The Difficulty of Resolving US-China Intellectual Property Disputes

Poisonous core of Communist Party’s schemes limit effectiveness of negotiation

President Donald J. Trump signs a memorandum on addressing China's laws, policies, practices, and actions related to intellectual property, innovation, and technology at The White House in Washington on Aug. 14, 2017. (Chris Kleponis-Pool/Getty Images)

Chinese Vice Premier Liu He’s recent visit to the United States for trade negotiations produced no visible results. Among the seven topics covered in the communiqué, numbers one, two, and four all involve intellectual property (IP) rights.

They are, according to the White House, (1) the ways in which United States companies are pressured to transfer technology to Chinese companies; (2) the need for stronger protection and enforcement of intellectual property rights in China; (4) the harm resulting from China’s cyber-theft of United States commercial property.

Obviously, protecting IP rights is a is major concern for the U.S. Many commentators have stated that the U.S.-China trade conflict is rooted in the conflicts of values between the two countries. In-depth analysis shows that the difference between the understanding of IP rights best on both sides illustrates this conflict of values between U.S. and China.

The US-China Conflict Revolves Around IP Rights

From the beginning of the US-China trade war, the U.S. has demanded that China stop its IP theft from the U.S. Since then, it has been prosecuting a number of people involved in stealing trade secrets, many of whom are scholars in China’s Thousand Talents Plan.

On Jan. 28, the U.S. Department of Justice officially announced the prosecution of China’s telecom giant Huawei and its chief financial officer Meng Wanzhou, and filed 23 specific allegations via two sets of indictments. The main charges include bank and wire fraud, obstruction of justice and trade secret theft.

In general, various industry groups in the U.S. oppose the White House’s decision to place pressure on China by imposing tariffs, but on the issue of IP rights, they are in line with the White House’s position: the Chinese government must stop its protectionist practices of subsidizing domestic enterprises and forced technology transfer, which harms the interests of American companies.

Then, does China not know of the the importance of respecting the IP rights of other countries? Of course it does. Since Deng Xiaoping announced the reform and opening up in 1978, China has always paid lip service to respecting international IP laws and regulations. Since 1980, China has joined 17 international multilateral treaties on intellectual property protection. Of these 17, two are considered most important. One is the WIPO Convention which China signed in 1980 and is the main instrument of the World Intellectual Property Organization (WIPO). The other is the Paris Convention for the Protection of Industrial Property (Paris Convention).

According to IP rights experts, apart from these two, there are six international multilateral treaties that are relatively more important for IP protection, namely, the WIPO Conventions, the Paris Convention, the Berne Convention, TRIPS, WCT and WPPT. Except for TRIPS, which is supervised by the WTO, the other five treaties are all active under the auspices of the WIPO.

The United States and China established economic relations several decades ago, and the U.S. has always been urging China to pay attention to IP rights protection. The two countries signed the Agreement on Trade Relations in July 1979, and Memorandum of Understanding (MOU) on the Protection of Intellectual Property in January 1992. The MOU put forward specific requirements for the protection of IP rights such as patents, copyrights, and trade secrets in pharmaceuticals, agricultural chemicals, computer software, etc. In June 1996, the US-China Intellectual Property Consultation Agreement was signed.

Why is it that so many international treaties and U.S.-China bilateral agreements are unable to restrict Chinese violations of IP rights? Why is the issue of IP rights the most difficult part in the U.S.-China trade negotiations? I believe it is because China has some cognitive barriers, that is, its policy is host to a “demonic mindset.”

China’s Understanding of IP Rights Has ‘Chinese Characteristics’

China is one of the late-developing countries. In addition, Chinese people have been fed the communist regime’s systematic indoctrination that China is a miserable victim of imperial plunder. In carrying out the Chinese authorities’ catch-up strategy—to catch up with and eventually surpass Western “imperialist” countries, many Chinese believe that knowledge (IP rights) should be something that belongs to all of mankind.

As Beijing needs to follow international rules on the surface, official documents will not explicitly make such statements, but from some of China’s internal documents regarding the subject of IP rights, it can be seen clearly China understands these issues. There are many such documents. One is the research report code-numbered 20122S0077, and titled “A Political-economic Analysis of the Globalization of Intellectual Property Law,” which was funded by the Research Fund of the State Intellectual Property Office of China.

The authors of the research paper believe that:

1. The United States requires that all countries around the world strengthen their IP protection using the pretext that “intellectual property rights are private rights.” This is hegemonic behavior, as the U.S. refuses to provide free intellectual property products to the international community

2. The U.S. makes use of IP rights to increase the international obligations of other countries, and uses its intellectual property advantages to suppress the development of other countries for the sake of maintaining its hegemonic status. As examples, Section 301 and 307 Of The Trade Act in the United States demonstrate the intentions stated above.

3. The United States uses multinational corporations to build intellectual property barriers to impose control and thereby transform technological oppression into political oppression and legal oppression.

Only by fully understanding Chinese society’s attitude towards IP rights can we understand why China felt so confident and self-righteous when putting forward its “Made in China 2025” plan. With the “IP Rights oppression theory” and the belief that “the United States should provide IP free of charge” as its theoretical basis, this research article clearly gives the definition of intellectual property in China: “There are three ways to innovate: original innovation, imitative innovation, import/absorption and re-innovation.”

Both American IP laws and international IP laws recognize only what the Chinese paper “original innovation” as intellectual property. In the latter two cases, if they are not paid for, they are plagiarism. However, in recent years, the crimes of plagiarism are being committed by Chinese scholars and engineers in broad daylight.

