24 September, 2021

The Humanitarian Collective

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Improper Property Protection: China’s Harmful History of Intellectual Property Theft

From the technology we use to the brands we wear, we interact with intellectual property every day. Intellectual property refers to intangible ideas protected under international and domestic law, such as copyrights, patents, trademarks, and trade secrets. As intellectual property laws allow people and businesses to benefit financially from their creations and ideas, these laws often encourage creativity and innovation, helping countries make technological progress.   Intellectual property rights are so important that they are protected in Article 27 of the Universal Declaration of Human Rights, which states that “Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.”  Unfortunately, not all countries respect intellectual property laws.  One major offender in the realm of intellectual property laws is the People’s Republic of China. China’s decades-long history of violating intellectual property protections has become a focal issue in the current trade war between the United States and China – and rightfully so; the United States must push for changes to ensure that China respects intellectual property rights as it should.

China has had a long history of piracy, counterfeiting, and otherwise disregarding intellectual property laws. Although China has theoretically recognized international intellectual property conventions since the mid-1980s, the country has not adhered to these conventions in practice. In part because China lacks the overall legal structure and training necessary to implement intellectual property laws, the Chinese government has allowed many intellectual property violations to go unchecked, especially in cases where these violations benefit the Chinese government or the economy.  Some of China’s most frequent infractions include copyright violations, theft of corporate trade secrets, and manufacture of counterfeit goods. Recent Chinese intellectual property violations have affected major US companies such as Apple, IBM, and GE, and have also had a significant impact on many small businesses. One US entrepreneur affected by Chinese intellectual property theft is Ruth Brons, a 60-year-old violin teacher from New Jersey.  Brons sells a product she patented called Bow Hold Buddies, which helps students to maintain a correct bow hold, through her company Things 4 Strings.  A few years ago, while she was trying to expand her business to the Chinese market, she found that Chinese counterfeiters had copied her patent and registered it in China, and were now producing knockoffs of her products and selling them at a significantly lower price.  Brons has spent over $100,000 to fight a legal battle against counterfeiters in China, and as a consequence, her business is struggling to grow.  Many small businesses have similar stories to Brons, and unlike larger companies, these small businesses do not have the resources necessary to fight, and win, against Chinese intellectual property theft. Unfortunately, the legal battles these businesses must fight often end in bankruptcy. Although in recent years the Chinese government has slightly expanded the court system used to investigate intellectual property charges, the US government needs to further address Chinese intellectual property violations and help the small businesses struggling to fight against Chinese counterfeiting.

This is critical because Chinese intellectual property theft has a major impact on the United States. According to a poll conducted in February of 2019, Chinese corporations have stolen intellectual property from one in five North American companies on the CNBC Global CFO Council in the previous year alone, and from about one in three North American companies over the past decade. As a result, it’s no wonder that according to the IP Commission, China leads the world in every single type of intellectual property infringement. 

This infringement comes at a high cost. 

A report issued by the United States Trade Representative (USTR) in 2017 estimated that Chinese theft of American intellectual property costs the US up to $600 billion annually. Much of this impact falls on small businesses, who lose large amounts of money due to counterfeited products from China sold on Amazon. According to the Department of Homeland Security, seizure of counterfeit goods, which account for 3.3% of global trade, at the US border has increased tenfold over the past 20 years, with almost 90% of the goods seized in the past few years coming from either China or Hong Kong, China’s market outlet to the West. 

Because Chinese intellectual property theft has such an impact on US business, it has played a major role in the US-China trade war. Since coming to power, President Trump has made a point of attacking China’s record on intellectual property theft. In 2017, Trump ordered the US trade representative to ramp up investigations of Chinese attacks on US intellectual property in an attempt to pressure the Chinese government to bolster their enforcement of intellectual property laws. There seems to be some progress towards the reduction of Chinese intellectual property theft; after a meeting in December of 2019, the Chinese government released a memo laying out 38 new punishments for IP violations, including loss of access to Chinese government funding. This represented a significant change as the Chinese government has previously denied allegations of Chinese intellectual property theft, refusing to address the problem. In January of this year, the US-China Phase One trade deal was signed. In this document, China agreed to strengthen legal protections for intellectual property and to streamline the process of prosecuting intellectual property theft. This was a step in the right direction, but amidst the COVID-19 crisis, it is unclear what the future of the trade war and Chinese intellectual property law is. 

 According to Stanford Law professor Paul Goldstein, China’s newest intellectual property theft tactic is using hacking to steal trade secrets of US companies working on Chinese soil. However, China’s hacking isn’t limited to just China or the US; it is happening around the world.  Indeed, China is now being accused by the US of sponsoring Chinese hackers to target firms around the world working on vaccines and treatments for COVID-19.  According to the Washington Post, this is significant as it is the first time the US has specifically charged Chinese hackers for working both for their own benefit and on behalf of the Chinese government. With Chinese hackers being accused of stealing trade secrets from firms around the globe looking for a coronavirus vaccine, Chinese intellectual property theft may now have not only a significant impact on the global economy, but also on public health. According to John Demers, head of the US Justice Department’s National Security Division, these breaches by Chinese hackers could significantly slow down the vaccine research efforts, prolonging the global pandemic and allowing further harm to occur to the global economy.  

It is clear that China’s disrespect of intellectual property laws has tremendous consequences for the global economy and the world as a whole. In the US alone, Chinese intellectual property theft wipes out hundreds of billions of dollars each year and drives countless small businesses bankrupt. On a global scale, Chinese intellectual property theft harms countless companies, as China illegally steals from competitors to replicate their technology and attempt to gain additional power and leverage. Intellectual property rights are protected in the Universal Declaration of Human Rights and the US must continue to fight for these rights, for the benefit of both innovators and the general public. Amidst the current pandemic and uncertain economic future, additional Chinese pirating and intellectual property theft is the last thing the global economy needs, especially as this theft continues to impact coronavirus research. Although the future is unclear, the US must continue to fight back against Chinese intellectual property theft and to fight for a world where intellectual property rights are protected for all.

Sources:

www.nytimes.com/2017/08/15/opinion/china-us-intellectual-property-trump.html?searchResultPosition=2

www.marketwatch.com/story/five-things-to-know-about-chinas-promised-crackdown-on-intellectual-property-theft-2019-11-25

law.stanford.edu/2018/04/10/intellectual-property-china-china-stealing-american-ip/

www.cnbc.com/2019/02/28/1-in-5-companies-say-china-stole-their-ip-within-the-last-year-cnbc.html

www.cnbc.com/2020/01/29/why-intellectual-property-is-key-to-the-race-between-the-us-and-china.html

www.cnbc.com/2020/02/28/small-businesses-are-pushing-trump-to-fight-chinese-counterfeits.html

fortune.com/2019/03/01/china-ip-theft/

www.bbc.com/news/business-51114425.

www.reuters.com/article/us-usa-trade-china-details-factbox/whats-in-the-us-china-phase-1-trade-deal-idUSKBN1ZE2IF

Allison Hecht is a student at Mamaroneck High School. She is interested in political issues both on a local and broader scale. She enjoys doing playing the cello, reading, and doing puzzles.

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