Trump Administration opens probe into alleged Chinese theft of U.S. intellectual property

By Steve Brachmann
August 20, 2017

On Tuesday, August 15th, President Donald Trump signed a memo at the White House which authorized the U.S. Trade Representative (USTR) to make an inquiry into the alleged theft of American intellectual property which is believed to be aided by the Chinese federal government. Although there are concerns that the statement could increase tensions with China just as the U.S. government is seeking more cooperation from China on issues surrounding North Korea, the recent Trump memo comes in response to the $600 billion American intellectual property owners lose each year, a majority of which is due to Chinese tech transfer policies.

Robert Lighthizer, serving as USTR under President Trump, issued a statement in response to Trump’s directive to open the China IP probe:

“The United States has for many years been facing a very serious problem. China’s industrial policies and other practices reportedly have forced the transfer of vital U.S. technology to Chinese companies. We will engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry. Potentially millions of jobs are at stake for the current and future generations. This will be one of USTR’s highest priorities, and we will report back to the President as soon as possible.”

The Chinese government has already responded to the IP probe with cautionary words for the U.S. government. According to news reports, a statement released by China’s Ministry of Commerce admonished the Trump Administration’s for attempting to destroy principles of multilateralism. China’s commerce ministry also called for the U.S. to abide by pledges it made with the World Trade Organization (WTO).

It’s very interesting to note that China is calling on the U.S. to abide by its pledges with the WTO when it’s unclear as to whether China upholds its own pledges as a WTO member. Reports indicate that, going back to the 1980s, China has enforced joint venture policies which require foreign firms to transfer technologies to domestic firms as a price of entering the Chinese market. That’s a policy which flies in the face of WTO regulations on tech transfer.

And yet, in light of US Inventor’s recent protest of the Patent Trial and Appeal Board (PTAB), it seems to be clear that, if President Trump truly wants to protect the economic interests of U.S. intellectual property owners, he may want to investigate the current situation for patent holders within the U.S. Tech transfer rules enforced by the Chinese government are no doubt detrimental to U.S. patent owners but the PTAB has been outright deleterious with at least 90 percent of challenged patents being found defective at that tribunal.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 14 Comments comments. Join the discussion.

  1. IPdude August 20, 2017 11:38 am

    Domestic infringement by the big tech companies is by far a greater crisis. The Trump administration should first focus on domestic infringement before trying to gain political points by “defending us” against a lesser evil.

    (Theftovation: http://www.ipwatchdog.com/2017/08/17/theftovation-facebook-likes-copying-ideas/id=86916/)

  2. Tesia Thomas August 20, 2017 11:59 am

    I was wondering about this.

    I read all of the reports from USTR and thought it lacked a lot of details. But, the IPWd old article “Chinese Joint Venture Rules…” does say US firms are discouraged from speaking out about negotiations. But, the old IPWatchdog article mentions GM which I hilariously saw when I went there.
    GMs rust like heck and I think China uses more GMs than US especially where I live in the rust belt.

    I do see a 50-50 joint partnership (especially a carefully managed one) as less heinous to getting my IP invalidated in PTAB. So, really, yes. Trump needs to focus on the USA.
    But, maybe all that’s in his ear is the tech giants. And they love AIA so they would just talk about their China woes…
    They all quit last week. Great. Maybe my emails will get through and I have a chance of calling now.

    I still do think it all could be just emphasis on the joint venture. The documents cite joint venture is used “most often” but doesn’t name a company that doesn’t have joint venture agreements.
    And if companies aren’t really speaking up then how do we actually know this occurs most often?

    IMO China just doesn’t want a Google, FB, Apple, etc monopoly in China and so strangles them.
    Which I can understand. The government wants to remain in control…*cough* *cough* Cronies. It doesn’t want Google getting Issa’s in power and ruining everything and the best way to do that is to limit their money.

    Frankly, so long as China is really into making infringers pay then I don’t care.
    http://www.ipwatchdog.com/2017/07/23/chinese-president-xi-jinping-says-infringers-punished-pay-heavy-price/id=85953/

    In China, I can have a valid patent and defense of infringement for giving up half of my company.
    Fine.

  3. angry dude August 20, 2017 12:46 pm

    R U kidding?
    China and the rest of the world use USPTO as a giant free public library and laugh all the way to the bank
    while US inventors and startups struggle to pay their overinflated bills

  4. Benny August 21, 2017 5:59 am

    Try to explain this to me slowly (Anon will affirm that I am not the sharpest blade in the toolbox…)
    If a Chinese company copies my US patent, they have stolen nothing from me, since the patent does not confer any property rights outside of the US. If the Chinese manufacturer then offers my US patent protected product for sale in Europe, again, I have no standing. If the Chinese copy is offered for sale in the US, then I am being ripped off by the importer, and it is the US born and bred importer who will accountable to me and the ITC.
    If, on the other hand, I extend my patent to CN, then I will have to take it up with he Chinese courts. Nothing to do with the US.

