Posts in China

For over a decade, the National Intellectual Property Rights Coordination Center (IPR) has been at the forefront of the United States government’s response to combating global intellectual property (IP) theft and enforcement of its international trade laws. The IPR Center brings together over 25 global partners, including government and law enforcement agencies focused on IP enforcement. Steven Francis is the IPR Center Director and is also the Assistant Director for Global Trade Investigations at Homeland Security Investigations, with over 22 years of federal law enforcement experience. This month, I had the opportunity to interview Francis about the work of the IPR Center, particularly during Covid-19, and how the center is partnering with the stakeholder community through initiatives such as Operation Stolen Promise.  

A bipartisan group of senators has introduced legislation to stop the theft of U.S. intellectual property by foreign governments, with a focus on China. The bill, titled the “Safeguarding American Innovation Act,” was introduced today by Senators Thom Tillis (R-NC), Rob Portman (R-OH), Tom Carper (D-DE), Marco Rubio (R-FL), Maggie Hassan (D-NH), James Risch (R-ID), Joe Manchin (D-WV), Chris Coons (D-DE), Josh Hawley (R-MO), Jeanne Shaheen (D-NH), John Barrasso (R-WY), Catherine Cortez-Masto (D-NV), Rick Scott (R-FL), Mike Braun (R-IN), and Marsha Blackburn (R-TN).

Societies are always most vulnerable in times of crisis. Right now, America is in the midst of the COVID-19 outbreak, subsequent economic devastation, and justified nationwide protests for social and criminal justice reform—perhaps an unprecedented level of unrest. As such, it is also perhaps more important than ever for us to demonstrate our ability to unite, cooperate, and innovate. Fortunately, through the improved protection of our intellectual property (IP), America has an opportunity to do exactly that. COVID-19 has demonstrated the equal importance of encouraging and protecting America’s innovators. Worldwide manufacturing shutdowns, part of the global effort to slow the spread, exposed our country’s reliance on China for many of our basic necessities and raw materials. America often generates the ideas of tomorrow. But, until we can generate the ensuing products as well, independence from China will be impossible. This reliance, and lack of investment in domestic production, is proving to have serious consequences.

On June 9, the full Senate Judiciary Committee held a hearing titled “COVID-19 Fraud: Law Enforcement’s Response to Those Exploiting the Pandemic.”  The hearing, which was led by Chairman Sen. Lindsey Graham, R-S.C., included testimony by William Hughes, Associate Deputy Attorney General United States Department of Justice, The Honorable Craig Carpenito, United States Attorney District of New Jersey, Calvin Shivers, Assistant Director Criminal Investigative Division Federal Bureau of Investigation, and Michael D’Ambrosio, Assistant Director United States Secret Service Department of Homeland Security. Following an acknowledgment of the tragic death of George Floyd by each of the witnesses, the testimony focused on the response to fraud that has resulted from the COVID-19 pandemic, including the sale of fraudulent personal protective equipment (PPE) and cyber-enabled fraud. In general, Hughes focused primarily on the Department of Justice’s response to criminal conduct relating to the COVID-19 pandemic, Carpenito focused on hoarding and price gouging, Shivers focused on fraud schemes and illicit finance activities that seek to exploit the COVID-19 pandemic, and D’Ambrosio focused on the U.S. Secret Service’s work to counter cyber and financial crimes exploiting the pandemic.

It happened to Japan in the 1950s. Then it happened to Taiwan, and then Korea. Rapidly-developing countries started out relying on copying foreign technologies to drive their economies. But as growth increased and investments in education led the way to domestic innovation, each country found that a framework of strong intellectual property (IP) laws was necessary to sustain economic expansion. For many years, the relationship between China and the United States (as well as other Western countries) around IP has felt like pulling uphill on a very heavy wagon, as we tried to convince, cajole and threaten, often demanding reforms as part of trade negotiations. The relationship with China was further weighed down by the perception that the government was itself involved in misappropriation and that in general it was a proponent of weak IP protection. This past January, in the midst of a tariff war, China signed the “Phase One Agreement” that promised certain improvements in its trade secret regime in return for the United States dialing back some of the trade pressure.

Much has happened to the patent subject matter eligibility standard in the U.S. since Mayo. On April 27, 2020, Judge Paul Michel and John Battaglia published an excellent article on IPWatchdog analyzing the U.S. Section 101 patent subject matter eligibility jurisprudence. In that article, Judge Michel and Battaglia reminded judges and practitioners to reference “the more-favorable foreign patent laws on the patent eligibility for diagnostic testing, business methods and software … in countries such as England, China, or the European Union … to inform such a judicially created ineligibility standard, as opposed to the U.S. Constitution or a federal statute.”  Here, we take a quick comparative look at the current patent subject matter eligibility standard in China.

For months now, the news has been plastered with updates on COVID-19, the novel coronavirus that has upended lives and trickled into near every facet of the modern experience. Across the political aisle, consumers and producers are questioning the current level of reliance on Chinese production for drugs, ventilators, and masks. Despite these concerns, most manufacturing alternatives, including India, are still working to reestablish normalcy, making China even more indispensable. Realistically, China is and will remain the dominant player for outsourcing production for at least the next five years. Now that Chinese factories are producing close to their full capacity, foreign investors should refocus their attention to newfound legal issues that may complicate the supply chain.

