Don’t Undermine U.S. Innovation While Standing Up to China

By Joseph Allen
November 26, 2019

“While we must effectively respond to China and others looking to do us harm, we must avoid inadvertently undermining the very policies which made us the leader in turning government funded R&D into cutting edge products. Unfortunately, the initial bureaucratic response is not reassuring on that score.”

U.S.-China innovation https://depositphotos.com/97124506/stock-photo-hand-pickpocketing-wallet-of-businessman.htmlOne of the few areas of bipartisan agreement in Washington is that it’s time to respond to Chinese economic and military aggression. The need is underscored by a sobering report from the Senate Homeland Security & Governmental Affairs Committee’s Permanent Subcommittee on Investigations titled “Threats to the U.S. Research Enterprise: China’s Talent Recruitment Plans.” The report documents how China exploits our culture encouraging the open exchange of science in order to achieve their commercial and military objectives.

In its editorial, “China’s Bid on American Science,” The Wall Street Journal aptly summarizes the report:  “It found the U.S. government is funding research for hundreds of scientists at American universities and labs who are effectively under contract to turn over their findings to China.”

No nation can allow others to steal its cutting-edge technologies. While we must effectively respond to China and others looking to do us harm, we must avoid inadvertently undermining the policies which made us the leader in turning government funded R&D into highly innovative products. Unfortunately, an initial agency response is not reassuring on that score.

[[Advertisement]]

The Senate Report

The Senate Subcommittee pulls no punches on the seriousness of the threat:

This report exposes how American taxpayer funded research has contributed to China’s global rise over the last 20 years. During that time, China openly recruited U.S.-based researchers, scientists, and experts in the public and private sector to provide China with knowledge and intellectual capital in exchange for monetary gain and other benefits. At the same time, the federal government’s grant-making agencies did little to prevent this from happening, nor did the FBI and other federal agencies develop a coordinated response to mitigate the threat. These failures continue to undermine the integrity of the American research enterprise and endanger our national security.

Pilfering U.S. technology is a centerpiece of the Chinese government’s plans to dominate international science and technology by 2050. China sees foreign trained scientists and experts as an essential asset to close their economic and military gap with the United States. They’ve already made impressive strides towards achieving that goal.

In the 1990s, China sought to limit the brain drain of its most talented researchers who wanted to work in the West. However, their government soon recognized that it was well served placing scientists in foreign research facilities. The Chinese targeted 14 critical technology areas needed to meet its economic and military objectives. Much of the leading R&D in those areas is being conducted in our research universities and federal laboratories. The Senate report says:

…China was not losing brainpower, but rather it was storing its talent overseas to tap later. Chinese leaders, therefore, determined that it could be more efficient to allow its nationals to learn how to conduct research and develop cutting-edge technologies overseas and later find ways for these nationals to assist China.

In 2008, the “Thousand Talents Plan” was launched, paying its operatives in U.S. research institutions to transmit information they accessed back to China. It also recruited U.S. based researchers, scientists and experts in the public and private sectors to disclose knowledge and intellectual property they possessed in return for pay and other benefits. Those in the program are encouraged to conceal their relationships with China when applying for federal research grants, while setting up “shadow labs” in the mainland to build on the research they steal.

As of 2017, China was believed to have 7,000 researchers in the Thousand Talents program. It’s been so successful that it’s lavishly funded. Participants removed 30,000 electronic files from the U.S. before leaving for China, while others obtained proprietary information on military jet engines.

Because of increased scrutiny, the Thousand Talents Plan has moved underground but its aims remain unchanged. Additionally, China has developed 200 other “talent recruitment programs.” The Senate report chronicled how U.S. research agencies and the FBI have failed to counter the threat.

The report concludes by urging federal agencies to better monitor who receives its grants, ensuring that they fully disclose their foreign commitments and sources of support. It’s not clear why it’s believed that those being paid to purloin intellectual property and knowhow from our universities and laboratories will disclose they’re on the Chinese payroll.

The report also urges the FBI and intelligence communities to work with our research institutions to get on top of the problem.

A Proposal to Avoid

One agency response to the challenge to our technological leadership is outlined in the article “Air Force Planning IP Rights Changes to Keep Up With Foes.” The story cites the Air Force general counsel describing the need to change its procurement policies because “’it can ‘no longer afford’ to allow contractors to keep a consistently strong grip on IP amid increasing competition from Russia and China.”

The envisioned change would include moving from contractor ownership of inventions and data to a “smart IP” model to create a future system of “open architecture and open IP rights, allowing any company to compete to build or upgrade” parts over time.

The Air Force said it would consider paying more to its contractors whose intellectual property is being taken for this “flexibility.” However, according to the story, defense contractors have long complained that the Department of Defense “often overreaches in its attempts to secure rights to IP that companies have paid to develop, asking for too much access… or wanting to pay too little.”

Having the government take technologies from innovative companies to give them to competitors is a policy the Chinese would certainly recognize. Hopefully, that’s not what the Air Force has in mind. If it is, the proposal directly contradicts the Bayh-Dole Act, which gives contractors ownership of inventions made with federal funding to encourage them to pursue commercial applications in addition to the work they are doing for the government. It also violates President Reagan’s Executive Order 12591 giving contractors rights to data they create under grants and contracts. Because of these policies, government funded R&D has become a significant driver of our economy—to the dismay of our competitors.

