China’s Two Front IP War
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President Donald Trump’s recent decision to investigate China’s theft of American intellectual property (IP) is as good a sign as any that “America First” was more than just a campaign slogan. And when it comes to intellectual property theft, the President is entirely correct that China ranks at or near the top of all offenders regarding this crime. Moreover, the Chinese government often makes the wholesale surrender of intellectual property a precondition of doing business in its country — a fact which keeps all but the most cowardly, desperate tech companies wary of its business climate.

However, China’s strategy to hobble America through abuse of IP does not begin and end with theft or wholesale seizure. Rather, the Chinese attempt to wage economic warfare through IP policy has two fronts, one focused on hobbling American business by taking away its intellectual property, and the other focused on strangling American business within China’s own borders through even more restrictive IP policy than that followed by the United States. This second prong is less reported on, but no less deadly. Moreover, rather like the desperate cowards who abet the taking of American IP, the Chinese strategy of driving out American business with China’s own IP laws has its own set of quislings ready to defend it for the sake of sheer opportunism.

To see this strategy in action, one need only look at the actions of China’s government, which has been issuing patents as fast as it can print them, with little to no regard for quality, presumably as a means of giving Chinese businesses a way to exclude U.S. competition on IP grounds. No test case for this particular leg of the strategy has happened yet, but given that frivolous patent litigation experts are chomping at the bit to do business in China, it’s likely only a matter of time.

What has happened repeatedly, however, has been Western patent trolls suing within the Chinese legal system. Witness Canadian patent troll WiLAN deciding to pursue its lawsuit against Sony in China, rather than in Canada or the U.S., or a similar decision by the Hawaii-based troll GPNE Corp. to go after Apple in Chinese courts. In all these cases, the goal is to weaken the West by shutting it out of competition in China proper, and by exerting legal pressure on Western business through the Chinese legal system. In short, at the same time that China is stealing genuine American IP with one hand, it is generating bogus IP at home, and offering to enforce even foreign bogus IP “rights” with the other.

Now, you might wonder who is helping with this strategy at home. Well, to nobody’s surprise, trolls and opportunists stick together. As a result, a whole host of U.S.-based patent trolls and unscrupulous patent attorneys have jumped on the Chinese gravy train. With regard to the former, witness, for example, the Texas-based troll known as Longhorn IP buying up Chinese patent portfolios. Or, look at Dominion Harbor JV, another Texas-based troll, which recently decided to form a joint venture with China’s Paicheng International Technology Transfer (PITT) to enable it to more effectively “monetize” its patents (read: troll with them). Furthermore, market analysts predict that China could soon be the most friendly legal territory for patent trolls.

But the really troubling evidence of U.S.-based cooperation with this attempt to fleece American businesses through IP abuse comes from the lawyers themselves. The pro-troll blog IP Watchdog posted a thinly veiled pitch to China about how to exploit its patent portfolio in February, apparently blithely unconcerned that trolling already costs the U.S. economy $29 billion a year.

A few weeks later, famed troll apologist Paul Morinville praised the Chinese patent system. “Today, China leads the world in new patent filings,” Morinville gushed. “As a result, startups are fleeing to China.” What Morinville didn’t mention is that the reason China leads the world in patent filings is, among other reasons, that it issues patents without even checking if someone already filed a patent for the exact same invention by searching through previously submitted design schematics. Meanwhile, pro-troll legal analysts such as Dave Kappos and Russ Slifer have both praised China’s system while badmouthing the U.S. for not following the same policies, in spite of the fact that they have been repeatedly found unconstitutional by a unanimous Supreme Court and, again, cost the U.S. economy billions every year.

To see this kind of footsie-playing with a foreign power from self-interested legal and business actors is saddening, but nothing new. No doubt those people would defend themselves by saying that China is living up to their ideal principles of IP law. If so, they are either naïve or disingenuous. Can anyone kid themselves that China, whose theft of IP has become the subject of Presidential wrath, is somehow a principled defender of IP? The only reason for its adoption of a hawkish patent strategy is to economically extort the United States and make it an inferior competitor in the long run. We should be vigilant against this strategy just as much as we are against its thefts, and we should also remember the people who, in their desperate desire to screw companies like Apple, decided that screwing the United States was an acceptable side effect.

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