China v. United States: IP Theft and Protections
What is Being Stolen?
The hacking and stealing of American companies has been incredibly pervasive the Chinese have been accused of stealing everything you could imagine including: Counter just after a Chinese national was indicted for stealing technical date from Lockheed.
In 2010, Google settled that it had been hacked by the Chinese government.
A 2017 report by the National Bureau of Asian Research estimated “that the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion.”
How the Chinese Steal IP
Technology theft and other unfair business practices originating from China are costing the American economy more than $57 billion a year in 2019.
It turns out that one of the biggest factors in China’s ability to steal American technology is the American companies themselves. US Companies are afriad of rocking the boat in China because China is often one of their largest markets.
There is a secretive group working for the Chinese government known as Unit 61398. This Unit was found by out to be breaking into American companies at night and stealing as much data from them as possible. Problems arose when US government officials tried to ask the victim companies to act as plaintiffs. None of them would comply. They all had too much invested in their Chinese markets.
This was all reported by David Hickton, not former US Attorney for the Western District of Pennsylvania.
In an interesting interview, Paul Goldstein, a professor at the Stanford University Law School explained how China steals IP from US companies.
“Historically, the oldest forms of appropriation of American and other foreign-created intellectual goods were film, record, and software piracy, and counterfeiting of luxury goods and pharmaceuticals.
As is happening today, IP got injected into the trade process, but the waltz was long and slow. The USTR would complain of China’s failure to halt piracy of US-created goods; the two countries would enter into a MOU [memorandum of understanding] in which China would agree to clean up its act; three years later the USTR would identify continuing violations and come back and say, “this time we really mean it;” and the two countries would enter into another, more detailed MOU, and so on.
Eventually what happened was that, as China’s domestic copyright industries found themselves competing with cheap knock-offs of foreign goods, they pressed the Chinese government to fortify the IP enforcement process on its own. (To put this in perspective, this is also what happened a century earlier in the US, which until 1890 failed to protect foreign works, and then waited yet another century before joining the major international copyright treaty.)
Although piracy and counterfeiting remain issues in China, the two newer forms of siphoning off foreign IP value are theft—often cyber theft—of extraordinarily valuable trade secrets and know-how, and the technology transfers required of American and other foreign companies as a condition to doing business on Chinese soil. Traditions of territoriality and sovereignty, as well as the willingness of foreign companies to trade IP for access to the Chinese market, give the latter a degree of legitimacy that outright industrial espionage lacks.” (https://law.stanford.edu/2018/04/10/intellectual-property-china-china-stealing-american-ip/)
While the threat of hacking of both the private and public sectors will remain a concern of national security for the United States in the foreseeable future, the issue of the theft of intellectual property laws in China may resolve part of itself on its own. As China has been taking foreign IP it is quickly catching up to the rest of the world. This means that innovation in China is less and less of catching up and more of innovation on par with other first world nations, particularly the United States. This means that in order to preserve indigenous innovation, China will have to increase protections and penalties within its borders for IP violations of all kinds.
History of previously developing economies shows that they have taken the same tactic towards IP. Japan, South Korea, and Taiwan were each consistent IP violators until they reached a per capita GDP of about $20,000-$25,000. The United States was a major IP violator in its younger years as well. The Copyright Act of 1790, stated, “Nothing in this Act shall be construed to extend to prohibit the importation or vending, reprinting or publishing within the United States, of any map, chart, book or books written, printed or published by any person not a citizen of the United States.” The United States did not extend IP protections to foreigners until 1891 with the Chase Act.
That is if COVID-19 doesn’t get us first….
- Is it possible for the US to use any sort of unilateral action to contain Chinese IP theft?
- If not, are there truly any international organizations that have the power to curb it?
- Might it be that China’s IP theft will naturally decline as it becomes a competitor at the edge of emerging technologies?