There is a Chinese idiom called “forcible seizure and crafty acquisition” (equivalent to “by hook or by crook”), and both tactics are used in IP theft in today’s China. Participants of the Thousand Talents Plan are instructed to steal technology by “crafty acquisition,” while forcing foreign companies to transfer technologies to China by imposing all kinds of restrictions or coercion is undoubtedly a type of “forcible seizure.” Sometimes Chinese engineers even steal technology through hacking.

On Dec. 12, 2018, during the U.S. Senate Judiciary Committee’s hearing “China’s Non-Traditional Espionage Against the United States: The Threat and Potential Policy Responses,” John Demers, the assistant attorney general for the national security division at the U.S. Department of Justice, testified that “from 2011-2018, more than 90 percent of the Department’s cases alleging economic espionage by or to benefit a state involve China.”

China is accelerating its pace of plagiarism. Made in China 2025 Plan is, in practice, a plan for mass plagiarism. “The playbook is simple — rob, replicate and replace,” John Demers told the senators, Rob the American company of its intellectual property. Replicate the technology. And replace the American company in the Chinese market and one day in the global market.”

When the Office of the U.S. Trade Representative issued its Investigation Report on China in 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), the office revised the draft three times. This report detailed China’s methods of indirectly or informally forcing technology transfer, including “the government’s use of opaque and discretionary administrative approval processes, joint venture (JV) requirements, foreign equity limitations”, etc. The report also pointed out that “on at least eight occasions since 2010, the Chinese government has committed not to use technology transfer as a condition for market access and to permit technology transfer decisions to be negotiated independently by businesses.” However, there is a large amount of evidence to indicate that China has continued its practice of forced technology transfer up to the present.

China’s Unique Understanding of Complying With International Rules

International rules, by definition, are those established by international organizations and institutions when they were founded. These rules may be modified with the change of time. For example, the Paris Convention for the Protection of Industrial Property was amended twice after World War II, in 1958 and 1967, respectively. But one principle always remains unchanged, that is, all participating countries must commit to comply with these rules.

But China has different interpretation of this principle. After the collapse of the Soviet Union, Deng Xiaoping once proposed the idea of “hide our strength, keep a low profile, take some action but do not attempt to take the lead,” as the guiding principle for China’s foreign relations. By the time China joined WTO, Chinese authorities came up with a new development plan—”gear up for international standards”—and promised to abide by various international treaties so that China could gradually integrate into the international community.

But this was a temporary measure, for before China becomes a global power. For example, it was only in the first five years that China strictly complied with the relevant WTO regulations after joining the organization. Ever since China announced its “peaceful rise” at the end of 2015, there have been frequent incidents of China violating international regulations, and the United States has had to constantly urge China to “become a responsible member of the international community.”

At the 2011 Hawaii Summit, the then-U.S. President Barack Obama, who had always been friendly with Beijing, asked China to stop “gaming” the international system and “act like a grown-up.” He also expressed his indignation: “Enough is enough.”

In response to Obama’s criticism, Chinese diplomat Pang Sen claimed that, “if the rules are made by the international community through agreement and China is part of it, China will definitely abide by them. But if the rules are decided by one or several countries, China does not have the obligation to observe them.”

Lest anyone make the mistake of thinking that Pang’s statement is just his personal opinion, diplomats don’t express their personal opinions at such important meetings. Shortly after Pang’s press conference, I wrote an article explaining Pang’s preposterous statements. What I wrote was that China is a latecomer to the international community. Most international organizations, including the United Nations, were established long before China joined them. The rules of these organizations, including the Charter of the United Nations, all had China missing in the formulation process. So based on Pang’s logic, China actually has the right to ignore all international rules.

In this respect, former U.S. Secretary of State Kissinger, regarded by the Chinese government as an old friend, is particularly clear about China’s “demonic mindset.” In his book “World Order,” he wrote that for many Chinese, when they learn that foreign countries urge China to comply with international rules, they would instinctively think of the fact that China had no say in shaping these rules, and is actually making a compromise when it agrees to follow them. Kissinger gave the Chinese authorities a friendly reminder of the importance of China to do well in handling the relationship with the United States.

However, when it comes to the understanding of IP rights issues, the Chinese regime has always and will always continue with its demonic mindset. On Feb. 1, the day after the US-China trade negotiations, Beijing-based Chinese media group Duowei News (with print circulation in the U.S.) published an article titled, “Lessons Learned from the Trade War: Beijing Can No Longer Bear the Shame of Having a Knife Held to Its Neck.” The article accuses the United States of trying to keep China down by launching the trade war. The United States, it says, operates on a hegemonic mindset, no different from that of the Western powers during the Opium Wars; imperialist oppression has never truly come to an end. To be able to restore China’s dignity some day, Beijing must continue to quietly and secretly grow more powerful.

It can be inferred that as long as China subscribes to the “intellectual property oppression theory” and the belief that “the United States should provide intellectual property rights free of charge,” China will never abide by intellectual property laws of the international community In IP rights negotiations. Instead, it is certain to delay and procrastinate in the hopes that U.S. domestic politics will shift to the disfavor of President Trump. China is probably thinking that if China can drag out the U.S.-China trade negotiations for two more years, then a new president is likely to occupy the White House. Even if China is forced to agree to certain provisions in the following two years, it will only be a temporary measure to buy the Communist Party some extra time.

He Qinglian is a prominent Chinese author and economist. Currently based in the United States, she authored “China’s Pitfalls,” which concerns corruption in China’s economic reform of the 1990s, and “The Fog of Censorship: Media Control in China,” which addresses the manipulation and restriction of the press. She regularly writes on contemporary Chinese social and economic issues.