China IPR, Thanksgiving and “The Room Where It Happens”

“No one really knows how the game is played
The art of the trade
… no one else is in  
The room where it happens.”

(Lin Manuel-Miranda, from the musical “Hamilton”)

I never met Joe Biden, although I did work on IP for him in China.  My work for the Vice President over the Thanksgiving holiday of 2013 has influenced my attitude towards interagency dialogues with China on economy and trade, including who should be in “the room where it happens.” 

I received a phone call from the White House on Friday November 29, 2013 to be part of the advance team for Vice President Biden to negotiate IP issues as part of his meetings in Beijing.  The Chinese Embassy issued me a visa in a matter of hours and my PTO team was able to get me a ticket at the last moment. I reluctantly said goodbye to my family gathered for the holidays, and I was on a plane that weekend. 

My discussions in Beijing involved post-filing supplementation of data in pharmaceutical patent applications.  One does not normally think of the Vice President leading these types of discussions.  However, the meetings were held at the Ministry of Finance under the auspices of the US-China Strategic and Economic Dialogue (S&ED), which was chaired by Treasury and had originally been initiated by Secretary Hank Paulson under the leadership of George W. Bush, Jr with the abbreviation at that time of the “SED” (often pronounced like “said”).   The SED added a new, higher level IP negotiations beyond the Joint Commission of Commerce and Trade (JCCT), which was chaired by USTR and the Commerce Department. 

Zhu Guangyao, the Vice Minister of the Ministry of Finance, hosted the negotiations as he worked in the counterpart ministry in China to the Treasury Department.  I  knew Zhu from prior Treasury-led IP discussions, which he hosted but had largely absented himself from.  The discussions, however, were concluded in time for a fact sheet encompassing the range of bilateral economic relations that was released on Thursday, December 5.  My  blog appeared on my return of December 6.   The IP outcome had been downplayed constituted a mere 3.2% of the overall fact sheet text.  In the spirit of the season, I was nonetheless grateful for such high-level support.

Why did Biden negotiate IP under the “framework of” the  S&ED? The S&ED had been initiated by Secretary Paulson as an omnibus, authoritative integrated negotiating process with China.  It provided the broadest possible interagency support.  The Secretary of Treasury chaired the “economic” track, and the State Department chaired the “strategic” track.  The first meeting in December 2006 brought IP into Treasury’s interagency umbrella by highlighting the role of “effective intellectual property protection” in “competitive markets.”  At one of those first working-level meetings,  I sat warily on the backbench watching an impressive team of IP colleagues from China, all of whom I knew, negotiate with seasoned Treasury officials whom they did not know, and who were also new to Chinese legal and/or IP issues.  The negotiations were part of efforts on both sides to avert a WTO case that had been threatened by the United States. The WTO case in preparation involved copyright piracy and trademark counterfeiting, including Customs remedies, and the Chinese team was staffed with experts on enforcement of these rights.  Treasury led with a  discussion around Schumpeter’s economic views of disruptive innovation.  It was a great engagement – if you were an academic.  Technology-related IP, such as patents, trade secrets and licensing, were not part of that WTO case.  The WTO case was nonetheless filed on the 10th of April 2007.   I was in “the room where [those discussions] happened,” but without a speaking role.

The S&ED was intended as a “super-dialogue” mechanism to resolve issues that could not be resolved through other mechanisms.   At their best, super-dialogues, whether led by Treasury or the JCCT, offered an opportunity for difficult issues to be progressively “elevated” from “lower” agency-led expert discussions to “higher” political discussions for their ultimate resolution. The 2013 meeting afforded such an opportunity.  At their worst,  the super-dialogues could produce a number of negative outcomes: issues and agencies were alienated from the process or subsumed into macro-economic discussions; issues were horse-traded against other concessions in a manner where line agencies lost control; Cabinet-level or high-level agency officials wasted their time in high-level meetings with little relevance to their agency; and non-experts led discussions to no avail, such as that meeting in 2007.

During my tenure in the government, I believe that Chinese IP officials also easily recognized when there was an inexpert negotiator at the table.  They must certainly have wondered how Treasury officials or other trade generalists could be negotiating IP-related concerns.    Often the high-level US experts were also inadequately schooled in Chinese law, as Chinese legal scholar Jamie Horsley recently pointed out. Thankfully, most of my interagency colleagues on a working level were reasonable people and they knew when they had to delegate more granular negotiations. However, the paramount institutional authority vested with the heads of these super-dialogues, including making sure that their right people were “in the room”.   

