White House Releases Memorandum on Actions against China

President Trump has released his directions to the United States Trade Representative concerning China.  In the Presidential Memorandum on the Actions by the United States related to the 301 Investigation, the President states:

First, China uses foreign ownership restrictions, including joint venture requirements, equity limitations, and other investment restrictions, to require or pressure technology transfer from U.S. companies to Chinese entities.  China also uses administrative review and licensing procedures to require or pressure technology transfer, which, inter alia, undermines the value of U.S. investments and technology and weakens the global competitiveness of U.S. firms.

Second, China imposes substantial restrictions on, and intervenes in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms.  These restrictions deprive U.S. technology owners of the ability to bargain and set market-based terms for technology transfer.  As a result, U.S. companies seeking to license technologies must do so on terms that unfairly favor Chinese recipients.

Third, China directs and facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by Chinese government industrial plans.

Fourth, China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies.  These actions provide the Chinese government with unauthorized access to intellectual property, trade secrets, or confidential business information, including technical data, negotiating positions, and sensitive and proprietary internal business communications, and they also support China’s strategic development goals, including its science and technology advancement, military modernization, and economic development.

It is hereby directed as follows:

Section 1.  Tariffs.  (a)  The Trade Representative should take all appropriate action under section 301 of the Act (19 U.S.C. 2411) to address the acts, policies, and practices of China that are unreasonable or discriminatory and that burden or restrict U.S. commerce.  The Trade Representative shall consider whether such action should include increased tariffs on goods from China.

(b)  To advance the purposes of subsection (a) of this section, the Trade Representative shall publish a proposed list of products and any intended tariff increases within 15 days of the date of this memorandum.  After a period of notice and comment in accordance with section 304(b) of the Act (19 U.S.C. 2414(b)), and after consultation with appropriate agencies and committees, the Trade Representative shall, as appropriate and consistent with law, publish a final list of products and tariff increases, if any, and implement any such tariffs.

Sec. 2.  WTO Dispute Settlement.  (a)  The Trade Representative shall, as appropriate and consistent with law, pursue dispute settlement in the World Trade Organization (WTO) to address China’s discriminatory licensing practices.  Where appropriate and consistent with law, the Trade Representative should pursue this action in cooperation with other WTO members to address China’s unfair trade practices.

(b)  Within 60 days of the date of this memorandum, the Trade Representative shall report to me his progress under subsection (a) of this section.

Sec. 3.  Investment Restrictions.  (a)  The Secretary of the Treasury (Secretary), in consultation with other senior executive branch officials the Secretary deems appropriate, shall propose executive branch action, as appropriate and consistent with law, and using any available statutory authority, to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.

(b)  Within 60 days of the date of this memorandum, the Secretary shall report to me his progress under subsection (a) of this section.

News agencies are reporting that tariffs will be assessed on around $50 billion of Chinese imports, here and here.  CNN reports that the U.S. companies that stand to lose in a U.S./China trade war include Intel, 3M, Boeing, Apple and others.  However, there is the question of how much those companies are losing because of intellectual property theft that may be supporting competitors based on stolen intellectual property in markets outside of China. 

The Alliance for Creativity and Entertainment: What About the Little People?

A new group of professional, large scale, content creators has formed to fight online piracy: Alliance for Creativity and Entertainment (ACE).  The new group, with around 30 members, includes Netflix, Amazon and many well-known entities such as BBC Worldwide, Paramount, HBO, Univision and Telemundo.  The press release notes that there are "480 online services worldwide available for consumers to watch films and television programs legally on demand." The press release further ties the problem of piracy to jobs and even the danger of identity theft.  The press release notes:

Films and television shows can often be found on pirate sites within days – and in many cases hours – of release. Last year, there were an estimated 5.4 billion downloads of pirated wide release films and primetime television and VOD shows using peer-to-peer protocols worldwide. There were also an estimated 21.4 billion total visits to streaming piracy sites worldwide across both desktops and mobile devices in 2016.

