Senate IP Subcommittee Talks Legislative Fixes for China’s Threats to American Innovation Leadership

Yesterday, the U.S. Senate Committee on the Judiciary’s Subcommittee on Intellectual Property held a hearing titled Foreign Threats to American Innovation and Economic Leadership, featuring testimony from private businesses on the myriad challenges facing American intellectual property (IP) owners in the face of illegal activities sponsored by the Chinese Communist Party (CCP). Along with consumer safety and national security risks, the day’s hearing featured discussion of several IP-related bills, some of which will be introduced into Congress in the coming days.

American Innovators Suffer High Cost of Blatant Infringement by Chinese Companies

The United States cannot afford to allow China to abuse its IP assets, one major reason why Senate IP Subcommittee Chair Senator Thom Tillis (R-NC) recently introduced the Patent Eligibility Restoration Act (PERA), which would restore “broken” patent eligibility law impacting innovation in diagnostics and elsewhere. In his opening remarks, Ranking Member Adam Schiff (D-CA) told the story of one constituent business owner who found that a previous manufacturer in China had registered the Chinese trademark to the branding of the American speaker company, continuing to sell branded speakers more than a year after the American company changed manufacturers.

Charlotte Pipe and Foundry Company, a global leader in iron casting and pipe manufacturing, had a similar experience as explained by Bradford Muller, the company’s Vice President (VP) of Corporate Communications. In 2017, Charlotte Pipe discovered that Shanghai-based Yitai Plastic was introducing plastic pipe and fitting products into China and other markets under Charlotte Pipe’s branding, even going so far as to register the trademark rights in China to Charlotte Pipe’s name, logo and branding. After spending more than $100,000 to retain its IP in China, Charlotte Pipe’s case against Yitai Plastic has been stayed at the Beijing High People’s Court since 2023.

Consumer safety concerns posed by Chinese products were highlighted by Aaron Bores, Executive VP of Product Development for faucet maker Moen. Bores discussed third-party testing of the top 19 selling off-brand faucets, which showed that 90% failed safe drinking water standards, with 60% of faucets tested exceeding acceptable lead limits. Bores noted how difficult it was for himself, a 16-year employee at Moen, to discern authentic Moen products from counterfeits on e-commerce platforms. He urged the committee to consider upgrading the INFORM Consumers Act to encourage consistent verification protocols for safety standard certifications posted on imports.

Providing context on China’s unfair economic rules was Mark Cohen of the Asia Society of Northern California and University of Akron Law School. Cohen advocated for the introduction of IP experts into high-level negotiations with China, the treatment of IP as a private right requiring court transparency and effective enforcement mechanisms, and a stronger U.S. patent system with clarified eligibility standards and restored injunctive relief. Rounding out the witness panel was Karyn Temple, Senior Executive VP and Global General Counsel of the Motion Picture Association. She spoke to the effectiveness of site-blocking regimes enacted in 55 countries worldwide in diverting traffic from piracy websites to legitimate sources for TV and movie content.

Egregious Copying ‘Demonstrates How Much Work We Have to Do’ With China

The CCP places enormous pressure on Chinese nationals, especially students attending American universities on visa, to conduct espionage according to Senator Ashley Moody (R-FL), who cited an investigative report published last week by The Stanford Review regarding Chinese spies targeting Chinese students working on artificial intelligence (AI) projects at the school. Later, Cohen added that recent state and federal actions to ban non-compete agreements actually weaken the prospect of American companies trying to stop trade secret theft by enforcing those agreements against former employees, including Chinese nationals returning to China with sensitive and confidential information.

Muller noted that Charlotte Pipe’s total costs protecting its IP in China has exceeded $6 million, with Senator Dick Durbin (D-IL) remarking that Muller’s experiences are similar to many American innovators. Although Charlotte Pipe was successful in recovering its brand from Yitai Plastic in Singapore, Muller indicated that Yitai still likely commands the lion’s share of the Asian market selling unauthorized products under Charlotte Pipes’ brand. Tillis remarked on the egregious nature of Yitai’s copying, including an almost movie set-like reproduction of Charlotte Pipes’ main production facility in Charlotte, NC. “How anybody can spend hundreds of thousands of dollars in a lawsuit, in a country that respects the rule of law, and not prevail [on these facts] demonstrates just how much work we have to do to get to a fair trading relationship with the [CCP],” Tillis said.

Witnesses on the panel urged Congressional action on several pieces of legislation including the Fighting Trade Cheats Act, which would create a private right of action against customs fraud to address the growing backlog of complaints at U.S. Customs and Border Patrol about products from China. Temple also called on Congress to pass site-blocking legislation this session that could include provisions to limit Internet service provider (ISP) liability for site-blocking practices, though she added that such limited liability provisions haven’t been exercised in countries with site-blocking regimes.

Senator Marsha Blackburn (R-TN) announced that she and Senator Chris Coons (D-DE) would be reintroducing the Countering Chinese Espionage Reporting Act as early as today. This bill would require the U.S. Department of Justice (DOJ) to report to Congress every seven years detailing DOJ activities to counter national security and espionage threats from China. Blackburn also announced that she was working on crafting legislation with Senator Peter Welch (D-VT) that would speed examination at the USPTO for patent applications claiming AI, quantum and other emerging tech inventions.

A few Senators during the hearing questioned the legality of President Trump’s recent firing of Shira Perlmutter as Register of Copyrights. Senator Durbin told Temple, who formerly served as Register, there was some suggestion that the Copyright Office’s recent report on copyright and AI led the Trump Administration to fire Perlmutter. Temple noted the AI report was largely uncontroversial in nature, mainly analyzing fair use issues as applied to generative AI models. Senator Coons also criticized Perlmutter’s firing during the hearing, adding that he was encouraged to see bipartisan pushback against the Trump Administration’s decision.