The World Turns on IP: Trump, China and New Balance

As the world turns on intellectual property, Trump has refocused efforts on China and intellectual property.  He apparently leaned off China supposedly because of concerns with obtaining China’s help with North Korea.  Now he’s apparently back on track.  Interestingly, The New York Times has recently published a strongly worded Op-Ed by Dennis C. Blair (“former director of national intelligence and a former commander in chief of the United States Pacific Command”) and Keith Alexander (“former commander of the United States Cyber Command and a former director of the National Security Agency”) titled, “China’s Intellectual Property Theft Must Stop.”  The Op-Ed is strong endorsement for Trump’s focus on China’s asserted intellectual property theft.  The Op-Ed states in part:

Chinese companies, with the encouragement of official Chinese policy and often the active participation of government personnel, have been pillaging the intellectual property of American companies. All together, intellectual-property theft costs America up to $600 billion a year, the greatest transfer of wealth in history. China accounts for most of that loss.

Intellectual-property theft covers a wide spectrum: counterfeiting American fashion designs, pirating movies and video games, patent infringement and stealing proprietary technology and software. This assault saps economic growth, costs Americans jobs, weakens our military capability and undercuts a key American competitive advantage — innovation.

Chinese companies have stolen trade secrets from virtually every sector of the American economy: automobiles, auto tires, aviation, chemicals, consumer electronics, electronic trading, industrial software, biotech and pharmaceuticals. Last year U.S. Steel accused Chinese hackers of stealing trade secrets related to the production of lightweight steel, then turning them over to Chinese steel makers.

Perhaps most concerning, China has targeted the American defense industrial base. Chinese spies have gone after private defense contractors and subcontractors, national laboratories, public research universities, think tanks and the American government itself. Chinese agents have gone after the United States’ most significant weapons, such as the F-35 Lightning, the Aegis Combat System and the Patriot missile system; illegally exported unmanned underwater vehicles and thermal-imaging cameras; and stolen documents related to the B-52 bomber, the Delta IV rocket, the F-15 fighter and even the Space Shuttle.

Citation to data backing up the claims in the Op-Ed would be helpful.  It is important to remember though that back in 2015, the New York Times published another article concerning China’s new antiterrorism rules for various foreign companies doing business in China.  The upshot of the rules basically required access to computer source code as a condition to doing business in China.  Industry was objecting at that time for several reasons, including national security as well as intellectual property.  It looks like that problem has not gone away. 

On a positive note, reports from China seem to indicate an uptick in enforcement for intellectual property law theft.  I’ve heard some say this is part of China’s transition to an innovation/services based economy and that they are hard at work at changing beliefs concerning intellectual property.  Notably, New Balance recently received a $1.5 million award concerning trademark infringement from a Chinese company in Suzhou.  This is reportedly the largest award by a Chinese court against a Chinese company in favor of a foreign company.  This award follows the recent decision favoring Michael Jordan and another $500,000 award in Hangzhou concerning New Balance.