Friday, December 24, 2010

China and Intellectual Property

For years, Chinese officials have promised to improve their protection of intellectual property. But the infringement of copyrights, patents and trade secrets has, in many instances, gotten worse. Last week, they made some new promises. While we welcome China’s willingness to utter commitments in this area, we remain skeptical of its ability or desire to protect foreign innovation.

At the Joint Commission on Commerce and Trade in Washington, Chinese officials promised better protection for foreign software. They promised not to discriminate against foreign intellectual property in government procurement. They even agreed to keep talking about improving how they award patents, a crucial step to prevent the proliferation of parasitic patents of little merit.

Yet for all the new agreements, stringent protection of foreigners’ intellectual property is at odds with China’s development strategy. Foreign companies operating in China complain that Beijing views the appropriation of foreign innovations as part of a policy mix aimed at developing domestic technology.

Bootleg copies of the “Dark Knight” and Shenzen sweatshops churning out fake Louis Vuitton bags are only part of the problem. Last March, the United States International Trade Commission banned imports of cast steel railway wheels made by the Chinese group Tianrui. Tianrui had hired nine employees from the Chinese licensee of Amsted Industries of Chicago, a maker of railway parts. They came with an armful of trade secrets that allowed Tianrui to muscle into the business.

This type of intellectual property theft is increasingly common, according to American companies operating in China. In fact, they say, it is tacitly supported by Beijing, and includes forcing foreigners to disclose their technology in order to gain contracts.

China’s new antimonopoly laws would allow compulsory licensing of foreign technologies in some cases and require foreign companies that wanted to merge with or buy a Chinese company to transfer technology to China. Several foreign companies have found themselves competing against Chinese firms using a slight variation of the foreign technology.

In 2005, the China National Railway Signal and Communication Corporation invited Germany’s Siemens to join in building trains for the Beijing-Tianjin high-speed railway. Most of the technology came from Siemens, which trained 1,000 C.N.R. technicians in Germany. But most of the trains were built in China. For the next project — the Beijing-Shanghai high-speed rail — the Ministry of Transportation decided it wanted domestic technology, and C.N.R. bumped Siemens out. CSR Corporation, another Chinese train builder, did the same with Kawasaki Heavy Industries of Japan.

China’s attempt to move up the tech ladder is natural. Many countries in history have pursued technological progress by first trying to piggyback on foreign inventions — tweaking and improving — before blazing their own trails. Still, intellectual property misappropriation cannot be a government policy goal, especially in a country the size of China, which can flood world markets with ill-begotten high-tech products.

The United States has made some progress at the World Trade Organization against the theft of intellectual property in China. But it must be much more vigilant and aggressive.
Editorial, New York Times

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