For almost 9 months, the U.S. has been embroiled in a full-fledged, high-stakes war with China over things that cannot be held in your hands. The parties’ multi-hundred billion dollar fight centers almost exclusively on something intangible, yet wildly valuable, a category of highly-protected assets upon which the U.S. and other international industries are built: intellectual property.
The ugly back-and-forth between the U.S. and China – which follows from a formal probe by the U.S. Trade Representative in 2017, and has since seen the U.S. government implement tariffs on $250 billion worth of Chinese imports, with China levying tariffs of its own on $110 billion worth of U.S. goods – is the result of U.S. demands that China curb its practice of forced technology transfers and that it work harder to enforce the rights of non-native intellectual property (“IP”) holders.
More than that, though, the fight has been borne from what Reuters aptly characterized as “deep IP differences” between the two nations.
IP – an area of law that protects and prohibits the unauthorized use of products of the human mind – is firmly at the center of this ongoing fight, and in the process, the two nations’ varying approaches to protecting IP have been thrust into the spotlight, with both sides calling foul.
For many decades, the U.S. has boasted domestic innovation – from inventing new products to creating novel technologies – and with that came a desire to protect these intellect-based outputs in order to remain competitive on the international market, and to sustain the nation’s superiority and security on a global level. With this in mind, the U.S. maintains – and has, in some cases, for over a century, maintained – strict protections for IP rights. There are copyrights, which protect artistic works, such as sculptures, photographs, novels, and song lyrics. Trademarks for brand names, logos, product packaging, and even some products, themselves; and patents, which cover original inventions, technologies, and/or processes), both for native and non-native entities.
These legal protections often bestow upon the rightsholder the exclusive ability to use, copy, and sell the protected song or logo or system at issue for a specific (and limited) duration, while at the same time, the granting of exclusive rights serves to encourage innovation (in terms of patents), creativity (for copyrights), and brand awareness and consumer protection (in re: trademarks and trade dress). Although, it is worth noting that unlike copyrights and patents, trademarks do not come with an explicit duration limit, and can last as long as the company/individual at issue is actually using (and policing unauthorized uses of) the mark.
Generally speaking, this is legal framework U.S. and many other nations have adopted in terms of IP.
For the majority of its existence, the People's Republic of China has not been one of those nations. In fact, China has largely failed to enforce reciprocal IP protections, and has actively employed widespread infringement tactics in the eyes of the U.S. Trade Representative, the U.S. International Trade Commission, and many global rights holders.
As Robert Farley, a senior lecturer at the Patterson School of Diplomacy and International Commerce, wrote for The Diplomat last spring, the reason for the U.S. and China’s differing approaches to IP protection is not so much “cultural” as it is “positional.” In other words, “States that have advanced IP to protect tend to want to protect it; states that don’t tend to be lax about protection, especially in regards to foreign IP.”
The latter has traditionally been the case for China, which instead of fostering innovation at home, operated for much of its history as a lower-cost manufacturing center for innovators elsewhere in the world. As companies in other nations were developing new products and technologies, China was building a manufacturing-based economy that could bring those developments – whether it be Apple’s iPhones or jeans from the Gap – to market in a far more cost-efficient manner than many Western nations could.
That, however, is changing.
Over the past decade, China’s government has sought to “catch up with their foreign counterparts” in terms of developing its own designs and technologies. So, the Chinese government has taken to fostering IP innovation within its borders, including the promotion of its $300 billion China 2025 plan, an initiative that aims to bolster China’s energy efficiency, AI, machine learning, biomedicine and information technology capabilities, among others, as part of a larger move to solidify itself as a global economic superpower.
At the same time, however, many Chinese entities have sought to get ahead by “appropriating foreign IP by whatever means necessary,” per Farley, whether it be the technology behind smartphones … or fighter jets, or the trademarks – and designs – of famous Western fashion brands.
While China has arguably updated and strengthened its own IP legislation at least in part “because of U.S. pressure,” it is impossible not to ignore that the nation is almost more significantly driven by the fact that “its economy has grown more technologically competitive,” and Chinese business need a legal framework to rely on to protect their own innovations.
Still, the U.S. government is not convinced that these new efforts are not enough to remedy what the U.S. Trade Rep calls "Chinese theft of IP that currently costs the U.S. between $225 billion and $600 billion each year.” And it might be right. Barely three months ago, the Justice Department uncovered a sophisticated scheme in which companies in China and Taiwan were stealing valuable trade secrets about a technology that stores memory in electronic from Micron, an Idaho-based semi-conductor company.