US-China relations

China launches campaign to protect foreign intellectual property rights as US probes alleged thefts

Beijing’s drive to protect foreign businesses from infringements comes ahead of US President Donald Trump’s visit to China next month

PUBLISHED : Wednesday, 20 September, 2017, 10:44am
UPDATED : Wednesday, 20 September, 2017, 11:13pm

China has launched a four-month campaign to protect the intellectual property rights of foreign businesses, a move that may alleviate a major concern among foreign investors on the mainland and appease Washington ahead of US President Donald Trump’s visit to Beijing.

The Trump administration last month officially launched a probe into alleged Chinese intellectual property theft and the findings could lead to the US imposing tariffs on Chinese products – potentially triggering a trade war between the world’s two biggest economies.

Steve Bannon, the former White House chief strategist, told the South China Morning Post in an interview in Hong Kong last week that Washington would release the results of the probe before a Sino-US summit in Beijing so both sides can reset trade with “a whole series of negotiations”.

It is the first time the Chinese government has started a nationwide campaign to protect foreign businesses’ intellectual property. The drive, which runs from this month to the end of December, is designed to “create a level playground”, protect investors’ legitimate interests and “further increase foreign investment”, according to a notice released by the Ministry of Commerce earlier this week.

China calls US intellectual property investigation ‘irresponsible’

In addition to the commerce ministry, another 12 Chinese government and judicial bodies, including the Ministry of Public Security and the Supreme Court, are taking part in the campaign to crack down on the theft of trade secrets, trademark infringement, patent violations and online property rights violations.

Each government department has been assigned its respective focus. For instance, the State Administration of Industry and Commerce is leading the efforts to protect foreign trademarks, while prosecutors give special attention to investigate any corruption or neglect of duty involved in intellectual property violations.

China was once the darling of foreign investors, drawing most Fortune 500 companies to its marketplaces. But some labour-intensive manufacturers, finding China increasingly expensive, have been relocating to countries with cheaper costs. Meanwhile, the government’s endeavour to lure hi-tech investors has been impeded by intellectual property rights issues.

Trump launches US probe into ‘unlawful’ China trade practices, raising spectre of trade war

Foreign direct investment in China dropped 6.5 per cent from a year earlier to US$72.1 billion in the first seven months of this year, according to commerce ministry data.

China’s intellectual property rights protection measures frequently draw complaints from foreign investors and have been a long-standing focus of attention at annual talks with the US and Europe.

The campaign has implications for Trump’s family as many trademarks under the Trump name established by the president – a billionaire US real estate mogul – and his family are registered in China.

Foreigners’ impression that China has poor intellectual property rights protection “was partly caused by its different legal system from common law countries”, said Shu Yujing, a Chinese partner of US law firm K&L Gates, who has represented Western clients in trademark infringement cases.

Is China making life difficult for foreign companies?

For instance, plaintiffs bear the burden of proof and need to provide Chinese courts with sufficient evidence of infringement, which is usually hard to find, Shu said.

“Such government-led campaigns will have more or less positive results, such as a quickened pace of investigations,” Shu said.

Beijing has admitted that its way of protecting intellectual property rights is imperfect, but it will continue to make a huge effort to improve it, Vice-Commerce Minister Wang Shouwen told a press conference last month.

In the past five years, the national leading group chaired by Vice-Premier Wang Yang has pushed forward the revision of more than 10 laws or regulations, set up intellectual property rights courts nationwide and investigated 1.3 million cases and pressed charges against nearly 100,000 violators, Wang has said.

Is the golden age over for multinationals in China?

But such rhetoric has not convinced China’s critics in Washington.

Trump last month signed a memorandum instructing US trade representative Robert Lighthizer to investigate China’s “unfair trade practices” to protect US technology. IPR protection also is likely to remain on the agenda during Trump’s first China visit in November.