers will need to secure a “community benefits agreement” as a precondition to receiving permits from numerous state agencies, including the Department of Environmental Protection, the Energy Facilities Siting Board, and the Massachusetts Environmental Policy Act Office. Beyond requiring community benefits agreements, the order also mandates that developers mitigate utility costs to consumers, prohibits the use of nondisclosure agreements, and requires various state agencies to develop measures to limit data center impacts on the environment. North Carolina Regulators Decline Approval of Duke Energy Gas Turbine On September 18, 2026, North Carolina Utilities Commission (NCUC) denied Duke Energy’s application for a certificate of public convenience and necessity required to construct a gas-fueled combustion turbine at its Smith Energy Complex in North Carolina. The NCUC objected strongly to the $584 million price tag and noted that Duke appeared to be constructing the facility “based on anticipated data center customer additions.” The NCUC rejected that anticipated growth as “insufficiently reliable for the Commission to act at this point.” In rejecting Duke’s application, the NCUC also noted that Duke had signed the White House Ratepayer Protection Pledge, in which it represented that it would not shift data center costs to consumers. The NCUC observed that the record did not demonstrate how Duke “intends to adhere to its commitments under the Ratepayer Protection Pledge with regard to the Proposed Facility.” Notably, commission staff had actually supported the construction of the turbine, citing concerns about Duke’s reserve margins. The NCUC noted that it “understands the Public Staff’s expressed concerns,” but those concerns were outweighed by the NCUC’s reservations, including questions of demand. Department of Energy Approves Funds for Grid Improvement The U.S. Department of Energy (DOE) recently announced that it would fund 31 grid-improvement projects in 26 states. The funding initiative is part of the DOE’s “SPARK” initiative. The funding will include $1.9 billion in federal funding from DOE and $3.35 billion in recipient cost-sharing funding. The funds will go to projects designed to improve grid reliability and lower electricity costs. Recipients plan to reconductor over 1,500 miles of transmission lines and will deploy grid-enhancing technologies across approximately 21,000 miles. DOE stated that this initiative will make available over 23 additional gigawatts of electricity. Texas Moderates Rules Governing Data Center Interconnection The Texas Public Utility Commission adopted new regulations governing large-load interconnections. The rules impose a flat study fee of $100,000 for all proposed interconnections, which departs from the initial proposal to impose study fees using a tiered system based on project size. Additionally, the final rule eliminates the PUC’s previous proposal to impose a non-refundable interconnection fee of $50,000 per MW of contracted peak demand. The final rule also moderates the initially proposed regulations governing Electric Reliability Council of Texas (ERCOT) notifications for large-load customers’ non-utilized capacity. The proposed rules would have required notifying ERCOT within 30 days of missing a scheduled energization milestone by six months. The final rules, however, do not require informing ERCOT unless a scheduled energization milestone is missed by 24 months. FERC Denies TransAlta 202(c) Cost-Recovery Plan The Federal Energy Regulatory Commission (FERC) recently rejected TransAlta’s plan to recover $19.9 million in expenses stemming from a DOE order in which DOE prohibited TransAlta from retiring its coal-powered Centralia power plant. TransAlta had previously intended to retire the facility at the end of 2025. TransAlta’s cost recovery plan proposed spending an additional $23 million on repairs to continue operating the unit. FERC’s main objection had to do with geographic scope. TransAlta’s recovery plan called for recovering costs from California Independent System Operator (CAISO) and the Southwest Power Pool (SPP), but the DOE’s order requiring operation of the plant was designed to ensure reliability in the Northwest assessment area (Montana, Oregon, Washington, and parts of northern California and northern Idaho). Accordingly, FERC was unwilling to allow cost recovery from CAISO and SPP when the order that precipitated the additional costs only related to the Northwest assessment area. FERC informed TransAlta that it would only approve cost recovery from load-serving entities in the Northwest assessment area. FERC’s decision comes amid a rush of DOE emergency orders requiring the continued operation of coal-fired generating units. Litigation Appeals Court Upholds Washington Hydropower Plant With Caveats In a September 21, 2026, opinion, the Washington Court of Appeals largely upheld a Clean Water Act water quality certification by the Washington Department of Ecology for the Goldendale Energy Storage Project, a proposed pumped-water storage hydropower system adjacent to, but off-stream from, the Columbia River. A nonprofit (Columbia Riverkeeper) and the Confederated Tribes and Bands of the Yakama Nation appealed the certification, contending that it failed to impose necessary conditions and monitoring requirements to protect the water quality of the Columbia River. Most saliently, the plaintiffs argued that the project had the potential to leak 100 acre-feet of water per year into tributaries of the Columbia River. The Court of Appeals broadly rejected plaintiffs’ challenge to the state’s conclusion that “the project was designed not to leak.” That said, the Court of Appeals did reverse on one narrow issue. Specifically, the court determined that the state’s conclusion that “leakage from the project’s tunnels would be monitored and reported” was not supported by the evidence because the certification “does not explicitly require monitoring and reporting to determine whether there is any leakage.” Accordingly, the court remanded the matter to the state to impose monitoring and reporting requirements but otherwise affirmed the certification. Legislative Developments California Legislates Restrictions on Data Center Energy Use and Grid Costs On September 21, 2026, California Governor Gavin Newsom signed seven bills broadly regulating data centers in the state. SB 1168 directed the California Public Utilities Commission to assess the energy used by data centers. It also requires the PUC to pass costs of transmission and distribution upgrades and load increases on to data centers, rather than customers. SB 886 and SB 887 compel data centers to pay for infrastructure upgrade and generation costs, and wildfire mitigation costs, in addition to imposing environmental review. The statutes additionally increase local oversight of data centers. AB 1577 imposes a monthly reporting requirement that requires data centers to supply energy consumption and efficiency data to the California Energy Commission. AB 2383 contains incentives for data centers to use onsite clean energy generation. Finally, AB 2469 and AB 2619 require data center developments to assess water supply and develop a water scarcity plan. The statutes also mandate statewide water reporting as a precondition to obtaining and renewing business licenses.

