IP, China, and President Trump’s Tweets

Protecting Intellectual Property Rights in China

By:  Miss Tomi M. Suzuki

According to the Commission on the Theft of American Intellectual Property, an estimated annual $225 billion to $600 billion is lost every year due to ineffectively protecting intellectual property.  In order to do business in China, government regulations require foreign firms to partner with local companies in order to sell their goods.  As a result, many Chinese firms have required a technology or transfer of intellectual property rights as part of contracts. While formally disallowed by the World Trade Organization, the agreements have continued.  In 2015, it was estimated that over half of the technology possessed by Chinese companies came from foreign firms.[1]

 

Chinese Intellectual Property Continues to Strengthen

Many business owners face the unavoidable choice of having to either sacrifice their intellectual property rights and technology to Chinese business partners or avoid entering into the Chinese market at all.  In recent years, the Chinese government has set up intellectual property courts in major hubs like Beijing, Shanghai, and Guangzhou.[2]  In 2017, China paid $28.6 billion in royalties to foreign rights owners.[3]  These advancements stem from President Xi Jinping’s positive attitude towards strengthening IP laws.  At the 2017 National Financial Work Conference, President Xi Jingping proclaimed that China “must step up efforts to punish illegal infringement of intellectual property rights and force infringers to pay a heavy price.”[4]

 

U.S. Response to Concerns Regarding Chinese Intellectual Property 

On March 7th, 2018 President Trump tweeted, “The U.S. is acting swiftly on Intellectual Property theft.  We cannot allow this to happen as it has for many years!”  His plan? To place tariffs on over $150 billion worth of Chinese exports as a threat to induce China to strengthen its foreign intellectual property protections and practices.[5]

 

 

While President Trump’s tweets reflect the sentiment shared by many U.S. companies.  A 2017 survey by the American Chamber of Commerce revealed that three-quarters of surveyed companies felt increasingly unwelcome in China.[6]  As tensions between the United States and China increase, many believe that we are on the brink of a trade war – with intellectual property rights acting as the spark.  China is less dependent on U.S. trade than it ever has been, making it difficult to see punitive measures having a large impact.[7]  For the U.S. however, it could be quite destructive when considered with the fact that foreign investment in China has become “increasingly critical to financing U.S. economic growth.”[8]

 

 

Firms looking to expand into the Chinese marketplace should remain extremely alert about any potential intellectual property violations or concerns before doing business.  By being well prepared on both the past regulatory schemes and more importantly, the current political climates effect on regulatory schemes, companies can shield themselves from potential infringers.

 

 

 

 

 

 

[1] Holmes, Thomas J., Ellen R. McGrattan and Edward C. Prescott. 2014. “Quid Pro Quo: Technology Capital Transfers for Market Access in China.” Staff Report 486. Federal Reserve Bank of Minneapolis.

[2] http://english.court.gov.cn/pdf/OutlineoftheJudicialProtectionofIntellectualPropertyinChina(2016-2020).pdf

[3] https://www.voanews.com/a/us-tariffs-china-intellectual-property-theft/4336083.html

[4] https://thediplomat.com/2018/01/chinas-progress-on-intellectual-property-rights-yes-really/

[5] https://www.marketwatch.com/story/why-is-the-us-accusing-china-of-stealing-intellectual-property-2018-04-05; https://www.thedailystar.net/business/us-china-trade-dispute-what-intellectual-property-1559668

[6] AmCham, 2017 Business Climate Survey. AmCham China. 2017.

[7]https://wits.worldbank.org/CountryProfile/en/Country/CHN/StartYear/2006/EndYear/2016/TradeFlow/Export/Partner/USA/Indicator/XPRT-PRTNR-SHR

[8] Id.