USTR and Restructuring China IP Policy

When one reads carefully through Katherine Tai’s testimony or the 94 pages of responses to questions during the confirmation process last week, intellectual property hardly figures into the questions she is asked, or her responses. The IP agencies including the USPTO, the Copyright Office, the Intellectual Property Enforcement Coordinator, etc., are hardly mentioned either.

As the senior trade official now responsible for IP-related negotiations with China, Tai’s responses reveal little of how the Biden administration is calculating on how to re-engage with China.  She noted that “[t]he China Phase One Agreement sought to bring structural reforms and changes to the state-led, market-distorting approach from China in areas of intellectual property … Evidence seems to show China has been moving forward under this Phase One Agreement.”  Regarding conduct of future disputes, she stated that “the Phase One Agreement provides for regular meetings between officials designated by both sides, including a regular working group on intellectual property issues. Where obligations go unmet, there is a mechanism for consultations and redress. If confirmed, I will closely monitor China’s compliance with the intellectual property obligations in the agreement. I will not hesitate to make use of the agreement’s mechanisms when China falls short of its commitments.” Regarding intellectual property generally, she observed that “USTR leads an all-of-government approach to ensure that our trading partners respect the patents, copyrights, trademarks, trade secrets and other intellectual property rights of American innovators. The Commerce Department is a major partner in this effort.” 

USTR’s “leadership” of an all of government approach is not unique to IP. In agriculture, when Tai was asked whether she would “collaborate” with USDA, she responded, “If confirmed, I will …commit to consulting with USDA on this and other agricultural issues” [emphasis supplied]. Collaboration, of course, is quite different from consulting.  Consulting does not imply a partnership.

In the “alphabet soup” of USG agencies, there are often multiple overlaps which make leadership a precious commodity.  For example, USTR has another significant overlap with the IP Enforcement Coordinator, who is also appointed by the President and chairs the White House Intellectual Property Enforcement Advisory Committee.  By law, USPTO’s international IP authority is based on its obligation to advise the President and other USG agencies on domestic and international IP matters, and is thereby also often coincident with USTR on intellectual property matters.  See the American Inventors Protection Act (AIPA).  In addition, USPTO can work to “promote exports of the goods and services of United States industries that rely on intellectual property” and can conduct “programs” and “studies” with international organizations.   USPTO is also funded to engage in technical assistance and IP-related bilateral and plurilateral engagement, which have brought concrete changes to China’s IP system.  As a user-fee funded agency, USPTO also has other advantages.  It has a high degree of autonomy in staffing and support.  It has an engaged and responsive community of IP users that provide input into its policies.  It also has a 20+ member China IP team that has staff in Beijing, Guanghzhou and Shanghai.  This team is further aided by approximately 200 people in Alexandria, Virginia concerned with policy and international affairs, who work in a 13,000 person agency with diverse technical, linguistic and legal skills.  It is the largest IP agency in the federal government – by a long shot.

In Washington, DC, however, power often determines authority.   Katherine Tai is a cabinet-level official.  The USPTO Director is an Under Secretary.  A Director will be at least two steps below a cabinet member. USPTO lacks USTR’s authority over the 301 process, tariff setting or other retaliatory actions.   USPTO Director positions are typically not filled until late in the first year of a new administration, as were Dave Kappos (in August) or Jim Rogan (in December).  Due to the delay in appointments, much of the Administration’s trade-related IP policies will already be in place at the time of a new director’s arrival.  With a limited opportunity to make an impact, but important matters concerning running the 13,000 person PTO office, and the nuisance of having to cross the Potomac from Alexandria to DC each time a new interagency meeting is held, there are few positive incentives for a new Director to become consistently and deeply enmeshed in time-consuming international IP diplomacy.  A more natural international focus will inevitably be on interaction with other IP offices and international IP organizations, where both practical work-sharing and policy issues are often discussed.

The Senate confirmation structure also decreases coordination between PTO and USTR.  A USPTO Director’s appointment is made on recommendation of the Senate Judiciary Committee.  The Finance Committee confirms trade officials.  The committees have different mandates and priorities.  Not surprisingly, during her confirmation hearing, Katherine Tai was asked several times about adjustment of the tariffs imposed on China by the Trump Administration by reason of its “IP theft.”  She did not discuss substantive developments in China’s IP system.    

Prior efforts to ensure greater efficiency of USTR have also not advanced IP-related engagement with China.  As an example, Senator Rob Portman, Katherine Tai’s predecessor at USTR during the Bush administration obtained a commitment from Katherine Tai to conduct a “top to bottom review” of Chinese trade policy. Portman conducted such a review when he was at USTR in 2006.

The 2006 Top to Bottom Review (the “Review”) made several recommendations to enhance USTR’s capacity in trade issues.  Regarding IP, USTR announced that it would “expand … negotiating capacity in Beijing and other resources in China to more effectively pursue top priority issues, especially the protection of intellectual property rights.”  Furthermore, “economic sections in each of our four consulates … support the Ambassador’s continuous efforts to strengthen China’s intellectual property rights enforcement through regular contact with China’s central and provincial governments.”   It also noted that USPTO was increasing its staff in China by two.   Thankfully, US Ambassador Randt and all of his successors have strongly supported the USPTO presence in the US Embassy and consulates, and during my tenure I was able to negotiate a series of MOU’s with Chinese IP agencies, supported efforts of USG agencies to expand bilateral cooperation, helped resolve commercial disputes, trained US embassy officers, had meetings with high-ranking Chinese officials, etc.

