The intellectual property game in the Sino-US trade war

By John Xia, Corner Stone & Partners

China and the US reportedly agreed on the first phase of the trade deal at the beginning of December, and officially signed the agreement after the finalization of the text in January, 2020. Although the terms of the agreement will not be disclosed to the public at China’s request, it’s not hard to predict that intellectual property rights (IPR) will be the key issue of the agreement.

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John Xia
Corner Stone & Partners

At first glance, the Sino-US trade war is about trade disputes, with both parties imposing additional tariffs on each other’s trade products, but the core issue is the contest over IPR. It is the differences of perceptions and positions between the two parties in the IPR issues that have made IPR the focus of the friction, and an unavoidable part of the trade agreement.

From a US perspective

Intellectual property rights are private rights in the American legal system. The government should generally not involve itself in issues related to private rights in a market economy. IPR disputes between countries are usually submitted to the World Trade Organization’s (WTO) ruling.

In fact, the section 301 Investigation against China by the US made IPR the focus of the Sino-US trade war. The investigation concluded that China failed to dutifully fulfill its commitment of IPR protection after joining the WTO, and had caused especially serious harm to American companies, mainly in the following aspects:

  • The Chinese government forced American companies to make technology transfers through administrative interventions and other means;
  • Malicious registration of trademarks, internet piracy, counterfeiting and other infringements of IPR; and
  • The Chinese government’s inadequate law enforcement and legal punishment against IPR infringements.

By provoking the trade war, the US attempted to force China to accept America’s definitions of IPR protection, make structural reforms, and reduce government intervention in the market, as well as reinforce punishments against IPR infringements. Admittedly, the US is also taking this chance to suppress the rising competitive power that China has demonstrated in the revolution of new technologies.

From a China perspective

The world has witnessed the development of China in the past few decades. As the biggest developing country around the globe, China has reacted accordingly to address the IPR concerns of the US:

(1) China adheres to a market economy with Chinese characteristics. The problem of whether China improperly acquired technology transfers from American companies should be submitted to the WTO for arbitration;

(2) China has made corresponding modifications and amendments to its Patent Law, Trademark Law, Anti-Unfair Competition Law and other related laws and regulations to deal with other IPR infringement issues;

(3) In compliance with the amended relevant laws and regulations, China has strengthened and will further reinforce its IPR protection efforts and impose more severe punishments on infringement acts.

China’s progress in the fields of internet technology, 5G communication, and other innovative technologies is the result of the ingenuity and constant endeavours of the Chinese in the context of the new round of scientific and technological revolution, and industrial transformation.

By increasing input into technical research and development, and by enhancing the Chinese people’s perception of IPR, China will overcome the existing IPR barriers in more fields, and lead the world in its contribution to global technological development.

The outlook

If the Sino-US trade war continues, the general living cost of the American people who rely on products “made in China” will increase. China will also be affected due to the additional tariffs imposed upon its exports to the US, which will be a lose-lose war.

The IPR issue is not only the cause of the current trade war, but also a problem that neither side can avoid, and it must be resolved in the future.

Only by abandoning each one’s own self-interest, seeking common ground, and making certain concessions can both parties promote the development of international trade, and the IPR mechanisms of both China and the US can converge.

The author has reason to believe that as the two biggest independent economies in the world, China and the US depend on each other, and between which there are no unsolvable conflicts as long as two parties show sincerity.

It is also reasonable to believe that the trade war due to IPR conflicts will end in a way that benefits the progress and development of the world.

John Xia is a partner and patent attorney at Corner Stone & Partners

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