The image shows classic stone columns and steps, which often represent government buildings, courthouses, or legal institutions.

Insights

The Supreme Court Update - October 14, 2026

Regulatory Affairs Partner Randy Dann Joins Dorsey

News

Regulatory Affairs Partner Randy Dann Joins Dorsey

Attorney John Cooney Returns to Dorsey in the Finance & Restructuring Group in Minneapolis

News

Attorney John Cooney Returns to Dorsey in the Finance & Restructuring Group in Minneapolis

Insights

The Supreme Court Update - October 8, 2026

On September 29, 2026, the Supreme Court granted certiorari in one case: Department of Homeland Security v. D.V.D., No. 26-426: This case concerns the Trump Administration’s “third-country removal” procedures, where immigrants are deported to countries not listed in the removal orders. In granting certiorari, the Court granted the Government’s application to stay a lower court decision halting the practice, which will allow third-country removals to continue pending resolution of the case. The issues presented are: (1) Whether the district court had jurisdiction over respondents’ claims; (2) whether the district court had authority to enter class-wide declaratory relief and APA vacatur under 8 U.S.C. § 1252(f)(1); (3) whether the Government’s guidance on third-country removals is unlawful under 8 U.S.C. § 1231(b), the due process clause, or FARRA/CAT and its implementing regulations; and (4) such other questions that the Government determines are appropriate for the proper disposition of the case. On October 1, 2026, the Court granted certiorari in three additional cases: Rhoney v. Barbosa da Cunha, No. 26-104: Immigration officials detained Ricardo Aparecido Barbosa da Cunha—a Brazilian citizen who had lived in the United States for approximately twenty years after entering without inspection—and denied him a bond hearing under 8 U.S.C. § 1225(b)(2)(A). The Second Circuit held that his detention was instead governed by § 1226(a), which permits release on bond, because § 1225(b)(2)(A)’s mandatory-detention requirement applies only to noncitizens apprehended while entering the country or shortly thereafter. The question presented is: Whether 8 U.S.C. § 1225(b)(2)(A) mandates the detention pending removal proceedings of aliens who, like Barbosa da Cunha, are present in the United States without having been admitted. Missionaries of St. John the Baptist, Inc. v. Frederic, No. 25-113: A Catholic religious organization sought to build a shrine to the Virgin Mary on land the organization owned adjacent to its church in Park Hills, Kentucky. Local zoning restrictions prohibited the proposed construction. The question presented is: Whether a land-use regulation that prohibits a religious institution from building a religious structure on its own property constitutes a “substantial burden” on religious exercise under the Substantial Burden Provision of the Religious Land Use and Institutionalized Persons Act, 42 U.S.C. § 2000cc(a). Marschner v. Marschner, No. 25-1349: Under the Uniformed Services Former Spouses’ Protection Act (“USFSPA”), a veteran’s longevity-based retirement pay can be divided in a divorce, but retirement pay based on disability and retirement pay that was waived to receive disability pay are indivisible. The question presented is: Does the USFSPA require state courts to refuse enforcement of indemnification provisions in a divorce settlement agreement?

