In an interview earlier this week President Trump announced that his administration is preparing to get tough on Chinese trade practices and accused the US’s geopolitical rival of forcing American companies to give up some of their IP as a cost of doing business in the country.
“We have a very big intellectual property potential fine going, which is going to come out soon,” he said. He went onto tell the journalists from Reuters that: “We’re talking about big damages. We’re talking about numbers that you haven’t even thought about.” His comments will no doubt interest US IP owners in numerous sectors, who believe they face increasingly stern competition from Chinese rivals.
The president was speaking in relation to a Section 301 Investigation into Chinese trade practices launched last August. Announcing that, US Trade Representative Robert Lighthizer commented: “President Trump instructed me to look into Chinese laws, policies, and practices which may be harming American IP rights, innovation or technology development.”
Trump had indicated his willingness to get tough on Chinese trade on numerous occasions on the presidential campaign trail in 2016, but the launch of an official investigation heralded a marked change in tack by US authorities. His comments this week suggest that we’re about to see the results of Lighthizer’s work.
Normally with 301 IP investigations, sanctions follow a period in which the relevant country is given notice of improvements the US government would like to see. Only if there is no subsequent movement is any action taken. Even then, it is relatively rare. In 1991, 1995 and 1996 the US threatened sanctions against China if changes were not made to its IP regime, but each time enough progress was made for nothing to actually happen. To move from an investigation straight to a fine or other kind of trade-related action would be quite a step to take – but Trump is never one to play by the rulebook, so it would not be a surprise. Alternatively, of course, the president may be getting ahead of himself.
What is not clear, though, is to what extent the whole exercise is simply shutting the stable door after the horse has bolted. A decade, or even five years, ago Chinese companies were far weaker in terms of their technological development and IP holdings. Today, though, they have become far more focused on R&D and building their own patent portfolios as the country’s government has sought to shift from a manufacturing based economy to one that also develops its own products.
The Chinese enforcement system has also become far more robust with the launch of specialist IP courts which give local companies a means of taking action against US competitors in their own backyard. The US still has significant leverage in large part because of its size, but it’s not as if China doesn’t have any means of hitting back in patent terms or more generally – after all, its domestic market is growing exponentially and its one that any number of US businesses want to access. The Bush and Clinton administrations back in the 1990s may have been able to extract concessions from Beijing on IP, but it is far less clear whether more than 20 years on the same will apply.
What gives all this an added angle is that Trump’s comments followed the Supreme Court’s decision to grant cert in WesternGeco LLC v ION Geophysical Corp, a case focused on whether a patent owner, having been successful in an infringement assertion, can recover lost profits that it would have earned outside of the US if the infringement had not occurred. Should the petitioner WesternGeco, which owns the original patents in suit related to conducting marine seismic surveys, be successful then patent owners could see big jumps in the amount of damages they can recoup. The case, which the US Justice Department urged the court to take, is not specifically focused on China, but taken with the trade investigation represents another way in which US authorities maybe about to get much tougher on the infringement of US IP overseas.