Chinese courts curb IP theft as US sees bigger threat

Intellectual property theft by China became one of the world’s most pressing trade concerns this year, after US President Donald Trump said he would level tariffs on Chinese high tech industries, which he accused of being built on the back of stolen US technology.

“The US is acting swiftly on Intellectual Property theft. We cannot allow this to happen as it has for many years!” Mr Trump tweeted.

At a local level, however, the problem Mr Trump has identified — IP theft — is one where China has made considerable progress in recent years, experts say.

Holly White of global IP consultancy Rouse said China had made strides towards reform on combating intellectual property theft by individual companies. “There have been several high-profile cases of Chinese IP theft in the past, and as a result, the Chinese government is rapidly developing a first-class system to deal with IP infringements and to improve its international reputation,” she said.

Mr Trump’s concerns seem to have more to do with large-scale industrial policy than with local courts. Many foreign governments are worried about China’s new “Made in China 2025” initiative aimed at creating national champions in 10 industries, from robotics to electric cars. The strategy calls for China to achieve 40 per cent self-sufficiency by 2020, and 70 per cent self-sufficiency in specific industries by 2025.

“The US government’s recent assertions on China and IP theft are more to do with China’s status as an emerging ‘innovation nation’, which directly challenges the USA’s position as a leader in the area,” said Ms White.

That has created fears of pressure on foreign companies to transfer technology to Chinese companies — especially through licensing agreements and joint ventures.

One method China uses to achieve its strategic goals, according to a study on IP theft by China commissioned by the White House last August and released in March, is through restrictions on foreign investment. It uses this to selectively grant market access to foreign investors in exchange for commitments to transfer technology, the study said.

Over the past two decades, foreign makers of everything from high-speed trains to fighter planes have licensed the technology to Chinese partners only to find a few years later that their partner is a major international competitor.

But China has said its efforts at innovation-led growth are completely legal under World Trade Organization rules.

Mr Trump put the theft of intellectual property by China as probably in the neighbourhood of $200bn to $300bn. In spite of being “ a very, very powerful country,” the US, said Mr Trump, had to “do something on trade with certain countries. And, obviously, China is the leader in terms of deficits”.

‘Once the laughing stock of the intellectual property world, China has created a . . . remarkably fair enforcement system’

International property rights lawyers agree that US trade policy ignores big changes in favour of IP protection. Foreign companies win 80-90 per cent of cases in local courts, according to Erick Robinson of law firm Beijing East IP. In 2016, one judge in Beijing said foreign companies had won 65 cases and lost none in his court.

Based on this alone, said Mr Robinson, “it is clear that the government of China supports advertising its patent courts to foreign plaintiffs”.

Mr Robinson said China was once the ‘laughing stock’ in the world of intellectual property. But he said it “has created an effective, efficient, and remarkably fair patent enforcement system.”

Yet China still has a way to go to shake its reputation for copycat products. Last year, a survey of US business by the American Chamber of Commerce in Shanghai listed intellectual property rights reform as the top concern of American businesses in China.

Inadequate protections in this area were the main constraint on R&D investment for 52 per cent of respondents, up from 42 per cent the previous year.

Foreign companies have often said that judicial protectionism and local bias against them have limited their ability to press their cases in courts. Multinationals such as Samsung, Dell, and Apple have lost patent infringement cases in Chinese courts to virtually unknown local companies — feeding the perception that the deck is stacked against them.

Nonetheless, William Weightman, who researches intellectual property law in China, argues “foreign firms have been slow to realise the substantial changes in China’s protection of IP rights”.