China and IPR, part IV-Innovating Chinese IPR Improvements
This is the last in a four-part series that has looked inter alia at debates surrounding China’s protection of foreign intellectual property (IP) rights (IPR), detailed China’s problematic fulfillment of its IPR commitments, and examined various factors potentially driving China’s poor compliance with its IPR obligations. The focus of this blog is on enumerating a variety of measures that governments and businesses, particularly the former, should embrace to deal with the China challenge to foreign IPR.
Starting with businesses, they need to identify their IP and create formal IP protection policies and processes that are appropriate given the nature of their IP, the risks to it, and Chinese laws and regulations relating to conventional IP protection measures such as non-disclosure language. Companies need to think carefully about what IP they will transfer into China physically (e.g., equipment) as well as through agreements with other Chinese individuals or organizations and must register their IP in China. Businesses also need to educate and train their employees, contractors, and business partners about the importance of protecting IP and limiting IP theft, restrict access to IP by avoiding “concentration” in knowledge, production, and distribution, and increase the difficulty of copying IP. Firms further must monitor and document IP theft. In terms of political steps, firms should maintain sustained communication with Chinese government entities, their industrial associations, and their home governments, develop mechanisms to use Chinese enforcement bodies and political channels, and leverage Chinese business partners. In light of the diffuse nature of China’s IPR regime, it is critical for firms to pursue the above horizontally and vertically and to support lower level entities, public and private, with technical assistance, training, and funding. Given the fact Chinese IP-creators/holders as well as government entities may profit from a flawed IPR system, businesses should pursue ways to shape their cost/benefit calculus to encourage compliance or enforcement when there is non-compliance and to empower those favoring compliance and/or enforcement.
Turning to governments, the United States (US), European Union (EU), Japan, and others, should exploit, above all collectively, the World Trade Organization (WTO). While the WTO is far from a panacea, external pressure is critical to improving China’s treatment of foreign IP and joint action magnifies this pressure. Regardless of whether or not they are collective, WTO cases shed light on China’s failure to fulfill its IPR obligations and consequently have “shaming” value. They also increases the economic pressure on China if the parties bringing the cases win. Furthermore, victorious WTO cases legitimate concurrent or subsequent political pressure. In addition to the WTO, governments should explore multilateral trade agreements to increase the likelihood that China will improve its protection of foreign IPR. As with companies, governments, in tandem with other governments and relevant industry associations, must utilize diverse ways to work with diverse Chinese government bodies in Beijing as well as Chinese agencies at lower-levels such as provinces and municipalities. They should use measures such as dialogues and technical assistance and even provide financial resources to support higher quality Chinese IPR protection. As well, they should work to educate Chinese subnational actors how compliance may benefit them and their firms while non-compliance will increase their and their firms’ costs.
As for the US, there is much anger about China’s continuing shortcomings in protecting foreign IPR. Congressman Kevin McCarthy recently exclaimed, “‘China is the No. 1 country when it comes to intellectual property theft. All the other nations combined, China steals more than them. We will put a stop to this.’” What strategies might the US embrace beyond bellicose language? One option is pressure in the form of trade sanctions. Another is bilateral agreements, though as the US-China Phase 1 agreement shows, they are no panacea. Noted IPR expert Mark Cohen recommends the US turn its attention to agreements that improve civil remedies in China’s IPR regime as well as promote transparency. Shaomin Li and Ilan Alon assert, “an effective way for a country to pressure China to follow the rule of law is to use the law in its own jurisdiction.” In this vein, the US should modify its antidumping laws, insist on reciprocity in licensing and IP legal services, and modify its antitrust rules to punish Chinese IP violators. The US further should exploit Section 301 of the Trade Act of 1974 to restrict the direct or indirect (through 3rd parties) imports of China products or services that violate American IP rights. Along similar lines, the US International trade Commission and U.S. Customs and Border Protection should act more aggressively against the import of products that infringe American IP. On top of these initiatives, Washington should take a more active role to educate American businesses on preventative measures like those noted above and to assist them in pursuing action in China and in the US to defend their IP when violations have occurred.
Innovating improvements in China’s IPR regime is no easy task. Given that there are multiple factors, some more consequential than others, driving China’s problematic compliance, it is clear that businesses and governments, ideally in collaboration with each other, need to adopt a mix of measures featuring both old and new as well as international and domestic that target Chinese actors horizontally and vertically. It is patently obvious that results will require patience, but this does not mean there should be any patience in pursuing the aforementioned steps.
 The US-China Business Council, “Best Practices: Intellectual Property Protection in China,” 2015, https://www.uschina.org/reports/best-practices-intellectual-property-pro... East West Manufacturing, “How to Protect Your Intellectual Property in China,” December 19, 2018, https://news.ewmfg.com/blog/can-manufacturer-protect-intellectual-proper... European Commission, IP Helpdesk, “Managing IP in China,” n.d., https://intellectual-property-helpdesk.ec.europa.eu/regional-helpdesks/c... Sofeast, “IP Protection in China When Developing Your New Product [Importer’s Guide],” n.d., https://www.sofeast.com/resources/ip-protection-in-china-developing-new-....
 See also Bryan Mercurio, “The Protection and Enforcement of Intellectual Property in China since Accession to the WTO: Progress and Retreat,” China Perspectives, No. 1 (2012), p. 28.
 Victoria Huang, “U.S.-China Intellectual Property Issues in a Post-Phase-One Era (Interview with Mark Cohen),” The National Bureau of Asian Research, January 29, 2022, https://www.nbr.org/publication/u-s-china-intellectual-property-issues-i....
 Mark Allen Cohen, “Statement of Mark Allen Cohen before the U.S.-China Economic and Security Review Commission,” June 8, 2018, https://www.uscc.gov/sites/default/files/Mark%20Cohen%20uscc%20testimony....
 Many Chinese provinces and municipalities have their own companies.
 Julia Mueller, “McCarthy Planning Select Committee on China if Elected Speaker,” The Hill, November 21, 2022, https://thehill.com/homenews/house/3745317-mccarthy-planning-select-comm....
 See the sources cited in Jean-Marc F. Blanchard, “China and IPR, part III-Caring about Causes,” Mr. & Mrs. S.H. Wong Center for the Study of Multilateral Corporations Blog, Septembver 22, 2022, https://mnccenter.org/blog/china-and-ipr-part-iii-caring-about-causes, esp. fn(9).
 Mark A. Cohen, “The Phase 1 IP Agreements: Its Fans and Discontents,” China IPR Blog, January 21, 2022, https://chinaipr.com/2020/01/21/the-phase-1-ip-agreement-its-fans-and-di....
 Shaomin Li and Ilan Alon, “China’s Intellectual Property Rights Provocation: A Political Economy View,” Journal of International Business Policy, No. 3 (2020), pp. 60-72.
 Cohen, “Statement of Mark Allen Cohen before the U.S.-China Economic and Security Review Commission.”
 Kevin J. Hickey et al., “Intellectual Property Violations and China: Legal Remedies,” Congressional Research Service R46532, September 17, 2022, pp. 28-31, 47-50.
 Ibid., pp. 37-46.