Geithner slams China's intellectual property policies

WASHINGTON Fri Sep 23, 2011 12:43am EDT

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WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner said on Thursday that China is holding to its decades-old strategy to steal American intellectual property, in a pointed statement reflecting U.S. officials' growing impatience with Beijing.

"They China have made possible systematic stealing of intellectual property of American companies and have not been very aggressive to put in place the basic protections for property rights that every serious economy needs over time," Geithner told a forum in Washington.

"We're seeing China continue to be very, very aggressive in a strategy they started several decades ago, which goes like this: you want to sell to our country, we want you to come produce here ... if you want to come produce here, you need to transfer your technology to us," Geithner said.

Although unusually direct, Geithner's comments echo a common refrain from U.S. officials and executives. The new U.S. Ambassador to China, Gary Locke, who has assailed China in the past for its trade practices, has put the defense of U.S. intellectual property among his chief priorities.

China has said it would drop some of its "indigenous innovation" rules that have riled foreign companies who say access to government equipment and technology orders hinge on their transferring patents and other intellectual property.

But business associations in China argue that enforcement of Beijing's promises has been spotty, particularly at the local government level, hampering foreign companies' access to a market estimated to be worth as much as $1 trillion a year.

In an offshoot of Washington's dissatisfaction with Beijing's trade policies, leaders in Washington have long argued that China's yuan currency is undervalued, giving Chinese companies a price advantage that costs U.S. jobs.

But the foreign business community in China -- concerned about what they see as China becoming more closed toward foreign investors in recent years -- has argued that the emphasis on yuan revaluation distracts from the most serious issues threatening U.S. business interests.

A coalition of 51 U.S. business groups sent a letter dated Wednesday to senators considering a currency bill, urging them to focus more on China's inadequate protection of intellectual property and restrictions on market access.

"... unilateral legislation on this issue <yuan reform> would be counterproductive not only to the goals related to China's exchange rate that we all share, but also to our nation's broader objectives of addressing the many and growing challenges that we face in China," the groups said.

Piracy and counterfeiting of U.S. software and a wide range of other intellectual property in China cost U.S. businesses alone an estimated $48 billion and 2.1 million jobs in 2009, the U.S. International Trade Commission has said.

The United States' trade deficit with China hit a record $273 billion in 2010 and could top that this year.

In May, China was listed for the seventh year by the U.S. Trade Representative's office as a country with one of the worst records for preventing copyright theft.

(Reporting by Rachelle Younglai; Writing by Michael Martina in Beijing; Editing by Don Durfee)

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Comments (3)
zhubajie wrote:
BTW, where in the Bible or Koran or the Buddhist Scriptures is there authority that “Intellectual Property” is sacrosanct? IP is a man made concept, to favor the haves against the have nots. For example, copyright term keeps getting lengthed (Used to be 35 years? Now it is life of author + 70 years or something like that, and 95 years if a corporation is the author). It’d be silly for the still developing nations to give heed.

Moreover, today the economic relationship between China and America is grotesquely unbalanced – IN FAVOR of America on almost all counts.

One outrageous trend is that the major U.S. corporations routinely seek to legalize theft of IP from Chinese suppliers. It is well known that in the “standard” vendor contracts from major U.S. importers (all the big names), they all contain PREDATORY clauses (a) taking the trade secrets and confidential info of the China exporters without extra compensation while obligating the China exporters to honor the counterpart of the U.S. importer; and (b) clause that says once the vendor supplies the product to the COMPANY for a while (e.g., 1 year), then the COMPANY (the U.S. behemoth) would be granted a PAID UP, ROYALTY FREE license on all the IP of the Chinese exporter, until the end of time (or end of life of the IP).

Given the unequal bargaining positions of U.S. behemoths and the tiny Chinese suppliers, this open theft of Chinese created IP through the use of contracts of adhesion, simply cannot be effectively countered by the small Chinese exporters.

IMAGINE clauses like that being imposed by ANY Chinese company on the likes of American companies – Microsoft, Intel, GE, etc., and see fire and brimstone responses from Washington!! Too bad Beijing has not wised up to this travesty, and has done nothing to help the Chinese exporters yet, leading to the loss of likely hundreds of billions of dollars in Chinese IP through this predatory practice by major Western companies.

What is good must be universal. If IP is to be protected, ALL IP should be protected.

Sep 23, 2011 8:01pm EDT  --  Report as abuse
zhubajie wrote:
At least when the Chicoms condition approval of joint ventures on technology transfer, there is value paid (in all cases the technology is valued and count towards the capital contributed by the parties). That is not theft. That is a business deal. Buying products from China at rock bottom prices (typical export margins are 3-5% max), and NOT PAYING for the Chinese IP, is on the other hand PURE THEFT. Or highway robbery, if you prefer.

WHAT Chinese IP can there possibly be? In the copyright field alone, each year China probably produces over 250,000 copyrightable consumer product designs (graphics on chinaware, sculptural work on ornaments and decorative sculptures, fabric designs, etc.).

Sep 23, 2011 8:08pm EDT  --  Report as abuse
canpotex wrote:
The U.S. should establish cartels for each sector of the economy that does substantial business with China. U.S. companies are divided against each other and they are giving up more than they should in return for market access because they know that if they don’t then their competitors will. Having cartels comprised of the top companies in each sector with government oversight to veto contracts that are taking advantage of U.S. companies would go a long way to solve this problem. Giving up individual control would strengthen the negotiating position of all of the companies that make up the sector.

Sep 23, 2011 11:28pm EDT  --  Report as abuse
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