SNS Members have been way ahead of the curve in learning about China’s national business model and its dependency on stolen foreign intellectual property. Until recently, China’s Intellectual Property thefts have been discussed and dealt with publicly as security or crime issues.
Since President Obama’s State of the Union speech, however, and more specifically in the last three weeks or so, we have had the deep satisfaction of seeing virtually all members of the Executive Branch, and Congress, espousing what we can now call the “SNS INVNT/IP” interpretation of this problem, a perspective we have described in detail over the last three years.
Finally, unlike what we heard from Obama during the presidential campaigns, we now are seeing a publicized direct connection between Chinese theft of corporate IP, and jobs. Also from the INVNT/IP playbook: an orchestrated effort by all branches of the government to end this theft.
In the last month, the the president, the State Department, and now the DoD have all embraced the SNS/INVNT/IP view on this matter, linking the economy to security, IP theft to job loss, and China’s government and military to sustained IP attacks. Although we cannot attribute any particular government action to INVNT/IP efforts, we can celebrate a result that we have been working to achieve over the last year.
Here are a few quotes behind the campaign, beginning with the just-released Department of Defense report:
“In 2012, numerous computer systems around the world, including those owned by the U.S. government, continued to be targeted for intrusions, some of which appear to be attributable directly to the Chinese government and military.”
And here is SNS member and INVNT/IP network contact Robert Hormats, Under Secretary for Economic Growth, Energy and the Environment. Members who attended the SNS Annual Predictions Dinner at the Waldorf-Astoria in December 2011 will recall Bob’s similar, private comments, after we’d had a chance to talk at length about this problem. This excerpt is from a recent speech Bob gave in China (highlights are the publisher’s):
Let me turn to the third area, which is cyber theft and IPR protection. Another key problem that can leave China disconnected from, or subject to suspicion within, the global online community is the serious and continuing challenge of insufficient protection of intellectual property rights.
It is troubling to see the deterioration in the confidence in our economic relations with China, within the U.S. government, and our business community, because of IP violations, trade secrets piracy, and incidents of cyber intrusions.
So many aspects of the U.S.-China bilateral relationship are moving in the right direction. In fact, there are many examples where we are working constructively on economic, political, and security issues. It’s disappointing that this is not one of those areas.
From my vantage point, more than any other single factor, serious incidents of IP violations, trade secrets piracy, and growing evidence of cyber intrusions are responsible for substantial mistrust in our economic relationship by many American businesses and many officials in our government, who otherwise hope for, and are working for, improved relations with China. And, unfortunately, this mistrust is not confined to the United States. It extends to other countries as well.
The level of IPR infringement and trade secrets piracy in China – including online piracy – remains puzzling to me for a country that has more and more intellectual property of its own that needs to be protected.
Allow me to focus for a moment first on the IP issue. When I addressed this gathering in 2011, I emphasized that we do not view IP theft as a “United States versus China” issue. Many in China also suffer from it. So, it would be useful for all stakeholders in the U.S. and China to collaborate on this issue.
I have noted during the past year that this message also resonates with many Chinese companies, researchers, and educational institutions. Unfortunately, the IP issue can be a major deterrent to the high-value added investment China wants to encourage. It also goes to the trust factor as it relates to access of Chinese goods to foreign markets – if there is suspicion that certain products are made with illegally obtained intellectual property.
We know that many Chinese companies have devoted significant resources to developing new products and new technologies. And many of these companies complain that they also suffer when competitors here have illegally copied their ideas and technology.
But it is also important and fair to acknowledge that China has made some progress in some areas. Much of that progress is the direct result of the personal engagement of Chinese leaders. It reflects the hard work of people like former Vice Premier and now Politburo Standing Committee member Wang Qishan led the State Council IP campaign and worked to create the National Leading Group on IP. And as a result of these efforts, there has been improved IP protection in some areas, such as software legalization.
Further improving intellectual property rights protection would be a positive development for China. It would give inventors and creators here greater opportunity to engage foreign counterparts in business and research cooperation without these foreign counterparts fearing loss of their intellectual property.
