Chinese Intellectual Property Theft

by Antonios J. Bokas

Abstract: China uses disinformation and backdoor methods of intimidation to obtain US intellectual property in bad faith. They will continue to steal US intellectual property unless the US better enforces proprietary rights and counters Chinese disinformation in US media. The two largest factors that motivate China to comply with US intellectual property laws are fear of retaliation and economic dependency. If both of these factors are removed, China will further exploit US intellectual property to the point of harming the US economy permanently.


China steals US intellectual property by exploiting the law, its economic power, and the media apparatus. They will continue to steal US intellectual property unless the US counters their actions by (a) enforcing intellectual property laws and (b) neutralizing disinformation. They create a paradigm that tolerates their underhanded methods of obtaining valuable American ideas and technology.

China strongly relies on US intellectual property. In 2017, China paid the US 25% of its intellectual property royalties (Tiankai, 2018). However, over the next decade, if the US does not respond adequately to Chinese intellectual property theft, it will likely permanently harm the US economy. The US International Trade Commission estimates that Chinese intellectual property theft “leads to a loss of 1 million U.S. jobs” (Ash, 2015, p. 81). China must adhere to US intellectual property rights before they can be considered a trustworthy trading partner.

Raustiala et al. (2013) explain that in 1891, the US decision to recognize foreign copyrights led to a large increase in creative expression, which assisted the US economy. They contend that, while China significantly updated its laws to approach these US standards, China still does not properly enforce intellectual property rights. Despite this reality, Chinese representatives continually deny wrongdoing and do so through US media.

For example, the Chinese Ambassador to the US, Cui Tiankai (2018), wrote an article for USA TODAY in which he claims that forced technology transfer is patently false and has never occurred. Not only is his claim disputed, the article itself is deceptive. As can be seen in Figure 1, the Ambassador refers to himself in third person. He does not identify himself as the Chinese Ambassador to the US until the final paragraph of the article. Under these circumstances, a typical reader is unlikely to recognize the identity of the author and his relationship to the article content. In fact, the analyst researching this topic did not recognize that the author was the Chinese Ambassador to the US until he inspected the author of each information source during evidence collection.

Figure 1. Article in USA TODAY Written by Chinese Ambassador to the US

Note. From “Trade war against China is unjustified” by C. Tiankai, 2018, USA TODAY. (https://www.usatoday.com/story/opinion/2018/07/18/china-trade-war-unjustified-unfair-donald-trump-tariff-column/792022002/). © 2021 USA TODAY.

Furthermore, the Ambassador’s claim is contradicted by the Office of the US Trade Representative (2018) in a report published months earlier, wherein one CEO of a large company said, “Unless I promised the Chinese Government that I would open up an advanced technology lab there, I was told that I would not be able to sell to the Chinese telecommunications providers” (p. 39). The report outlines numerous other examples in which China is required to be the controlling shareholder of companies that manufacture aircraft, provide basic telecommunications services, or provide surveying and mapping services (p. 26). If this stipulation is not met, officials tell the company “behind closed doors” that it cannot do business in China (p. 19). This example illustrates how China uses disinformation to influence American opinion while illegally acquiring US intellectual property.

In addition to countering Chinese disinformation, the US must properly enforce intellectual property laws. According to Ash (2015), many federal agencies are charged with protecting intellectual property rights, but additional Congressional action is desired. While the US can use institutions such as the World Trade Organization to settle economic disputes with China, such organizations are insufficient for dealing with intellectual property theft (Shatz, 2016). If US institutions already exist to combat intellectual property theft, they may need to receive more funding or support.

Figure 2 illustrates four potential outcomes (hypotheses) of US strategy to address Chinese intellectual property theft. It designates two main drivers that influence Chinese behavior.

Figure 2. Drivers of Chinese Theft of US Intellectual Property

The two drivers, (a) Chinese fear of US retaliation and (b) level of Chinese economic dependency, are a prominent feature in the intellectual property theft issue. For example, when the US Department of Commerce announced it will ban the Chinese company Huawei “from using U.S.-made machinery and software to design or produce chips,” without getting a license, a Chinese newspaper threatened that China will retaliate by putting US companies on an “unreliable entity list” (Tayyab, 2020). However, no such retaliation has yet occurred. In fact, Cheng (2020) from CNBC reports that major software and chip-making companies, such as Apple, Microsoft, Qualcomm, and Intel/AMD, are listed as “less appealing” targets in recent provisions about the unreliable entity list. China will likely not retaliate economically against the US if (a) it is afraid of similar retaliation and (b) it relies on US intellectual property.

The most viable US strategy is to continue to implement consistent and impactful measures against Chinese violations of intellectual property rights and to counter Chinese disinformation. In such a scenario (Hypothesis 4), China will be forced to acquire intellectual property by other means and the following indicators will likely be present:

  1. China will allow intranational free-market development of technology.
  2. US-sponsored organizations will validate Chinese compliance with intellectual property regulations.
  3. China will create novel technologies, indicating original development.

The most dangerous scenario (Hypothesis 2) will occur if the US decides to reduce intellectual property theft protection efforts against China and allow Chinese disinformation to flourish. In such a scenario, the following indicators will likely be present:

  1. China will surpass the US in measures of economic power, such as GDP.
  2. Reports of Chinese theft of US intellectual property will drastically increase.
  3. Technology and innovation hubs will shrink in the US and grow in China.

China uses economic threats, manipulative business tactics, and disinformation to implement its intellectual property theft objectives. The US must protect Americans by enforcing intellectual property laws and countering Chinese disinformation, which prominently appears in US media. Testimony from business executives shows that China uses intimidation to force innovative companies to exchange intellectual property for access to Chinese markets. While China may appear to be an honest competitor, the main drivers of their compliance are fear of retaliation and dependence on the US economy. In the future, if those conditions change, China will likely become an adversary that no longer feels obligated to respect intellectual property rights. US policy-makers must appropriately respond to this threat by strengthening their stance on intellectual property rights, continuing to balance diplomacy and economic trade with China, and implementing strategies to combat Chinese disinformation in US media.

References

Ash, R. (2015). Intellectual property law: Intellectual property and the nation’s economic security. GPSolo, 32(3), 80-81.

Cheng, E. (2020, September 21). China releases details on its own blacklist, raising uncertainty for foreign businesses. USA TODAY. https://www.cnbc.com/2020/09/21/china-releases-details-on-unreliable-entity-list-raising-uncertainty-for-foreign-businesses.html

Office of the United States Trade Representative. (2018). Findings of the investigation into China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation under section 301 of the Trade Act of 1974. https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF

Raustiala, K., Sprigman, C., & Tepp, S. (2013). How to Copy Right: Is Piracy Productive? Foreign Affairs, 92(6), 167-170. http://www.jstor.org/stable/23527024

Shatz, H. (2016). Strategic Choices Abroad: China. In U.S. international economic strategy in a turbulent world: Strategic rethink. RAND Corporation.

Tayyab, A. (2020, May 27). Should China wield antitrust laws to counter US attacks on Huawei amid global tech competition? Technology Times. https://www.technologytimes.pk/2020/05/27/should-china-wield-antitrust-laws-to-counter-us-attacks-on-huawei-amid-global-tech-competition/

Tiankai, C. (2018, July 19). Trade war against China is unjustified. USA TODAY. https://www.usatoday.com/story/opinion/2018/07/18/china-trade-war-unjustified-unfair-donald-trump-tariff-column/792022002/

Vaughan, M. (2006, March 29). Panel presses administration for more action on China. CongressDaily.

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