SUBJECT-INTELLECTUAL

PROPERTY LAW
TOPIC-CHINA’S INTELLECTUAL
PROPERTY THEFT
CHINA’S INTELLECTUAL
PROPERTY THEFT

ABSTRACT
According to Confucianism, in China the Individual is much less important
than the group whereas in the West the people grew up with this idea that
every individual is like a special snowflake and everything they do is
special and hence their ideas become intellectual property.

In China it is better to copy whether it was calligraphy or a work of art or a

document like a literary document, according to them it is better to copy a
master until you have mastered his technique before you add on your own
style to something. Hence piracy and copying things was never ever
frowned upon because individual thought was never appreciated.

Piracy is so rampant here is because in the past there was no other way to
get a hold of things. For example, Hollywood movies were never officially
released here in China, so if they wanted to watch a Hollywood movie they
eventually have to get a cheap knockoff VCD from Hong Kong or
somewhere else to watch it. And for instance with games consoles, which
were banned in China as there were no official channel to sell games,
eventually they have to buy copied games. Hence there was no choice but
to buy pirated things.
INTRODUCTION
“Imagine Nike without the Swoosh, McDonald’s with no golden arches or
Apple without the apple. Trademarks and patents can make or break a
company.”

Most of the inventions that power the modern world started out as an idea
which was eventually patented.

Over the past decade, there’s been an explosion of claims from companies
and investors hoping to carve out their own slice of the digital age.

Intellectual property is turning into a key battleground between the

world’s biggest economic powers.

China now accounts for more than 10% of all trademark applications filed
in the US.

More than 14 million trademark applications were filed worldwide in 2018,

up almost 160% from 2008. At the same time, patent applications have
surged more than 70%.

In the US alone, intellectual property-intensive industries contribute

trillions of dollars to the economy every year.

One of the main points of the patent system is to encourage innovation

from those who otherwise wouldn’t do it. For many entrepreneurs,
investors and businesses say patents and are the lifeblood of innovation.
They can help turn an idea into reality and generate millions of dollars in
returns.

Mark Zoske, the CEO of Seattle-based gourmet salt says the trademarks
have helped boost brand loyalty and fend off imitators. The smaller the
company are, the more important that the trademark is, because if you
really catch fire with something, that’s the only thing that’s going to
differentiate you from someone that has lot of money that can put out a
nearly identical product.

Many of today’s innovations are in the form of software, machine learning

or AI instead of tangible physical objects. This can make evaluating patents
harder.
Tech companies are capitalizing on IP rights for computers, smart devices
and software. California-based chip maker Qualcomm, for example,
generates a large portion of its sales by licencing patents. Tech giants like
IBM, Samsung, Microsoft and Apple apply for thousands of patents every
year.

“Patents have the ability to play a vital role in the economy and in
innovation, but that the bad patents can also do a huge amount of damage.’’-
Alex Moss, Staff Attorney, Electronic Frontier Foundation.

Some people, companies and even countries are trying to stretch the legal
limits when it comes to cashing in on IP.

The rise of fraudulent trademarks is one concern among lawmakers in

Washington. USA trademark register has been inundated with applications
in recent years, with many coming from China.

“The significant concern here is that a lot of these applications are

fraudulent, meaning that they are making claims that there’s actually goods
or services sold under the trademarks in US when in fact they are not.’’

“They are essentially photo shopping, digital photographs that begin off the
Internet, submitting these to the PTO, saying here is evidence of our use in
commerce.’’-Barton Beebe, Law Professor, NYU.

Beebe estimates about 67% of the trademark applications from China in

the apparel goods category in 2017 were fraudulent, meaning they didn’t
correspond with a real brand.

The problem, he says, is that these applications are clogging up the system.

They have clients that have had trademark applications denied because of
these fraudulent registrations, and they have had to take additional steps,
which typically costs thousands of dollars to remove those fraudulent
registrations from the US trademark register.

The US Patent and Trademark Office implemented a new rule in August

2019 that required any foreign company registering for a trademark to use
a US licenced attorney.
This push of China’s trademarks in US is just one example of a bigger fight
over IP between the world’s two biggest economies.

CHINA’S GOAL
China has one stated goal in the industry –“get out under the yokes of
others”. They say that means innovation, self-sufficiency, R&D, government
financing- the slogan is this, made in China 2025.

US companies say it actually means “trouble”. US industry leaders in

analysis say Chinese tech policy does a few things, imposes a high cost of
entry, hence American companies are forced to turn over key technology
just to enter the market. They describe it to as pay to play in the world’s
second largest economy.

