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MEMORANDUM NOTE DE SERVICE

PURPOSE OR ISSUE

China's failure to protect and enforce intellectual property (IP) rights harms U.S IP, rights holders.

BACKGROUND

• Intellectual property violation by China technological companies and other companies is the main issue of concern between China and U.S. foreign relation.

• The Trump administration investigated the issues whereby they found that China had violated the trade Act of 1974. 1

• The U.S. and China reached an agreement on trade and IP issues in January 2020. Intellectual property (IP) issues addressed:-

• Normalization of China system for IP administration and enforcement,

• development of patent linkage system on pharmaceutical, and

• allowing foreign technology transfer in China.

• Biden administration will continue to take a hard stance toward China's IP abuses.

• IP issues will continue to be a major concern to the U.S. until the agreement is fully implemented and China changes its policies towards enforcement of IP laws.

• Biden administration will not tolerate any sign of lapse in China IP protection

CURRENT SITUATION

The U.S. has been aggravated by the Chinese government's failures to protect and enforce intellectual property (IP) rights. China has inadequate domestic IP protection and enforcement. The U.S. government and U.S businesses have raised this concern because they believe that poor enforcement of IP protection contributes to piracy and counterfeiting, cyber intrusion, and strategic acquisition. 2 IP infringement negatively affects U.S. business profit proceeds as well as exposing the U.S. government to security threats. The U.S. secrets could be stolen or accessed through cyber instruction when there is no law or poor enforcement of the law that could deter cyber intrusion behaviour. The U.S. accused China of violating its Trade Act of 1974. In a demonstration of China's action , the Trump administration imposed tariffs on Chinese imports. China protested U.S. action by imposed tariffs on U.S. goods.

KEY CONSIDERATIONS OR POINTs OF COMPARISON

The IP infringement issue is an economic, and security issue that creates a security threat to the U.S. especially when IP infringement leads to cyber instruction .

• U.S. businesses are limited from enjoying their profit proceeds fully due to IP infringement.

• China requires international companies seeking to do business in China to turn over their technology to a local firm or be denied their right to operate in the country.

• This creates a challenge in protecting IP even when China has agreed to refrain from directing outbound investment from acquiring foreign technologies.

• China administrations employ an authoritarian and static version of capitalism

• China's government managed and controlled almost every aspect of its economy including the policies relating to the protection and enforcement of intellectual property rights (IPRs).3

• China’s mode of governance conflicts with the rules and norms of its international law

• At the national level, China's leadership is reluctant to enforce the policies because doing so will protect the foreign firm making China over-rely on foreign firm technology.

• China’s IP law is thoroughly protective for either domestic innovators

• China has the responsibility of enforcing IP laws the same way it protects its domestic firms.

• IP laws and regulation are complicated and China lack enough highly trained professionals in the areas.

• Local patent lack independent jurisdiction because local leader control the patent offices

• The U.S. believes in rule of law and this explains the government's concern on the enforcement of IP protections and promoting governance that promotes freedoms.4

• U.S. has become professional in IP laws enforcement and that is why it has a competitive advantage to enforce IP laws.5

CONCLUSION/RECOMMENDATION AND/OR NEXT STEPS

The reason for choosing IP infringement issues is because China and the U.S. both invest huge interest in IP. China uses licensing as criteria for forcing U.S. businesses to surrender their IP. This strategy gives China considerable opportunities for infringement, fraud, and corruption. The China court only favours the local firm more than foreign business people. U.S.'s interest in IP enforcement is to protect its business and security from infringement. The U.S. sees China as a strategic competitor; therefore, allowing China access to trade secrets would give China a competitive advantage leaving the U.S. on the losing side. China agreed to enforce IP laws something which may not be possible based on China's administration, attitude, and influence of local leaders on patent office at a local level. This agreement will not be enforced in totality therefore future tension on technology and IP infringement will continue to build U.S. and China foreign policy relation.

Bibliography

Brander, James A., Victor Cui, and Ilan Vertinsky. "China and intellectual property rights: A challenge to the rule of law." Journal of International Business Studies 48, no. 7 (2017): 908-921.

Chow, Daniel CK. "Why the 2020 US-China Trade Agreement Needs Anti-Corruption Provisions for the Protection of Intellectual Property." Notre Dame Journal of International & Comparative Law, Forthcoming (2020).

Delisle, Jacques. "When Rivalry Goes Viral: COVID-19, US-China Relations, and East Asia." Orbis 65, no. 1 (2021): 46-74.

Habib, Misbah, Jawad Abbas, and Rahat Noman. "Are human capital, intellectual property rights, and research and development expenditures important for total factor productivity? An empirical analysis." International Journal of Social Economics (2019).

Huang, Kenneth Guang-Lih, Xuesong Geng, and Heli Wang. "Institutional regime shift in intellectual property rights and innovation strategies of firms in China." Organization Science 28, no. 2 (2017): 355-377.

1 Jacques Delisle, "When Rivalry Goes Viral: COVID-19, US-China Relations, and East Asia." 

2 Chow, Daniel CK. "Why the 2020 US-China Trade Agreement Needs Anti-Corruption Provisions for the Protection of Intellectual Property

3 Brander, James A., Victor Cui, and Ilan Vertinsky. "China and intellectual property rights:

4 Habib, Misbah, Jawad Abbas, and Rahat Noman. "Are human capital, intellectual property rights, and research and development expenditures important for total factor productivity?

5 Huang, Kenneth Guang-Lih, Xuesong Geng, and Heli Wang. "Institutional regime shift in intellectual property rights and innovation strategies of firms in China."