Posts Tagged: "China"

This week in our nation’s capital, Congress is mostly quiet during the work period, although the House Small Business Committee heads out to Kansas City for a hearing on employee shortages for small businesses outside of notable technology hubs. The Center for Strategic and International Studies kicks off the week with a look at innovations at the Missile Defense Agency. Elsewhere, The Heritage Foundation explores bioethics, New America looks at potential data privacy legislation and The Brookings Institution focuses on China’s tech sector and its threat to American tech dominance.

This week in Washington D.C., the Congressional hearings schedule is empty as both the U.S. Senate and the U.S. House of Representatives enter work periods. However, Monday kicks off with a pair of think tank events on global technology issues at the Center for Strategic and International Studies and the Atlantic Council. The Brookings Institution hosts a pair of tech-related events this week—one focused on threats to democracy through digital capitalism and the other exploring how tech policy has altered the U.S.-China relationship. Other events include a look at securing supply chains for information and communication technology at the Carnegie Endowment for International Peace and a look at the future of the Marine Corps at The Heritage Foundation.

The bipartisan STRONGER Patents Act of 2019 took an important step forward last week, as the Senate Judiciary Subcommittee on Intellectual Property held a hearing on the proposed legislation. Senators Tillis and Coons, the Subcommittee’s Chairman and Ranking Member, should be commended for holding the hearing and focusing attention on our patent system’s role in promoting American innovation and job creation. As several of the hearing witnesses made clear in their testimony, our patent system has been dangerously weakened in recent years through a series of judicial, legislative, and administrative changes. These changes have undermined patent rights and made it difficult for inventors to protect their innovations from infringement. Meanwhile, our foreign competitors, including China and Europe, have strengthened their patent rights. This has put us at a competitive disadvantage and helped contribute to a trend of both innovation and venture capital increasingly moving overseas. For example, the U.S. share of global venture capital fell from 66% in 2010 to 40% in 2018, while China’s share increased from 12% to 38% in the same time period. And despite more than a decade of economic growth following the Great Recession of 2007-2009, startup formation has failed to return to its pre-recession levels.

In the wake of fraudulent IP applications from foreign nations—namely China—the United States has recently enacted or called for policies that require foreign entities to complete more thorough IP applications. For instance, in August, we heard about the new USPTO rule requiring all foreign trademark applicants and registrants to be represented by a licensed U.S. attorney when filing. According to the USPTO website, this is intended to “increase USPTO customer compliance with U.S. trademark law and USPTO regulations, improve the accuracy of trademark submissions to the USPTO and safeguard the integrity of the U.S. trademark register.” And then just last week, news broke that the USPTO had issued new instructions requiring trademark examiners to ask applicants for proof of legal residence in the United States to enforce this new rule (note: these instructions have since been rolled back). The reasoning behind these legislations, or proposed legislations, seems to be that by making the IP application process more involved and more challenging, the USPTO will limit the number of foreign IP applications received—and therefore the number of fraudulent applications received. This will undoubtedly work, but is it the right approach?

There is a lot of focus—and rightly so—on China’s stealing of U.S. intellectual property (IP). Recently, Trump economic adviser Larry Kudlow stated on CNBC’s Squawk Box that China has stolen at least $600 billion in American IP. Additionally, one in five North American-based corporations on the CNBC Global CFO Council said that Chinese companies have stolen their IP within the last year. In all, 7 of the 23 companies surveyed said that Chinese firms have stolen from them over the past decade. The annual cost to the U.S. economy for these actions is estimated to be greater than $600 billion. While this is a serious matter that must continue to be addressed, domestic theft of U.S. IP is just as bad if not worse. It is easy to point fingers at China, given their track record, but small U.S. companies and inventors are not having their dreams extinguished by the Chinese. They are being victimized by Silicon Valley’s big tech companies, which make billions of dollars using their stolen IP.

Perhaps the report on China’s strategy for eclipsing the U.S. lead in biopharma from the Information Technology & Innovation Foundation (ITIF) resonated so strongly with me because of several articles in The Wall Street Journal. Taken together, they present a sobering picture of what we’re up against. The first was a book review of “Leadership and the Rise of Great Powers” by Yan Xuetong, a prominent Chinese professor. Characterized as “a window into Chinese elite thinking about the world; it is as much a political manual as an international-relations text book.”  The thesis is the inevitable rise of China as the world’s dominant power at the expense of the United States.

The decision came down to two technologies for detecting and correcting noise in signals transmitted over the air for 5G—one of the most fundamental features for wireless communications. Scientists and engineers in 2016 vigorously debated for months which one was technologically superior and most efficient. China had lined up Chinese companies’ and allies’ votes behind the “polar codes” technology led by Huawei. Ultimately, the technology that had broader technical support would share a role in the 5G standard with Huawei’s preferred polar coding. But the heightened political battle in a traditional technical arena was unprecedented. This incident highlights a growing threat. “China has politicized the standards-making process,” the Center for Strategic and International Studies (CSIS) reports. “Beijing expects Chinese companies to vote for [China-backed technologies] whether or not they are the best.”

