In Part I of this post, we discussed just how great a threat Chinese IP “theft” is to the U.S. economy and growth more broadly. Lest the PRC be accused of complete indifference or negligence when it comes to U.S. IP, let’s look at a few recent examples of the Chinese cracking down on IP theft.
First, let’s look at an article in the Financial Times from earlier this year that includes the following optimistic assessments of Chinese moves to combat IP theft:
Holly White of global IP consultancy Rouse said China had made strides towards reform on combating intellectual property theft by individual companies. ‘There have been several high-profile cases of Chinese IP theft in the past, and as a result, the Chinese government is rapidly developing a first-class system to deal with IP infringements and to improve its international reputation,’ she said…
[Erik] Robinson [of law firm Beijing East IP] said China was once the ‘laughing stock’ in the world of intellectual property. But he said it ‘has created an effective, efficient, and remarkably fair patent enforcement system.’
Second are the new enforcement mechanisms proposed by Chinese officials and outlined by state-run news agency Xinhua. Though promises from authoritarian regimes should be looked at with a skeptical eye, they sound tough on paper.
The “memorandum of cooperation” signed by 38 government agencies vows to punish individuals and businesses accused of repeated patent infringements by placing them on a blacklist that will be publicly available and shared among government agencies. Being placed on the blacklist would theoretically make it difficult to secure government financial support and contracts, a potential death knell in a country that blurs the lines between public and private enterprise.
Finally, let’s take the most recent dispute between Qualcomm and Apple. From The New York Times:
The court ruling is the latest turn in the two companies’ fight over Apple’s use of Qualcomm technology in iPhones. But Apple and Qualcomm disagreed on the impact the decision will have on iPhone sales in China.
Qualcomm said a Chinese court ruled on Nov. 30 that Apple had infringed on two Qualcomm patents and issued a preliminary injunction that bars Apple from selling the iPhone 6S, the iPhone 6S Plus, the iPhone 7, the iPhone 7 Plus, the iPhone 8, the iPhone 8 Plus and the iPhone X in China. The ruling did not apply to Apple’s three newest iPhones: the XS, the XS Max and the XR…
Qualcomm, which has long sold key communications chips to Apple but has been excluded from its latest models, has filed a series of patent suits against the smartphone giant in multiple countries. Those lawsuits came after Apple filed suit in early 2017 challenging Qualcomm’s practices in licensing its patents.
Qualcomm’s behavior is so hostile to competition and free trade that they are under investigation by the International Trade Commission in the U.S. for their chip licensing practices. But, from a purely pro- or anti-IP perspective, the Chinese court’s decision is decidedly pro-IP.
So, it would appear that there’s some IP hawkishness in the Chinese system after all. This isn’t necessarily a good thing, but it does put a wrinkle into the “China is stealing our technology” narrative.