China and Intellectual Property
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China as an existential risk to US technological supremacy.
I want to push back on this idea that Chinese theft of intellectual property is the major threat to US leadership in technology or its national security.
China leads in many technologies today...trains, drones, semiconductor manufacturing, digital platforms...WeChat, Alibaba, AliPay... not on the basis of theft but innovation...
After reading below, you may think of me as an ‘apologist' for China. So I am if the term 'apologist' means taking the opposite position from a prevailing one.
A prevailing criticism of the Chinese by both sides of the political spectrum is that the Chinese steal intellectual property. I don't know what that means...and some others do not understand either. Here's why:
As examples of the theft of intellectual property, I suspect many people think of the cheap copies of American movies, music, and software on CDs available in flea markets in countries in which they take a vacation.
And it's true that these early digital media forms were easily copied...stolen...but... without appearing to condone it... the early defenses against copying were inadequate.
They are an example of a classic case of not building a sufficiently high ‘economic’ fence. (Streaming is an example of a high economic fence...The Netflix service, for example, is too convenient and inexpensive to make copying movies a lucrative business these days. This effect is often called the ‘network effect’...the more customers the more economically efficient the service...for example, the more Netflix customers the more money in income to buy new media...the more attractive the offering….the fees for use can be kept down)...
Many individuals in many countries were copying and selling, but not the Chinese Government...the practice was rampant in the US, among its 'entrepreneurs,' as well... enforcing intellectual property rights at the consumer level is difficult....the Chinese didn't do it well and neither did the US.
I spent 7 years in Washington 'lobbying' technology-based issues especially intellectual property.
The Chinese undoubtedly seek to understand and benefit from the US...and other countries’... advances in technology.
But I contend that they do so primarily by:
1. sending thousands of students to US universities, sponsoring them subsequently as postdocs by funding the research of strategic university labs, encouraging Chinese graduates to work in US companies, investing in US companies, inviting US companies to open offices in China and to sell their advanced technology products in the Chinese domestic market.
2. buying US products and reverse-engineering them. (Many car companies bought or rented Teslas and some tore them down. Look at the ‘tear down’ videos on youtube) In general terms, reverse engineering is practiced by all companies more or less and is not a violation of intellectual property rights per se. Permissible reverse engineering does not include counterfeiting products, but it does permit 'close knock offs' which can skirt violation of any IP right. IP law is arcane. The best tunnel boring machines are made by Robbins. Yet the Boring company is designing its own. But first it bought one from Robbins and learned from it and ‘improved’ on it. The best massive stamping machines for car manufacturing are made in Italy. Tesla uses them in its factories. One of the best semiconductor manufacturing machines is made in the Netherlands. The Chinese manufacturers buy and study them and will attempt to improve upon them without violating the patents. This is called reverse engineering and is a common and legal and an intended outcome of the international regime for the protection of Intellectual property...managed by WIPO..based on the US constitutionally mandated system of protection for Patents and Copyrights.
3. taking advantage of the unique US implementation of intellectual property rights. These rights are provided in the US Constitution. The American concept of IP is to offer protection to the embodiment of ideas...not the ideas themselves.. An embodiment is an invention...protected by patents...and to ‘expressions’ of ideas...protected by copyrights... in return for public disclosure….that is a ‘bargain’...the individual or company gets protection...the public gets introduced to the new idea. This public disclosure...to the US public, to the Chinese, and to everyone else in the world of the ideas embodied...is a profound, condoned, encouraged means of technology transfer.
So, to say it another way, US policy to encourage the spread of ideas includes purposely publishing the details of intellectual 'works' for inspection by anyone and for the 'use' by anyone of the 'idea' that is embodied in the protected property.
We encourage technology transfer as a public good. (The US system is not universally good...for example, the drug companies have successfully extended patent protection far beyond what is a fair period in return for public disclosure. Drug companies make small modifications in the formulations and re-patent basically the same invention...but this glitch is remedied easily with sufficient political will.)
(NB… an example of an idea might be the selling books over the internet...this idea is not protectable..but Amazon’s reduction of the idea into a specific store style is protectable...its name...specific features...maybe Amazon Prime is protectable but not the idea of using free shipping as an incentive.)
The Chinese scour the patent registers of all countries for the ideas that are embedded in the patent applications.
This is precisely what the property rights regime in the US and around the world as promulgated by the World Intellectual Property Organization (WIPO) is designed to promote.
(as a digression, more and more companies instead of patenting new inventions which make the details public instead rely upon the concept of 'trade secrets' as protection...details are disclosed only under terms of non-disclosure agreements and employment contracts.)
4. encouraging ...not altogether successfully... at least up until now but to a greater degree under the Trump regime...the return to China of Chinese graduates of US universities who, because they have often worked in the US, possess trade secrets by virtue of developing them directly or by being privy to them.
Individuals who possess trade secrets are prohibited from divulging them by contract, but in everyday practice, it is very difficult to distinguish between general knowledge and experience and specific knowledge that can be classified and identified as a trade secret. So trade secrets are difficult to enforce.
Silicon Valley companies are notorious for recruiting competitor's employees precisely to capture the 'trade secrets' they carry around in their heads.
The Chinese try to do the same thing.
The original colonies 'appropriated’ technology from the British, for example, by paying the passage of relevant workers in textile mills to immigrate to the colonies carrying their knowledge of textile technology with them to be exploited by US entrepreneurs.
5. The very large customer base in China, that is especially adaptable to new technologies and eagerly adoptive. This enormous ‘customer’ resource provides China with a demand for new technology and the financial basis from revenues for very rapid innovation...The Chinese, therefore, are learning to compete not by reliance on protection from competition by a government grant of a monopoly...a patent...but by rapid introduction of improved new products.
My 'apology' is not a whitewash...or a minimization of all of their acts ...the Chinese are guilty of all kinds of bad stuff... but our trade relationships with China... and a race for technological leadership..., in my opinion, are mostly a function of international trade dynamics and national priorities in public investment..... not theft. Here’s a Youtube video that tries to make a similar case, but poorly in my opinion.
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