Compliance on Intellectual Property remains a sticky issue with China

Theft of intellectual property has been a touchy issue with Beijing: with allegations that it forces companies to hand over intellectual property as a price of doing business in the country to outright theft of software and ideas from U.S. firms. With the Trump Administration launching a section 301 probe into China’s trade practices, the Office of the U.S. Trade Representative will ultimately have to recommend what stance the U.S. Administration will take on these thefts.

Trade groups and U.S. businesses appear to be split on how to enforce intellectual property compliance on China without resorting to punishments. While one group prefers negotiations, the other wants a tougher approach.

On Tuesday, at an International Trade Commission hearing the complexity of the issue came at the fore with testimonies showing the U.S. has lost hundreds of billions of dollars in technology due to the theft. A group has charged Chinese firms as having stolen software and ideas from U.S. tech companies.

China requires U.S. firms to hand over the intellectual property as part of the price of doing business within the world’s fastest growing economy.

China “cheats across the board,” said Richard Ellings while testifying on behalf of the Commission on the Theft of American Intellectual Property, a private group set up five years ago to monitor China’s handling of trademarks, patents and other forms of intellectual property.

The Trump administration has launched a Section 301 investigation into China’s alleged theft of U.S. intellectual property which could result in the imposition of stiff tariffs if not import restrictions to protect U.S. firms China’s deemed unfair trade practices.

“Just agreeing to manufacture in the country opens yourself” to theft or forced technology transfer, said Ellings.

Significantly, the former U.S. official notes that Chinese cyber theft of intellectual property is “the greatest transfer of wealth in history” which requires a U.S. to respond based on “strength and leverage.”

Erin Ennis, the senior vice president of the U.S. China Business Council, a trade group of 200 companies that do business in China, however presented a different picture. He said, going by the surveys of its members, only a third had been asked to transfer technology; it was only ”a minority … who are forced to transfer technology and are not compensated.”

“The administration has the opportunity to lead like-minded countries,” to nudge China to address remaining problems rather than taking punitive steps which risk a trade dispute between the two countries, she said.

Many noted the recent creation of three special intellectual property courts in China as a sign of progress.

“That’s a positive step,” said Scott Partridge, head of the American Bar Association’s intellectual property section.

Many representatives of Chinese commercial groups said at the hearing that Beijing should be given more credit for its progress on building an IP enforcement system from scratch.

The panel investigating China, under section 301, will submit a recommendation to the Office of the U.S. Trade Representative.

The issue remains sensitive since there has been widespread allegations that Chinese firms routinely ignore patent and copyright protections and with Beijing’s competing with the U.S. on sophisticated goods, including commercial aircrafts, where the U.S. holds an advantage, the impact of the allegations have become amplified.

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Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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