Yesterday, U.S. Senators Thom Tillis (R-NC), Richard Blumenthal (D-CT), John Cornyn (R-TX), and Ben Sasse (R-NE) sent a letter to Federal Bureau of Investigation (FBI) Director Christopher Wray and Cybersecurity and Infrastructure Security Agency (CISA) Director Christopher Krebs regarding a notice issued last week by their agencies alerting American companies and research institutions about attempted attacks by hackers affiliated with the Chinese government.  According to the notice, these hackers “have been observed attempting to identify and illicitly obtain valuable …. (IP) and public health data related to vaccines, treatments, and testing from networks and personnel affiliated with COVID-19-related research.”

This week in Washington, D.C., while the nation continues to deal with the fallout of the COVID-19 pandemic, some Senate committee hearings on the Federal Communications Commission’s Ligado Networks 5G decision and funding COVID-19 testing innovation have been scheduled with social distancing guidelines in place. Tech and IP-related webinars continue to be scheduled by think tanks and Brookings Institution features a couple of online events this week, one exploring developments in telehealth, another looking at China’s technological growth and aspirations of global tech dominance. 

On April 29, the Office of the U.S. Trade Representative (USTR) released its 2020 Special 301 Report on Intellectual Property Protection and its 2019 Review of Notorious Markets for Counterfeiting and Piracy. The Report identifies countries and IP-related market access barriers and steps necessary to address those barriers. Section I of the Report highlights “Developments in Intellectual Property Rights Protection, Enforcement, and Related Market Access” and Section II is a Priority Watch List including country reports for countries where particular problems exist with respect to IP protection, enforcement, or market access. The Review identifies illustrative examples of online and physical markets that are alleged to have contributed to substantial trademark counterfeiting and copyright piracy activities around the world.

On April 20, international IP firm Rouse announced the positive results of a patent infringement case brought in Chinese courts on behalf of Spin Master, a Canadian children’s toy and entertainment firm. The decision from the Suzhou Intermediate People’s Court  found that defendant Guangzhou Lingdong Creative Culture Technology’s line of accused “Eonster Hunter” products infringed upon Spin Master patent claims covering the company’s line of Bakugan rollable transforming toys. The court awarded damages of 15 million RMB ($2.2 million USD), the largest damages award ever awarded by a Chinese court to a foreign patent owner.

Since China announced the first fatality caused by a virus about which little was known at the time, coronavirus and the disease it causes, COVID-19, has grown to pandemic proportions. In the less than three months since that first death, this new strain of the severe acute respiratory syndrome-related (SARS) coronavirus has shuttered social gatherings, precipitated a mandatory work-from-home revolution and decimated large parts of the world’s economy. As of the afternoon of March 27, the Coronavirus Resource Center at Johns Hopkins University reports that more than 585,000 cases of COVID-19 infection have been confirmed worldwide, resulting in a total of 26,819 deaths. Those figures have been increasing exponentially each day.

Having attained the title of the world’s second-largest economy, along with a constant influx of innovative companies and massive breakthroughs in digital development, China – often referred to by natives as “Zhongguo” – indubitably ranks among the strongest global tech leaders. While China has lately found itself in arduous times dealing with the dangerous COVID-19 virus, the country’s determination for progress surely hasn’t faltered. Such determination can deliver various results in various forms, and, considering China’s increasing size and global power, protecting intellectual property rights is one of those progressive outcomes.

Retired Chief Judge of the U.S. Court of Appeals for the Federal Circuit Paul Michel told registrants of IPWatchdog’s Virtual Patent Masters program taking place today  that the U.S. patent system has been “weakened to the point of being dysfunctional.” This dysfunction has been especially harmful to small businesses and startups, as well as to innovation in the life sciences industry—which we need now more than ever. Asked by IPWatchdog CEO and Founder Gene Quinn whether the coronavirus pandemic may be a wakeup call to those in power about the importance of incentivizing innovation in the life sciences area, Judge Michel noted that experts in the vaccine industry have indicated that China now dominates vaccine research and production. “The current circumstances may shift the thinking of policy makers quite suddenly and quite far,” Michel said. “We definitely are crimping the human health efforts for prevention and cure of symptoms. Let’s hope this really is a wakeup call for our leaders.”

Open innovation is a key ingredient to the development of valuable intellectual property. Research institutions, universities, and private businesses work in close collaboration with one another, sharing confidential business information, processes, and trade secrets in order to create content. But while open innovation is a boon to creativity it is also a vulnerable entry point for bad actors to exploit the open and collaborative mindset of research-focused institutions (like universities) or the faith in contractual confidentiality obligations that many companies rely upon to conduct business. Several recent U.S. government findings have placed the blame for some of the most significant threats to domestic intellectual property at bad actors in the People’s Republic of China. A report by U.S. Trade Representative Robert Lighthizer found that Chinese sponsorship of hacking into American businesses and commercial networks has been taking place for more than a decade and posed a significant threat to our nation’s economic prosperity and competitiveness.