Over the past decade—and likely for the rest of our lifetimes—China has become a favored venue for patent filings due to its increasing GDP and expansive market. However, U.S. applicants familiar with U.S. patent rules should be careful not to employ the same prosecution strategies as used in the United States when filing Chinese patents, as the rules in the two jurisdictions are materially different. For example, in the United States, it is common to file a string of continuation applications for inventions that are licensing/litigation worthy. In China, there is no corresponding opportunity.

This week in Other Barks & Bites: a series of bills introduced into Congress aim to improve prospects for minority inventors, eliminate compulsory copyright licenses in broadcast TV and reduce patent challenges against generic drugmakers; the Federal Circuit decides that there is no functionality in the aesthetic appeal of a design patent; FBI Director Wray testifies on about 1,000 IP theft probes pointing back to Chinese entities; France is the first EU country to adopt the Copyright Directive; Alphabet and Amazon beat revenue expectations; UKIPO discusses potential IP rights exhaustion in the event of a no-deal Brexit; and IP law associations ask the Supreme Court to rule against USPTO in Peter v. Nantkwest.

Currently, the massive volume of filings at the Chinese Patent Office (CNIPA) exceeds the filings of the next four most active patent offices combined. It portends a rapid shift to Chinese language prior art being the repository of technical teachings around leading edge technologies for the Fourth Industrial Revolution. This will happen for several reasons and much more rapidly than…

On July 15, retired Federal Circuit Chief Judge Paul Michel filed an amicus brief in Qualcomm’s appeal of the Federal Trade Commission’s (FTC) antitrust case to the U.S. Court of Appeals for the Ninth Circuit. The following day, the United States government filed a statement of interest with the appellate court as well. Both parties filed in support of Qualcomm’s request for a partial stay of an injunction handed down this May in the Northern District of California, which requires Qualcomm to license its standard essential patents (SEPs) to modem-chip suppliers after determining that the company’s “no license, no chips” policy violated U.S. antitrust law.

At a hearing of the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet this morning, titled Counterfeits and Cluttering: Emerging Threats to the Integrity of the Trademark System and the Impact on American Consumers and Businesses, members of Congress expressed concern over the steep rise in trademark applications by Chinese filers, many of which have been found to be fraudulent. The problem has been exacerbated by poor enforcement on the part of platforms like Amazon, eBay, and Walmart; by the limited authority of the U.S. Patent and Trademark Office (USPTO) to revoke registrations once issued; and by incentives offered by the Chinese government in the form of subsidies to Chinese applicants for U.S. trademarks, said panelists.

In late May, news reports surfaced regarding allegations of trade secret theft committed by Chinese telecom giant Huawei Technologies that had been made in an Eastern District of Texas case. The claims targeted an executive working for Huawei who is accused of participating in a scheme to misappropriate trade secrets from California-based semiconductor startup CNEX Labs. The recent filings mark a new turn in the case, which was originally filed in 2017 by Huawei when it accused CNEX of committing trade secret theft and poaching employees in an effort led by a former Huawei employee and CNEX co-founder. CNEX Labs might be a startup, but it has been attracting venture capital funding for its cloud software and solid-state drive controller products from major names in the tech industry, including Dell and Microsoft. While Huawei has made its own allegations against CNEX, news reports indicate that Huawei’s attempt to access a closely guarded research project by working through a Chinese university professor isn’t an isolated incident. In fact, such activities may be a major factor behind the company’s rapid rise in recent years.

Based on the age of many of us in the room, President Reagan was probably the first president many of us remember. And I mention this because we need another President Reagan—another person like that, who sees the power of the patent system. Upon taking Office, President Reagan told the then leaders at the patent office that the backlog of unexamined patent applications was unacceptable and he wanted it brought down to 18 months in his first term. The leaders at the patent office told him that that was simply not possible. That’s how bad the backlog was then. And then President Reagan and his advisors asked whether it would be possible to reduce the backlog to an average pendency of 18 months within two terms, assuming he would be given two terms. And they said, “yes, we think we can do that within two terms.”  And they didn’t quite get it done, but they got really, really close. They got to around 18.2 or 18.3 months average pendency by the end of President Reagan’s second term. And it was because President Reagan invested in the patent office.

Over the course of two weeks, the United States has imposed tariffs on hundreds of billions of dollars of Chinese goods and has blacklisted Huawei, the world’s largest telecommunications company, on national security grounds. Google, Intel, Qualcomm and Micron have announced that they will stop doing business with the company. The United States has even threatened to withhold intelligence from our key allies if they go forward with plans to use Huawei equipment. Although there are many issues driving this newly escalated trade war between the United States and China, chief among them is the concern that China and its companies are engaged in intellectual property theft. Say what? Upend global markets over infringement of private technology rights? This must be pretty serious. Let’s take a closer look.