The United States will continue to work with China in this area. We desire cooperation, not confrontation, because we believe that business and scientific collaboration between our two countries and among all countries can be mutually beneficial if done fairly and on a level playing field. But at the same time, we will vigorously act to protect our own interests because our innovation is vital to the future.
We recently unveiled a new IP and trade secrets strategy to address the theft – both online and otherwise – of our IP and trade secrets wherever it comes from in the world. The United States also has utilized the Special 301 and Notorious Markets reports to encourage improved IPR protection and enforcement.
We have seen positive results in many countries, and some positive results here in China where companies are attempting to address these concerns. But, there remains a great deal left to be done.
Finally, let me turn to the cyber issue. The level of cyber intrusions emanating from China that result in theft of valuable propriety information has reached an unprecedented level. Recent public evidence has documented this.
This problem is a big part of the mistrust I mentioned earlier. The U.S. government is taking an active approach to addressing the issue, and we continue to raise our concerns with senior Chinese officials.
As an old friend of China, I question and ask my Chinese friends to question, whether this activity serves China’s real interests as it seeks to attract high-end investment, aims to develop international markets for its innovative products, and wants its companies welcomed and respected as they increasingly invest around the world. —
In a recent speech, the U.S. National Security Advisor, Tom Donilon, called for a constructive direct dialogue between the United States and China to address acceptable norms of behavior in cyber, noting that our two countries, “the world’s two largest economies, both dependent on the internet, must lead the way in addressing this problem.”
The need for a productive dialogue with a clear and constructive outcome is critically important to our bilateral relationship and the restoration of trust. The dialogue must not be prolonged and must be a means to an end — which in this case must mean an end to this problem.
– Under Secretary Robert Hormats, speaking in China at the
U.S.- China Internet Industry Forum, Beijing (April 9, 2013).
(Arranged and sponsored by SNS member Craig Mundie, Microsoft)
Bob again, writing on HuffingtonPost.com:
Many nations have adopted strong intellectual property rights systems, which have benefitted not only their own people but also the global economy. Many governments, however, still turn a blind eye to trade secret theft, counterfeiting, and piracy. Some governments also believe in “innovation nationalism” which discriminates against innovators abroad. In the long-term, intellectual property theft or nationalistic innovation restrictions — that often appear to be attractive options in the short run — benefit no one. Innovators — young and old alike–deserve the opportunity to be rewarded for their efforts. And, the world economy benefits from new innovations, and growing collaboration among global innovators, to fuel growth and development.
Inventors and creative innovators should be seen as role models for this generation. It is they who will make the future work! Governments and individuals gain when more and more nations recognize and respect the value of intellectual property rights. All of us have a common interest in protecting and respecting intellectual property rights, which support innovative efforts and creativity.
In addition, our young people, and indeed all creators, inventors and entrepreneurs, must educate themselves about intellectual property rights regimes and take the time to learn how to protect their creations. They must know that a patent is only valid in the country where it is filed. They must consider the quality of intellectual property rights protection in the country, or countries, where they do research, work, manufacture, invest and sell their inventions, so those inventions are protected. Stopfakes.gov is a great place to start that research.
Finally, it is important for recognize the overall cost of failure to protect intellectual property rights. While fake handbags, illegally used software, counterfeit drugs, stolen copyrighted works or pirated movies may look appealing, many people who worked hard to create and produce them suffer from their sale. (And many are downright dangerous such as counterfeit drugs, auto and airplane parts etc.) Moreover, the incentive to put more money, creativity and energy into new creative products is diminished. The economy suffers. And there is a huge ripple effect. So, we all share responsibility to encourage our friends, families, associates, and governments to understand and respect intellectual property rights, for ourselves and coming generations.
We’ll be releasing a more detailed study of this major shift in US policy in the next few weeks. For the moment, it’s enough to make sure that SNS members realize that the US government, at the highest levels, now seems fully aligned with SNS INVNT/IP’s objectives.
And yes, there is much more work to do, creating actions that will lead to real results.