Then for matchmaking in some key industries like China’s energy, telecom
and auto sectors, US companies have to form joint ventures with domestic
firms. That means transferring valuable technologies, intellectual property
to the local company allowing the local firms to create their own new
products in their own new technology.

Well talking about the financing, American companies have to compare

with Chinese operators that get $300 billion in government assistance. In
addition to it Cyber security rules are being ruled out by China in the past
couple of years.

“China is deeply committed to industrial policies that include maximizing the

acquisition of foreign technology and information, policies that have
contributed to greater IP theft.”-Commission on the Theft of American
Intellectual Property

But American tech companies aren’t turning

away from China for one basic reason they
can’t, as the market is just too big to ignore, as
there are 1.4 billion people in China more than
the quadruple the population of US plus China
1.4 is booming in context of tech growth which

billion accounts of 43% of the world’s projected tech

growth.
So while the possible payoff is high for the innovators so as the cost to their
home country. One estimate says the US loses as much as $600 billion a
year to IP theft and China is considered a major infringer.

To this China’s concerns are:

“We will fully implement our plan for developing strategic emerging
industries.”-Premier Li Keqiang, China

SCOPE OF THIS ISSUE

China’s role in stealing Western companies’ intellectual property is well
documented. However, not too many of the victims know what the nation
does with trade secrets after they are pilfered; a former U.S. government
leader said Nov. 19

“China has institutionalized a system that combines legal and illegal means
of technology acquisition from abroad,” said William Schneider Jr., former
undersecretary of state for security assistance, science and technology and
former chair of the Defence Science Board.

It is easy to dismiss “acquisition” as a euphemism for theft. But in reality,

trade, foreign investment, licensing, international research collaboration,
cross-border movement of experts, collection of open-source material,
imitation, reverse engineering, and, yes, theft have all contributed to
China’s technological progress.

Beyond stealing IP, in some sectors China is accused of demanding

technology transfers in exchange for market access by requiring foreign
investors to form joint ventures with Chinese firms. Although China denies
any coercion (after all, foreign firms can simply walk away), many foreign
firms feel that the sheer size and attractiveness of the Chinese market give
domestic firms excessive bargaining power.

Americans continue to be susceptible to intellectual property theft thanks

to a growing crime spree in China – with former employees sharing trade
secrets or facing betrayal from once loyal partners. The Commission on the
Theft of American Intellectual Property reported that the total theft of US
trade secrets accounts between $180 billion to $540 billion per year, with
China committing most of that theft.

China steals the IP and other secrets from industries. It is first sent to one
of China's two dozen advanced science universities. They in turn apply for
Chinese patents on the technology. After they are acquired, the government
distributes the patents to various companies.

One of the most notable recipients is telecommunications giant Huawei

Industries, which has been under the microscope of U.S. regulators as the
company attempts to role out its 5G technology.

Huawei “is one of the best examples of this problem,” Schneider said. It has
acquired 56,000 5G and artificial intelligence-related Chinese patents
despite spending a pittance on research and development, he added.

EVIDENCE FOR THE THEFT

o Take Skyroam for example, a maker of virtual SIM cards. In 2008, the
company developed and patented a virtual SIM card that
revolutionized how people access the internet when they travel. But
in 2018, Skyroam went to trial against a Chinese company,
uCloudlink, for selling a competitive product in the United States, its
GlocalMe global Wi-Fi device.

During the discovery phase of the case, it was revealed that

uCloudlink CEO Gao Wen worked with a former Skyroam employee,
Wang Bin, to steal Skyroam’s proprietary technology. The case ended
in consequences for the Hong Kong-based company, who had to fork
over millions for the patent infringement in June 2018.

o Similar to the case with Skyroam, T-Mobile also faced a similar

issue with their robot, “Tappy.” The company patented a robot that
could detect problems with cell phones – an especially lucrative tool
based on the demand for cellular technology. But in 2013, an
engineer responsible for testing the technology stole an arm from
one of the robots to pioneer his own project in China.
 According to the civil lawsuit case over the Tappy incident, T-Mobile
was awarded $4.8 million in damages in 2017 – and the company
who supported the engineer in its efforts to steal the IP, Huawei, now
faces 10 counts in federal court.

o Aside from leveraging these inside sources, Chinese companies have

also found ways to steal trade secrets independently, as was the case
for American company DuPont Co. in 2017. After DuPont suspected
and sued its onetime Chinese partner for stealing chemical
technology secrets, investigators from China’s antitrust authority
showed up at DuPont’s Shanghai offices demanding passwords,
printing documents, and seizing computers, according to people
briefed on the raid.