Bayh-Dole also protects the government’s rights to use technologies it helped create by providing it with a “nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.”  That includes meeting an agency’s procurement needs.

Playing for Keeps

We’ll have to see how this plays out. If the new policy takes inventions and know-how away from contractors who’ve spent decades developing unique expertise, costs could sky rocket if fair compensation is being made for the loss they would suffer. If they’re not fairly compensated, will innovative companies want to do business with the government?

Before Bayh-Dole, many prime contractors segregated their commercial from their federally funded R&D to minimize the potential loss of IP to the government. Many small companies steered away from federal contracts altogether because agencies demanded ownership of their inventions and background rights. Further, when the government took patents away from contractors, they remained undeveloped because the incentives for commercialization were destroyed. We shouldn’t return to those failed policies in an attempt to respond to our current threats.

If we undermine the principles that have made us the most innovative country in the world, our adversaries will have achieved a coup far beyond their wildest dreams. This is no time to shoot ourselves in the foot. We’re going to need  healthy feet to run faster than our competitors. That means developing the military and the commercial products of the future. Current policies allow us to use federal R&D to accomplish both objectives. We should be very leery of changing lanes with our competitors right on our heels. Unlike a track meet, this game is being played for keeps.

Image Source: Deposit Photos
Image ID: 97124506
Copyright: AndreyPopov 

The Author

Joseph Allen

Joseph Allen is a Featured Contributor on IPWatchdog.com, and a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications.

Joe served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. He is our resident Bayh-Dole expert, and will write frequently about Bayh-Dole and issues surrounding the commercialization of university research.

In 2008, Joe founded Allen & Associates, through which he offers consulting services assisting clients in technology transfer issues, including developing effective communication strategies with national policy makers.

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 12 Comments comments. Join the discussion.

  1. Jason Lee November 26, 2019 10:51 pm

    China stealing America’s IP is yesterday’s news, China is now attracting American inventors to invent in China with government backed IP protection, this is something America no longer has nor can provide as FAANG has helped kill of patent right with the AIA Act PTAB and 101. While America chokes out its inventors China is welcoming them in with investors Throwing cash at inventions with chines goverment protected patent laws, with injunctive relief in play.

  2. Anthony Claiborne November 27, 2019 11:31 am

    I am wary of broad claims of Chinese misappropriation of U.S. intellectual property. Many of these claims are simply what is called “agitprop”. There is some merit to the argument that the U.S., whose technological eminence has actually been waning for some time, seeing ever increasing scientific and engineering development in China, uses the claim of technology theft to deny the unmistakable decline of American intellectual dominance and to fuel resentment against its Chinese competitor.

  3. angry dude November 27, 2019 11:51 am

    If American inventors/small R&D-intensive companies are forced to leave US due to lack of IP protection and go to China or elsewhere, folks responsible for this must be tried for HIGH TREASON

  4. Jacek the "troll" November 27, 2019 3:48 pm

    How to save the sinking (US) ship if everybody is ignoring the big hole in its hull?
    For eight years from the enactment of the 2011 AIA act, the obvious truth is being ignored. Cutting edge technology is not going to be developed in-country with an outdated IP law system. When for example, I can have instant, nest day IP protection for up to 100 Industrial Designs in up to 90 countries through Hague agreement and compare it with USPTO procedure and COST for the same number of design in the US is clear that I will never attempt to do things I ma encouraged to do in EU or in China. I have already lingering in my drawer product designs which will never see daylight in the US due to USPTO bureaucracy and COST.

  5. Anon November 27, 2019 4:28 pm

    Mr. Claiborne,

    If these claims were from only one source, I might join you with some degree of apprehension.

    Sadly though, I have heard of the unprecedented State-sponsored industrial espionage of China for many years now – from many sources.

    Our “Snowden” venture pales in comparison.

  6. Anthony Claiborne November 27, 2019 7:06 pm

    No question, @Anon, that the Chinese government either directly or through corporate proxies sponsors industrial espionage. However, my point stands: it is politically expedient to paint the Chinese effort to increase their technological sophistication as theft and to ignore the fact that U.S. government fostered innovation languishes in an environment of increasing American anti-intellectualism and skepticism toward scientific development.

  7. Tesia Thomas November 27, 2019 8:21 pm

    Joseph Allen…

    Where have you been? DoD buys from China: https://www.reuters.com/article/us-usa-military-china/u-s-military-comes-to-grips-with-over-reliance-on-chinese-imports-idUSKCN1MC275

    This is all so ridiculous.
    DoD’s left hand is buying tech from China.
    DoD’s right hand is claiming China’s stealing tech.
    How do we know we’re not handing it away? …just to save the almighty American dollar that the Federal Reserve probably prints too much of…

    …“’it [DoD/Air Force] can ‘no longer afford’ to allow contractors to keep a consistently strong grip on IP amid increasing competition from Russia and China”…so it buys from China and possibly Russia too.