ACE states that it “will conduct research, work closely with law enforcement to curtail illegal pirate enterprises, file civil litigation, forge cooperative relationships with existing national content protection organizations, and pursue voluntary agreements with responsible parties across the internet ecosystem.”  It’ll be interesting to see ACE, particularly with Internet companies, Amazon and Netflix, pitted against Google/YouTube and other platforms.  Do non-professional/smaller scale content creators have a lobbying/litigation group? 

A Very Active White House on IP: The 2013 Joint Strategic Plan on IP Enforcement

The White House, through its Office of the U.S. Intellectual Property Enforcement Coordinator, has released the new 2013 Joint Strategic Plan on IP Enforcement which builds upon the 2010 Joint Strategic Plan.  If anything, the White House is taking a proactive stance on IP.  Interestingly, some stakeholders who ordinarily may disagree seem to think this is generally a “fair” plan (see here and for more discussion see here).  For example, the Electronic Frontier Foundation and the RIAA seem to both give it a cautious “thumbs up.”  One interesting action item concerns the examination of labor conditions of manufacturers of counterfeits.  Here is the discussion of that interesting issue:

There have been anecdotal reports that poor and dangerous working conditions, sometimes involving child labor, are found to exist in facilities where counterfeit and pirated goods are being manufactured overseas or in illicit distribution networks. A deeper analysis of the issue would shed greater light on the problem and provide an opportunity to strengthen our engagement with foreign governments and improve efforts to combat manufacturing and distribution of illicit counterfeit and pirated goods. In addition, the resulting information could enhance public awareness of the direct connection between purchasing infringing goods, supporting illicit businesses, and the impact on working men and women across the globe. Going forward: DOS will begin an examination of the nexus between unacceptable working conditions and the production and distribution of counterfeit goods in certain countries. Further actions will be considered depending upon the outcome of that examination.

It will be interesting to see how this plays out. 

Here is a list of the action items building on the 2010 Joint Strategic Plan (there are 26 including items included in the 2010 Joint Strategic Plan):

1) Facilitate voluntary initiatives to reduce online intellectual property infringement. IPEC will reach out to additional sectors (which may include data storage services, domain name registrars, and search engines) and will also encourage rightholders to adopt a set of best practices. USPTO will start a process to assess the voluntary initiatives; 2) Conduct a comprehensive review of domestic laws to determine needed legislative changes to improve enforcement;  3) Support small and medium-size enterprises in foreign markets. DOC will increase outreach and support to such enterprises through nationwide educational efforts;  4) Evaluate the enforcement process of exclusion orders issued by the U.S. International Trade Commission (ITC). IPEC will chair an interagency working group to improve the process for enforcement of Section 337/ITC exclusion orders; 5) Coordinate international capacity-building and training. IPEC will reorganize the interagency working group on capacity-building and training and embassies will follow up on a regular basis with governments that receive training to evaluate results; 6) Improve transparency in intellectual property policymaking. IPEC will look for additional ways to hear concerns and gather input from a wide range of stakeholders; 7) Improve law enforcement communication with stakeholders. DOJ and ICE will look for additional ways to engage a broad range of stakeholders in an effort to increase understanding of law enforcement operations and expand stakeholder relationships; 8) Assess the economic impact of intellectual property-intensive industries. DOC will issue an annual report on the number of jobs and contribution to the GDP of such industries; 9) Use legal software. IPEC, with the Federal Procurement Policy Administrator and the U.S. Chief Information Officer will review the mechanisms that agencies have in place in order to share best practices and ensure legal use; 10) Examine labor conditions. DOS will examine the relationship between unacceptable labor conditions and the manufacture and distribution of counterfeits and take further action if necessary; 11) Improve IPR enforcement efficacy by leveraging advanced technology and expertise. IPEC will chair an interagency working group to identify and advance new and innovative technologies to improve enforcement capabilities at the border. In addition, law enforcement agencies will look for ways to engage outside technology experts and Internet engineers to increase expertise on online enforcement approaches; 12) Increase focus on counterfeits shipped through international mail and work with express carriers. CBP will work to obtain advance data from international post operators and express carrier companies to improve targeting; 13) Educate authors on “fair use” copyright doctrine. The U.S. Copyright Office will summarize current law and provide general guidance targeted to artists seeking to apply the law to their own situations;  14) Protect intellectual property at the Internet Corporation for Assigned Names and Numbers (ICANN). The National Telecommunications and Information Administration (NTIA) and the FBI will work with ICANN, in collaboration with stakeholders, so that new top-level domains do not become new venues for infringement; and 15) Consider copyright and patent “small claims” courts. The U.S. Copyright Office and USPTO are considering alternative adjudicatory processes for hearing “small claims” cases brought by copyright and patent holders.