Regulatory Affairs Partner Jeff Beelaert Joins Dorsey in Boise

News

Regulatory Affairs Partner Jeff Beelaert Joins Dorsey in Boise

News

Dorsey’s London Corporate Practice and Partners Earn Chambers UK 2027 Rankings

Insights

SEC Proposes Expansion of Investment Adviser Performance-Based Compensation Rule

On September 30, 2026, the Securities and Exchange Commission (the “SEC”) proposed amendments to Rule 205-3 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), which provides an exemption from the general prohibition under Section 205(a)(1) of the Advisers Act on registered investment advisers receiving performance-based compensation (the “Proposal”) so long as performance-based compensation is limited to “qualified clients”.1 Most notably for private fund sponsors, the Proposal would expand the definition of “qualified client” to include any investors that satisfy the “accredited investor” definition under Regulation D. The Proposal may also have implications for private fund managers that rely on exemptions from investment adviser registration under state law because certain state-level investment adviser registration exemptions incorporate or otherwise reference the federal qualified client definition. Expansion of the Qualified Client Definition Under the current Rule 205-3, an investor generally may qualify as a qualified client if, among other alternatives, the investor has at least $1.4 million under management with the adviser or has a net worth exceeding $2.7 million. These thresholds are higher than the financial thresholds applicable to many accredited investors under Regulation D. As a result, an investor may currently qualify as an accredited investor for purposes of investing in a private offering without qualifying as a qualified client for purposes of paying performance-based compensation. The Proposal would expand the qualified client definition to include any natural person or legal entity investor that satisfies the accredited investor definition under Regulation D. The Proposal would also remove the assets under management and net worth thresholds under the current Rule 205-3 qualified client test. For private funds relying on Section 3(c)(1) of the Investment Company Act of 1940, this change could reduce the need to apply a separate qualified client standard to investors that already qualify as accredited investors. Dorsey Observations and Next Steps If adopted as proposed, the expanded qualified client definition could be particularly significant for private fund managers. Most private fund offerings are already limited to accredited investors under Regulation D. However, the Proposal could expand the pool of prospective investors available to emerging private fund managers while reducing the regulatory burden associated with complying with Rule 205-3. The Proposal could also benefit advisers operating below the SEC registration threshold that rely on a state private fund adviser exemption. A number of states have adopted exemptions modeled on the North American Securities Administrators Association (“NASAA”) private fund adviser exemption, which may condition relief for advisers to certain funds relying on Section 3(c)(1) on each beneficial owner satisfying the federal qualified client definition. However, state requirements vary, and any effect of the Proposal would depend on the text of the applicable state exemption and how it incorporates Rule 205-3. Many emerging private fund managers may have a larger network of accredited investor relationships than qualified client relationships during the early stages of their investment advisory business. Currently, under Rule 205-3, private fund managers may receive performance-based compensation from investors who do not satisfy the qualified client definition if those investors were admitted to their private funds prior to registration with the SEC. Following registration with the SEC, however, managers may continue to permit investors that are not qualified clients to invest in future private funds but may not receive performance-based compensation from those investors with respect to such investments. In addition, because the net worth and assets under management thresholds for qualified client status are adjusted for inflation every five years, the pool of qualified client investors may diminish over time as previously eligible investors no longer satisfy the applicable thresholds. The Proposal could provide the dual benefit of greater flexibility for private fund managers to establish and maintain relationships with accredited investors as their businesses scale and they become registered with the SEC, and greater flexibility for certain accredited investors to participate in investment strategies that historically have been restricted to much larger institutional investors. Unless and until the Proposal is adopted, investment advisers should continue to comply with the existing qualified client requirements. If the Proposal is adopted, private fund sponsors should consider whether corresponding changes are appropriate for their subscription documents, investor questionnaires, and other offering materials. Advisers that are state-registered or rely on a state-level exemption should also consult the laws and regulations of each relevant jurisdiction before changing investor eligibility standards or performance-based compensation practices, because adoption of the federal amendments may not automatically modify state requirements. Comments on the Proposal will be due 60 days after publication in the Federal Register. 1 Investment Adviser Performance-Based Compensation Modernization, Investment Advisers Act Release No. IA-7022 (Sept. 30, 2026), available at https://www.sec.gov/rules-regulations/2026/09/s7-2026-28#33-11443proposed.