IP Theft: A Tale of Two Countries by Sharomi Ridwan, DigiLaw

The heavyweights are at it again as usual. This time, the Trump of White House and the Jinping of the Presidential Office Building, China, are the ones at each other’s throat. Billions of US dollars have so far been lost by companies and corporations on both sides of the protracted US-China trade war. One of the crux of the matter, is IP theft. In the ongoing trade war that is at its 226th day, the total US tariffs applied exclusively to China equalled US$250 billion while total Chinese tariffs applied exclusively to US stands at US$110 billion, with industries like Auto, Technology and Agriculture, taking the worst hit.

What is Intellectual Property (IP)?

Intellectual Property DigiLaw

Let’s examine what IP really is. In the simplest of terms, Intellectual property (IP) refers to creations of the mind, including inventions; literary and artistic works, designs, symbols, names and images used in commerce, so says the World Intellectual Property Organization’s website. The legal recognition of IP and IP rights is hinged on the necessity of enabling innovators to earn recognition or financial benefit on their innovations, to further boost creativity and innovation.

The American Angle

In a 53-page detailed report released by the U.S. Trade Representative Office (USTRO) manned by Robert Lighthizer, the USA levelled state-backed IP theft allegations against the Chinese government. The 2018 Special 301 Report published in April identified trade partners “that do not adequately or effectively protect and enforce” IP rights or otherwise “deny market access to US innovators and creators that rely on protection of their IP rights”. The allegations range from counterfeiting famous brands and stealing trade secrets, to pressuring companies to share technology with local companies before grants of access to the vast Chinese market. The US has since levied top-of-the-roof tariffs on Chinese imports but even at that, the USTRO believes China still indulges in this unfair practice.

Some of the ways through which the U.S alleges that its companies lose huge revenue due to China’s unhealthy practice are missouts on possible or projected sales, high incidence of counterfeited goods, usage of stolen foreign know-how by Chinese manufacturers, forced lowering of goods’ prices due to competition and budgeting of billions of dollars to address IP rights infringements.

The US believes all of these unfair and unhealthy policies and practices are geared towards hastily achieving the “Made in China 2025” projection, in whatever way and manner possible. No wonder the Federal Reserve Bank of Minneapolis concluded in a 2015 paper, that more than half of all technology owned by Chinese firms was obtained from foreign companies.

The Chinese Angle
A spokesman for China’s foreign ministry while responding to questions about the USTRO report, attempted to deny these claims by referring U.S. officials to a white paper published by the Chinese government in September 2018 which supposedly claims that China ‘firmly protects’ Intellectual Property rights. But conversely in 2017, President Xi Jinping in a speech, highlighted the urgency of speeding up IP protections in China by repeated calls for stricter enforcement of penal regulations on IP right violators. In December 2018 too, China announced its most serious measures since the US-China trade war started, including sanctions that could restrict local companies’ access to credit facilities and state-funding support, if found guilty of IP theft.

Additionally, the government said in January 2019 that it would accelerate the passage of a new foreign-investment regulation that encompasses measures to protect the IP of foreign companies, and relax the burden of transferring technology to them (China has foreign ownership restrictions that compel foreign companies to switch technology to local firms). By these, it can safely be concluded that China admits to most of these allegations

The State of Things

Despite all these propositions however, Chinese law enforcers are still hindered by insufficient punitive measures. So says Xu Xinming, a researcher at the Center for Intellectual Property Studies at China University of Political Science and Law. Xu believes the proposed regulations still allow IP violators to reap the fruits of their unholy labour.

Critics maintain that the proposed measures are weak as they still fall short of being able to adequately address the countless issues related to the regulation of IP rights in China due to the non-inclusion of criminal penalties like jail time. In fact, a China expert at the Center for Strategic and International Studies in Washington, Scott Kennedy, has noted that despite the increased attention paid to the issue, IP violations have only since been on the rise in the Chinese Peninsula.

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