The changes in the US-China trade relationship 2006 do require a reassessment of how the US should engage China on tech policies.  A new China and trade team will need to reevaluate the Trump administration’s efforts.  One of the first steps should be to clean up the legacies of a deepening lack of inter-agency coordination and public transparency.  Prior to the Trump administration, USPTO was a partner with USTR in the IPR Working Group of the Joint Commission on Commerce and Trade. During the trade war, however, it appeared that USPTO was rarely involved in negotiations.  This has also been accompanied by weakening commitments to transparency.  The Phase 1 Trade Agreement itself did not require greater enforcement transparency by China.  To date, there has also been no public information available on Phase 2 Agreement negotiations.  There is no also public analysis of Phase 1 Agreement implementation.  None of the Chinese reports required by the Phase 1 Agreement on enforcement actions has been released by the US government.  As has been the case since approximately 2012, United States comments on draft IP legislation are also not available to the public.

A new USTR Review will likely call for more staffing.  This adjustment may also work to the disadvantage of greater coordination.  Increased internal staff may decrease reliance on other agencies.  As an example, when the US filed a WTO case involving China’s criminal enforcement regime shortly after the Review on April 10, 2007 (DS362), neither the Computer Crime and Intellectual Property Section of USDOJ nor the FBI participated in the proceedings.

A revised and efficient interagency process needs to be established which leverages the expertise of the many science, IP and law enforcement agencies in the US government to address a complex and rapidly changing Chinese IP landscape.  Agencies that have been reluctant partners, such as those engaged in antitrust or criminal IP prosecution also need to be brought into a bigger tent with due respect for their law enforcement obligations.  New challenges also need to be addressed.  In IP, for example, this might include the more aggressive postures of China’s judiciary, competitive challenges in new technologies, the global FRAND/SEP disputes, the more active emergence of China’s administrative agencies, the selective transparency of its courts and agencies, as well as the possibilities of greater cooperation in a range of IP areas. 

The administration’s focus on labor rights could also inspire a new range of long-overdue IP-related engagement with China, such as ensuring that our smaller companies, rights owners and farmers have access to China’s inexpensive administrative and civil enforcement mechanisms, utilize lower cost rights such as utility model and design patents, benefit from enhanced grace periods for patent prosecution, encounter fewer procedural burdens to bringing civil litigation in China, have effective and efficient on-line remedies, can protect their unique agricultural products, are not burdened with bad faith trademark or patent registrations, and have an opportunity, once again, to directly raise their commercial complaints, as was done 15 years ago.   Although Tai did discuss the role of copyright protection in supporting US jobs in the content industry,   helping smaller companies, innovators and creators would be a new concern.  Small companies also rarely participate in the 301 process and their issues are typically not on the bilateral agenda in a prominent way.

As part of a more holistic engagement on Chinese IP issues, USTR might also, for the first time, fill the position of a Presidentially-appointed and Senate-confirmed Chief Negotiator for IP and Innovation, which was authorized by legislation in 2016 (18 USC Sec. 2171).  Ms. Tai was asked about this position as part of the confirmation process.  She replied in a non-committal way: “If confirmed, I will consult with this Committee and Congress on its intentions when it created that position, and more broadly, your views on how USTR can best accomplish our shared goal of ensuring that our trade agreements benefit American innovators [emphasis supplied].”  

If the position is filled, I hope that the President appoints someone from the IP and innovation community in order to deepen IP depth within USTR, support interagency coordination and also work more closely with the relevant congressional committees.  There are many well-qualified candidates.  Filling this position would support greater integration of relevant agencies into more thoughtful, comprehensive and durable China IP trade policy.

Categories: USPTO, USTR

2 replies »

  1. Mark,
    Very good article. It is in many ways unfortunate that the IPR aspects of US trade policy are so dispersed. Given the way in which Congress wants to reward its favorite agencies and individuals, the broad IPR approach tends to lack focus and no office or agency really “controls” or is “in-charge” on IPR issues. The difficult IPR issue, which has an impact on all commercial areas (services & manufacturing), there should be more consideration as to a focused approach that addresses everything from rights acquisition and maintenance to enforcement and everything in between (including IPR tech assistance & capacity building). It is disappointing after all these years (decades), that the USG’s IPR approach has not evolved much at all whether with regard to China issues or globally.

    Liked by 1 person

    • Tim, as I re-read your note this morning – I am wondering if there is room for a group of us – people who have spent time in government service and still want to do good – to send a letter to the President/ USTR/Commerce/IPEC, etc., saying how critical it is for the US to do the kinds of things you just mention and which I have also been complaining about for years – i can easily see people like Kappos, iancu, Michel, Rader, Papovich, and many others signing on. Maybe we could even convince a Charlene or other ex-USTr. I don’t think more articles/transition proposals/etc. are going to do the job – either on foreign policy or domestic policy….what do you think?


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