There is also an interesting list of government enforcement “successes” since 2010 and here is one of the items:

In April and May 2012, as a result of investigations generated by the IPR Center led Operation In Our Sites, in two separate cases ICE-HSI, working with DOJ, seized over $2 million in proceeds from online sales of counterfeit goods by Chinese perpetrators. The funds were seized from correspondent bank accounts located at the Bank of China in New York under 18 U.S.C. § 981(k), which permits the U.S. Government to seize funds from a foreign institution’s interbank accounts in the United States for forfeiture to the Treasury. This was ICE-HSI’s first use of section 981(k) to seize illicitly-derived proceeds identified as part of an intellectual property rights criminal investigation deposited in a Chinese bank.  . . . .

Piracy a Good Thing for Value? The Game of Thrones.

George RR Martin’s Game of Thrones is a wildly popular fantasy tale.  The HBO television series Game of Thrones has even eclipsed the popularity of Martin’s books and is apparently the most pirated television show ever.  I’ve only read part of the first book, but based on that reading the television series is an excellent retelling of the book (and at least for the part that I read the television series may be even better than the book).  In the United States, the first episode of the second season premiered on HBO last Sunday night.  Apparently after the airing of the episode and within a day, TorrentFreak reports that there were a million downloads of the show.  This is apparently a record.  TorrentFreak explains that one of the reasons for the number of downloads (besides popularity and avoiding paying to view it by subscription) is that there is a delay in releasing the show to markets outside the US.  This explanation seems to be bolstered by the fact that the leading downloading country is Australia and the leading downloading city is London.  Does the access by BitTorrent hurt HBO’s bottom line or not?  The Washington Post, the Public Broadcasting Service and CNN explore the issues.  According to some, the piracy may “generate a buzz” about the product—this may help promote the product and generate sales such as DVDs if it doesn’t generate subscriptions to HBO.  Some producers may be willing to pay handsomely for such buzz amongst their fans although not by allowing piracy (but see end user license agreements by Microsoft and Blizzard that allow some machinima and discussion about them here and here).  Suing your fans seems like a bad idea to me.  There is also a point, raised by someone at HBO, that piracy didn’t impact DVD sales.  And, of course, just because someone views something illegally doesn’t mean that they’d buy the real deal instead (but they may buy a real deal like the DVD or go see the eventual Game of Thrones movies—maybe those movies will be crowdfunded (doubtful)?).  And, Mike Rugnetta at the Public Broadcasting Service (remember Big Bird’s channel and Romney’s non-friend) has an interesting video about piracy helping the Game of Thrones here.  

Someone important recently said something about copyright owners not having the right under the US Constitution to divide markets to maximize profit—is that a sign of the law catching up to the disruptive change of reality?  Access (Creation) is important, but an important question is who gets access and when (can we all be insiders at the same time?).  How much is the game changing?  Is winter coming?  Or must we pay the iron price?  Must we always pay our debts?  Maybe all of the above?  What do you think?