    Well, DoD can’t afford anything because fraud, waste, and abuse is high – just look at all the white collar crime on any OIG website. They can’t pass an audit. Any other organization would be shuttered by the IRS.
    And, why do we keep giving more and more money with the same amount of (little) supervision to the same people in DoD that initiate transactions that can’t be audited.

    DOD WASTES MONEY!!

    What do you make of this illustration of what I KNOW is wrong with Federal Funding:

    A Carnegie Mellon University spin-off called nanoGriptech Inc has received every DoD SBIR for unique closure systems for the past ten years: https://www.sbir.gov/sbirsearch/detail/890409.
    They’re oh so Bayh-Dole.

    But, the government is getting absolutely nowhere. DoD is going so much of nowhere that after the several Millions of dollars of funding and ten years passed, they’re putting out public innovation contests like they don’t have anything to go on for new closure promises: https://www.innocentive.com/ar/challenge/9933788.

    It’s an unsuccessful strategy – funneling ~$5 Million to one company year after year then begging the general public for a hope.

    Contractors don’t want the nanoGriptech Inc closure and I know because the big names are contacting my startup asking for samples. And when we direct them to nanoGriptech Inc. they reply, “We need a zipper.”
    Every single part of the Army concerned with soldier protection and chem/bio defense has contacted my startup asking for samples but they all claim they don’t have funding to support getting the samples that they want.
    $1.4 Trillion budget but no money!

    We segregate our R&D “…to minimize the potential loss of IP to the government.”
    Bayh-Dole means nothing. DoD still misappropriates because fighting the government is not something anyone wants to do and is a lofty battle.
    It’s a nice section of Code Law that gets read in CAFC and then the government will just decide for itself that it didn’t infringe it’s citizen’s rights.

    You think Tech Corps buying government gives them an upper hand in court. Well, you’ll likely be fighting against the government in a government court. No jury.
    Inventor, saying to the government, “One part of you stole my stuff.”
    The Government, in unison, “I don’t think so.”

    Maybe if DoD and other government entities would fix their spending then they’d have the money to fund American innovation.

    All the contractors that contact me tell me of YKK lobbying… that’s the US government taking money from a Japanese Corp that they know can’t fill their closure needs – they’ve tried everything they produce ten times over.

    China or Asian and America… one hand washes the other. And, yes, Americans suffer

    DoD should focus on minimizing its waste instead of changing how it funds American innovation.

    Does an individual making $1.4 Trillion a year just stop eating or stop paying bills before sewing the gaping holes in his/her/it’s pockets?

  8. angry dude November 28, 2019 9:45 pm

    Anthony Claiborne @2

    There is clear political will in “communist” China for scientific and technological world dominance.
    Their most talented students (used to) study at best American universities and work for US companies and even government agencies such as NASA and then return to China to start their own companies or become professors at leading Chinese universities.. but by now they are advanced enough to ignore USA
    All of these in addition to industrial espionage
    China wants their talent back and encourages those folks with lavish grants for tech startups and strong IP protection

    Once Russia goes through the change of paradigm from selling natural resources (which China does not have) to supporting scientific and technological development the story will be the same – they will lure back folks from Silicon Valley or elsewhere in the world – the population of Russia (or ex-Soviet Union) born scientists and engineers working in USA or elsewhere outside of Russia is immense. What is needed is political will.

    Meanwhile USA which used to be a magnet for people from all over the world to come here to study and start their own hi-tech companies slowly (not so slowly lately) goes into abyss…

  9. Anthony Claiborne November 28, 2019 11:30 pm

    @angry dude, I agree with your overall assessment. At this point why would a gifted individual with scientific interest come to the US to study and work? Far better to go somewhere like China where scientific and technological advances are truly valued and funded. Our growing anti-intellectuality and hostility toward the academy will be our downfall.

  10. Jacek the "troll" November 29, 2019 12:53 pm

    I think is time to wake up and stop repeating like mantra nonsense visible in the public media about IP development in the US as a sample for the world to follow. In the US there is around 150 billion available annually for IP development. EU is planning to spend 600 billion. Four times more.
    China’s new developing IP law system is based on German law, not the US.
    The nonsense about American exceptionalism. The same nonsense you can spot in every country in the world if you know the language. What separates us from the rest of the word is mostly ignorance. Some humility always helps.

  11. Jacek the "troll" December 1, 2019 9:31 pm

    Something to read: “America is not the land of the free”
    https://www.theguardian.com/commentisfree/2019/dec/01/america-is-not-the-land-of-the-free-but-one-of-monopolies-so-predatory-they-imperil-the-nation

  12. angry dude December 2, 2019 9:47 pm

    Jacek the “troll” @10

    “What separates us from the rest of the word is mostly ignorance”

    Ignorance – Yes

    But economically it’s just US Dollar

    Once the trust in US Dollar is gone America will fall almost overnight

    There will be a lot of homeless and hungry folks sleeping on the steps of Capitol and FAANG headquarters

Post a Comment

Respectfully add to the discussion.

Name *
Email *
Website