Economy & Budget

US must bolster fight with China over intellectual property rights

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As President Trump and his trade team take the reins, they should adopt policies that embrace strong protection of intellectual property rights.

They must combat the practices of countries that attempt to use technology transfers and phony competition laws to promote their own national champions at the expense of innovative U.S. companies. 

{mosads}Trump’s selection of experienced Reagan administration trade hand and enforcement hawk Robert E. Lighthizer as his trade representative (USTR) is a major step in the right direction — one that was immediately applauded by the American music and movie industries.


Commentators have noted that the Trump administration’s specific plans regarding intellectual property, commonly referred to as IP, remain largely unknown. But this ignores the Trump team’s oft-stated concern about the real economic costs, in both dollars and jobs, of IP theft, particularly by China.

The majority of U.S. IP theft originates in China. Products from China account for more than three-fourths of the value of all infringing and counterfeit products seized by U.S. Customs.

Known IP theft by China alone has cost more than 2 million American jobs — a figure which we can safely assume underestimates the true impact on the American economy.

Trump’s intention to “[u]se every lawful presidential power” to stop China from stealing American trade secrets should reassure American businesses that his administration will keep its eye trained on China’s actions, not just its promises.

Lighthizer has rightly advocated for aggressive enforcement of China’s IP obligations under current trade agreements, even if USTR requires additional resources from Congress to get the job done.  

President Trump has drawn much-needed attention to the problem of forced technology transfers, whereby the Chinese government requires U.S. businesses to hand over IP to Chinese partners as a prerequisite to doing business there. The incoming U.S. trade representative should also look at China’s competition laws that interfere with the rights of U.S. IP holders under the guise of legitimate regulation.

But the President and USTR alone do not determine the strength of our protection of IP rights. Congress has an important role to play. It grants substantial resources to IP enforcement through several government agencies, including the Department of Justice, the Department of Homeland Security, the Department of Commerce, and the International Trade Commission (ITC).

The ITC may be the least well-known of the agencies working to protect U.S. IP, but it is an extremely effective weapon in the battle against IP infringement.

An independent, nonpartisan administrative agency established by Congress in 1916, the ITC administers 19 U.S.C. § 1337 (commonly known as Section 337), a unique statutory tool designed to benefit domestic industries suffering from unfair competition, including IP theft, by imported products.

Many IP owners, particularly those in industries with short product cycles, rely on the ITC’s expert judges and fast trials to quickly block infringing imports from entering the U.S. — a combination of benefits not always available in federal district courts.

Not surprisingly, between 2008 and 2015, approximately 80 percent of products accused in Section 337 investigations were imported from China. The ITC thus serves as the front line of IP trade enforcement for U.S. companies, right at the U.S. border.

If Congress and the president are serious about protecting U.S. IP, they will oppose legislation that would weaken the ITC, and they will appoint ITC commissioners who will staunchly defend U.S. IP rights.

The importance of IP to the U.S. economy cannot be overstated. IP protections allow inventors to profit from their ideas, creating an incentive for further innovation. The United States exemplifies the causal relationship between strong patent rights and economic growth.

So-called IP-intensive industries — i.e., industries relying disproportionately on patents, trademarks, and copyrights — contribute more than $6 trillion dollars (more than 38 percent) to gross domestic product (GDP) and support at least 45 million U.S. jobs.

Yet, impressive as that sounds, this data underestimates the role of IP in the U.S. economy because it does not include trade secrets or take into account the myriad downstream businesses supported by IP-intensive industries.

These numbers are continually rising, as IP “permeates all aspects of the economy with increasing intensity and extends to all parts of the U.S.,” according to a recent report by the U.S. Patent and Trademark Office.

The National Association of Manufacturers (NAM) refers to IP rights as “the lifeblood of our economy.” In a study assessing the economic impact of one type of IP theft, software piracy, NAM and the National Alliance for Jobs and Innovation (NAJI) found that, from 2002-2012, software piracy cost the U.S. economy over 42,000 manufacturing jobs, approximately $240 billion in lost manufacturing revenue, over $69 billion in lost GDP, and $6.7 billion in lost federal tax revenue.

Conversely, the report projected that a 2.5 percent reduction in global software theft for four years would create over 27,000 new manufacturing jobs, contribute over $29 billion to manufacturing revenue, add $8.7 billion to GDP, and generate $807 million in federal tax revenue.

The benefits of IP protection do not stop at the manufacturing sector: spillovers from manufacturing include increased demand for raw materials, energy, construction, and services. 

Failure to provide strong protection for IP owners poses a direct economic threat to U.S. companies through lost revenue, damage to brand, and, ultimately, decreased incentives to innovate because of a lack of return on investment.

Consumers are harmed when they purchase counterfeit goods of lower quality. Governments lose tax revenue from infringement and sometimes must bear enormous enforcement costs. Ultimately, decreased incentives to innovate inhibit economic growth, weaken national competitiveness, and slow job creation.

U.S. efforts to protect IP are continually being challenged. The ingenuity of the infringers themselves keeps pace with the innovations they steal, and global supply chains become more vulnerable as they become more complex.

In a dynamic enforcement environment, the ability of the U.S. government to adapt is critical. Fortunately, the U.S. has a network of agencies and offices that can work in concert to enforce strong protection of U.S. IP.

When it comes to innovation, there is no question that America has always been great. Since our country was founded, American ingenuity has flourished under robust IP laws that are as essential to our knowledge-based economy.

Readers may be surprised to learn that the Founding Fathers considered intellectual property worthy of special note when writing the Constitution. In Article I, Section 8, the Constitution grants Congress the power to “promote the progress of science and useful arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

But promoting innovation is only part of the Founding Fathers’ mandate — without enforcing those property rights, American competitiveness is at risk. A new administration with Lighthizer at the helm of U.S. trade policy, should help solidify recent gains with China and reinforce efforts to overhaul China’s IP system. 


Deanna Tanner Okun is former chairman of the ITC, and served as an ITC commissioner from 2000-2012. She is now a partner at Adduci, Mastriani & Schaumberg, LLP.

The views expressed by contributors are their own and not the views of The Hill. 

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