Those investigators also threatened DuPont to drop their original

lawsuit, according to people briefed on the raid. DuPont refused to
drop the case, but the example shows how China is willing to gain
information in any means necessary.

o It’s well known that China steals IP and other secrets from industries,
academia and the government, “but what is not so well known is
how China converts the technology it acquires into their military
capabilities,” William Schneider Jr., former undersecretary of state
for security assistance, science and technology and former chair of
the Defence Science Board, said at the DSEI Japan conference held
near Tokyo.

Evidence to it is,

 From alleged attempts to hack into Swedish telecom provider

Ericsson to the theft of information related to the F-22 and F-35.
There are several instances of China gaining access to foreign
technology or trying to do so.
 There are also examples of Chinese military systems looking
suspiciously like US systems-the F-22 and the MQ-9 Reaper drone
among them.
 Other elements of those Chinese systems-the software,
technology, and manpower used to operate them-aren’t on par
with the US military yet. But they might not be far behind,
 according to the Defence Secretary Mark Esper. At the
Department of Homeland Security’s National Cyber security
Summit on Sept. 19,2019, he warned that China is perpetrating
“the greatest intellectual property theft in human history. ”Esper
told attendees that he had cautioned European allies against
allowing Chinese companies to build 5G cyber networks in their
countries, warning that to do so would risk sensitive national
security information.
 “Every Chinese company has the potential to be an accomplice in
Beijing’s state-sponsored campaign to steal technology,” he said,
highlighting China’s integration of civil and military technology,
an area in which Beijing surpasses the U.S.
 China has systematically sought to acquire US technology both
through traditional espionage means, as well as through legal
investments in companies,” Daniel Kliman, director of the Asia-
Pacific Security Program at the Centre for a New American
Security, told Insider.
 It is evident from the China’s carbon copies stack up to US
weapons systems. The PLA’s J-20 looks extremely similar to the US
Air Force’s F-22 Raptor.
 As Popular Mechanics reports, the Chengdu J-20 is one of the
aircraft that was designed using information from the US.
 Su Bin, a Chinese national and aerospace entrepreneur, pleaded
guilty to cyber espionage in 2016. He co-conspirators spied on US
plans for the C-17 Globe master, the F-35, and the F-22. But while
the J-20 looks like the F-22, it’s not quite in the same league.
 Michael Kofman, a senior research analyst at the CAN think tank,
told Insider last year that he suspected “the J-20 probably has
great avionics and software but, as always, has terrible engine
design. In fact, Chinese low-observation aircraft designs like J-31
are flying on older Russian Klimov engines because the Chinese
can’t make an engine.”
 The Chinese Shenyang J-31 is strikingly similar to the US F-35.
 In August, Chinese national Pengyi Li was arrested on his way to
Hong Kong after an undercover investigation by the Department
of Homeland Security into the smuggling of components for
 missiles and surveillance satellites from the US to China, Tim
Fernhoz and Justin Rohrlich reported in Quartz.
 Chinese nationals have also been found guilty of trying to
smuggle accelerometers, which are necessary for guided missiles
and spacecraft.

CONCLUSION
 What that really means is US will give China five or 10 years to sell
their product to their more than billion consumers.
 But 10 to 20 years from now, that technology is going to be
manufactured here in US by their companies and then exported to
the rest of the world.
 Many American business leaders warn policies like force technology
transfers have resulted in IP theft, posing a major risk to business.
 A 2017 report by the IP Commission estimated IP theft from China
and other countries cost the US economy between $225 billion and
$600 billion per year.
 Basically, what’s happened over the last at least 30 years is one of the
single greatest transfers of wealth from one country to another. The
IP theft that has occurred between the US and China is historic in
scale.
 That’s why IP is key sticking point in the trade war between the US
and China.
 The phase 1 trade agreement between the two countries pledged
stronger protection against patent and trademark infringement.
 Imagine if instead of Facebook, Amazon and Google all being
American companies with American headquarters and mostly
American employees. If all of those companies in those technologies
were Chinese –developed, Chinese –owned, Chinese –led, all that
additional wealth and opportunity and influence on the world stage
goes to China rather than the US. That is exactly the competition that
the US is in the middle of right now.

SOURCES USED
 Bloomberg news
 PBS news report
 CNBC news
 Poly Matter YouTube channel
 Newsy YouTube channel
 DW news
 FOX business news
 GZERO media YouTube channel
 Wall Street Journal
 Dhruv Rathee YouTube channel
 ADVChina YouTube channel
 National Review