  5. Benny August 21, 2017 6:46 am

    Angry @3,
    SIPO is a free public library for the rest of the world, too (if you can get through the machine translation). Maybe some US engineers aren’t savvy enough to take advantage of it.

  6. Night Writer August 21, 2017 8:28 am

    OT, but I find it a bit discomforting that the email I use for posting on this blog has been the subject of hack attempts.

  7. Night Writer August 21, 2017 9:08 am

    OT, but I think Gene will want to read this one:

    http://www.717madisonplace.com/?p=9143

  8. Anon August 21, 2017 10:57 am

    Benny @ 4 and 5,

    I agree with both posts of yours here.

    But keep in mind that I have also chastised angry dude for posting without thinking (as he tends to post out of his pure emotion, without engaging a more detached and critical thinking stage).

  9. Mark August 21, 2017 10:58 am

    Totally agree. It is shocking that US$600 billion American intellectual property owners lose each year, so without delay President Trump should now start protecting the economic interests for all U.S. intellectual property owners and investigate the current situation for all patent holders for all the industries.
    U.S. intellectual property is seriously damaging progress and should not be allowed or tolerated.

  10. Mark August 21, 2017 11:02 am

    Correction:

    Totally agree. It is shocking that US$600 billion American intellectual property owners lose each year, so without delay President Trump should now start protecting the economic interests for all U.S. intellectual property owners and investigate the current situation for all patent holders for all the industries.
    This is clearly illegal theft and robbery and is seriously damaging U.S. intellectual property and progress and should NOT be allowed or tolerated.

  11. Anon August 21, 2017 11:16 am

    Night Writer @ 7,

    While perhaps disconcerting to see (or be reminded of) blatant evidence of the political nature of the Executive Agency “judicial function” at work like that – this is NOT a new thing (as witness the reference to the Alappat case).

    As I have previously pointed out (in discussions concerning admin law); various executive agencies have a range of how truly distant a judicial function is from the political controls of the agency, and OFTEN less “respect” (or if you prefer, comity) is due to those agencies that do not have the judicial function sufficiently separated. Further, the separation is typically set in the particular agency’s establishing legislation.

    The USPTO is one of the lowest “respected” executive agencies because of the lack of meaningful separation of the judicial functions and the political controls.

    Sadly, this aspect of admin law is often not understood by the very legislatures that want to give more power to the Article I entities, and then do not seem to understand how those who DO understand admin law point this (granting more power) out as inviting corruption.

    This too is another factor that makes the upcoming Oil States case so important. If patents are deemed to be NOT personal property, then protections afforded personal property are out the window, and the (captured) legislature can make ALL adjudications (of granted patents) fall under the Article I agency power.

  12. angry dude August 21, 2017 1:10 pm

    Benny and Anon,

    Given the realities of current UGLY situation with IP “protections” for small domestic entities in US I think it is time to rethink the policies towards foreign patent applicants (like Benny) in the USPTO and ITC rules at the very least…
    The Founding Fathers just did not envision the rape of small and not so small domestic innovative companies by large domestic multinationals AND foreign entities that is currently ongoing
    The US Administration should pay close attention to growth of small and mid-size domestic enterprises and not to huge multinationals like google or apple – those are already in chocolate

  13. Anon August 21, 2017 6:15 pm

    angry dude,

    Patent law – by its very nature – has always been a sovereign-centric law.

    We have here a classic case of “capture’ (on the scale that dwarfs the S&L crises and other capture events).

    Repealing Citizen’s United would be good first step to properly keeping juristic persons (especially juristic persons with NO real way of being beholding to a single sovereign) in line.

  14. Name withheld to protect the innocent August 21, 2017 9:52 pm

    NW@7

    I saw your link on the “other” site, and I took a look at it. BTW, I’ve bookmarked 717madisonplace because I have found it to be a good read. Regardless, the admissions by the USPTO at oral argument disgusts me but is something I find unsurprising.

    Most APJs at the Board have no shame. I have read so many decisions from the Board where the APJ (writing the decision) basically mailed it in. One APJ (I forgot his name) had a bunch of form paragraphs that he kept on recycling. They basically read: “Appellant argues [issue 1]. We incorporate the Examiner’s findings and arguments from the examiner’s answer. Appellant’s arguments are non-persuasive, and we disagree with the Appellant for the same reasons as the Examiner. Appellant argues [issue 2] … [repeat].”

    There have been many times where I’ve read a decision and said to myself, “I could have written than in 30 minutes.” Reproduce the language of the claim, reproduce some boilerplate language, identify an argument (or two), write you agree with the Examiner, throw in some generic KSR mumbo-jumbo and you’ve met your quota for the week. It must be pretty easy when you already know how the appeal is going to turn out before you even pick it up the briefs.

    If I was the emperor of the USPTO, one of the first things I would do is fire about 40-60% of the APJs. Anybody hired during the Dudas era is definitely on the chopping block. Also, anybody that has a long-standing history of always favoring the Examiners (and there definitely is a consistent group from the numbers I have seen) is dead wood that needs to be cleared.

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