Given the political firepower of the S&ED and JCCT, did lower-level meetings still make sense? At the same time as the S&ED meeting and the WTO case that was filed in 2007, there were other expert-level dialogues on IP.  These cooperative efforts employed far greater IP expertise but with lesser political authority.  Collaborative engagements were based on MOU’s between USPTO and SIPO, SAIC, the National Copyright Administration, and an interagency consensus that USPTO would co-chair an IP working group under the Joint Commission on Commerce and Trade among other activities.    

One of the durable outcomes of that cooperative period was initiated by a  phone call that I received from USPTO Director Dudas on December 24, 2006 to ask me to invite China to join an expanded community of five largest patent offices which would explore improving patent policy and practice.  That group is now called the IP5.  The first IP5 meeting was held in Hawaii at nearly the same time as the WTO case filing.  The IP5 structure has since expanded to include a TM5 for trademarks and an ID5 for industrial designs.  The photo above is of the first ID5 meeting in 2015.  Many issues, including expanding the scope of patent protection for graphical user interfaces, addressing bad faith trademark registrations, improving patent and trademark examination, making in-roads into post-filing supplementation of data for pharma applications, evaluating pending legislation, engaging on the role of specialized IP courts, reforming China’s technology transfer regime, discussing the role of precedent in IP cases, had made progress in these and other cooperative discussions.  In that pre-Trump era system, the additional political pressure from high-level dialogues was used to help accelerate these IP reforms in China.  These meetings were also not without political consequence – from the China side.  In some cases PTO officials, including myself were able to engage well above our bureaucratic rank – up to the Vice Premier level, including with Vice Premier Wang Yang and his predecessor Vice Premier Wu Yi.

Fast forward several years, and Janet Yellen and I were at the same meeting of the Strategic and Economic Dialogue with Treasury Secretary Jacob Lew in 2016.  That meeting showed the octopus-like reach of the S&ED, with about 30 enumerated separate sub-dialogues under the economic track alone. The role of Treasury officials in organizing bilateral IP issues was well-established.  However, I believed that our negotiations were getting strait-jacketed by an excess of scheduled talks and its consequent risks.  Indeed, in that 2016 dialogue, the principal focus was on economic policy,  trade and investment, and financial stability.   We had entered a period of  capture by the “super-dialogue” and “hyper-dialoguization” (sp).  Everyone needed to be in the room where it happens.  Other dialogues fared no better.   An earlier effort in 2014  by Commerce Secretary Penny Pritzker to  “choose a location outside of Washington” and “invite our respective business communities” to “reimagine and reinvigorate” the JCCT could hardly address the structural issues involved in a proliferation of dialogues and bureaucratic disincentives to using them effectively.

It is difficult to ascertain who was in the room during the Trump-era trade war, although photographs suggest that many of the higher-level negotiations were held by USTR, the White House and even the President himself without high ranking IP agency officials.  Photographs reveal that Chinese officials who cut their teeth on US-China trade negotiations, such as Zhu Guangyao, continued to play an active role in the Phase 1 Trade Agreement.  I wonder if  Zhu Guangyao was amused that the same post-filing supplementation of data issues from 2013 were included again as part of the 2020 Phase 1 Trade Agreement.  More likely, he did not recall those earlier discussions.

How much will a Biden administration reinvigorate super-dialogues? In an interview on CNN this year, Treasury Secretary Designate Janet Yellen has demonstrated an understanding of the complex bilateral tech issues that are now a focus of US-China economic relations.  She correctly noted that the Phase 1 Trade Agreement  doesn’t remove the “more troublesome” risk of conflict over emerging technologies.  If confirmed, Secretary Yellen will join a Treasury Department that now also plays a more direct role in tech relations through its chair of the Committee on Foreign Investment in the United States, and its sanctioning authority under the International Emergency Economic Powers Act.  However, Treasury has also been criticized as being “the very model of an unprepared generalist” – a tech mini-agency with a big mandate and without adequate tech expertise.

It is my hope that Biden appointees can find a balanced way to ensure that the United States government engages with China with pragmatic goals in mind without the strait jacket of excessive, redundant and inexpert meetings.  As the United States engages with the outside world, the lesson of the past several years remains that dialogues are never the ultimate solution. With respect to China,  tariffs may continue to need to be part of the picture, particularly if other multilateral solutions are ineffective.  Unilateral sanctions also require strategic depth to be effective.  I believe the Phase 1 Trade Agreement could have been much improved through the contribution of experts

No matter what strategy is undertaken, negotiations can only be part of an effective strategy if the right people participate “in the room where it happens.”

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