China IPR

USTR, IP and US-China Trade

On October 4 2021, USTR Katherine Tai delivered her much-awaited speech at CSIS outlining US-China trade policy under the Biden Administration. The speech summarizes her “top to bottom” review of US-China trade policy. Sadly, it was  one of the most IP-free speeches that we have heard from USTR on China trade policies in my memory. 

USTR Tai mentioned intellectual property only once when she briefly talked about the Phase 1 Agreement. This was not a slip-up in speech writing. There was also nary a word mentioned of patents, trademarks, copyrights, or trade secrets.  She also referred to industries, workers, farmers, ranchers—but not rights holders.  During the Q&A William Reinsch, the moderator, seemed to be coming close to mentioning patents, but in the end, he referred to “inventions.” Katherine Tai did mention industrial policy, innovation, supply chains, and technology several timesbut not in conjunction with IP. 

Based on its content, Tai’s speech outlines a US-China trade policy that is significantly “decoupled” from intellectual property. This is not a departure from current policies. Tai barely mentioned IP in her confirmation hearing. During her Obama-era tenure at USTR, no IP-related dispute was launched against China. Her policies are also consistent with the Administration. As I have noted elsewhere, the Biden administration’s support for the IP waiver at the WTO to address the Covid19 pandemic was an exercise in “virtue signaling,” without addressing the positive role that IP can play in supporting international collaboration or the weaknesses of China’s pharmaceutical IP regime. President Biden has also  yet to send up a PTO Director to the Senate for confirmation. USTR does have two officials in place who have IP in their portfolios, including a Deputy USTR for IP and Innovation and an acting Deputy Assistant USTR. Both are capable USTR-insiders, with trade and not substantive domestic IP experience. Outside of USTR, DOJ is unwinding some of the Trump administration’s policies by calling for a heavier hand in managing IP and antitrust.

The last top-to-bottom review of US-China trade policy was conducted 15 years ago under USTR Portman and included an extensive published report. It also supported a restructuring of USTR to better engage with China. USTR Tai’s speech was not similarly focused on structural changes in USTR.  It instead portended a broad change in policies, including addressing Chinese non-market orientations.  Specific issues were avoided. For example, although she mentioned that there would no Phase 2 Agreement, she was unwilling to discuss granular concerns such as to what degree China had lived up to its Phase 1 commitments.  This approach implicitly leaves a host of IP-related issues, such as those involving antitrust, standardization, anti-suit injunctions and global litigation, high-tech patenting, and transparency of court decisions, potentially off the negotiating table or reduced to a lower priority compared to her repeated references to expanding market access for agricultural products.

One questioner came close to asking about USTR resources that are necessary to address emerging new issues.  The questioner asked Tai about how USTR would “pivot” to “industries of the future” in USTR’s trade policies, including tariffs. In my view the anticipation of new technologies, industries, and IP-related evolution in areas such as AI, 6G, and biotech, likely demands more coordination and depth from US government agencies than USTR can possibly muster internally. It would also demand the kind of rethink in technology that the first top-to-bottom review attempted to accomplish in trade.

It is ironic that a US-China trade war initially launched to address China’s forced technology transfer policies has now devalued those same issues. USTR Tai referred several times to Chinese industrial policy limiting US market access, but she did not address it as a limiting factor in the ability of US companies to exploit their IP rights.  Nor did she consider improving China’s IP regime as a positive factor in advancing market reforms in China. Intellectual property has played an important part in China’s market reforms since 1979. China’s IP laws predate its property laws and have helped incentivize entrepreneurship in a wide range of industries in China. IP also plays a critical role in areas of anticipated cooperation with China, such as public health and clean energy. IP should continue to be supported by the United States to play these positive roles in US-China relations.

An Administration orientation towards increasing market access for grains and goods, but not protection and commercialization of intangible rights, could have long-term adverse consequences. If I were in Hollywood, I might be apprehensive that Tai didn’t mention restrictions on US access to China’s film market (the largest in the world)—and any violations of previous agreements between the US and China on this topic.  The lack of focus on transparency in China’s IP regime also means that lawyers and small businesses will continue to face difficulties in navigating China’s IP system. In addition to rightsholders and SMEs, consumer constituents should also be concerned about how USTR will address counterfeit or infringing goods coming from China and Hong Kong in the years ahead, as these two regions constituted  80-90% of US Customs seizures in FY’s 2019 and 2020 and have long played a dominant role in US seizures of infringing imports. 

 I look forward to a future speech of Ambassador Tai, where hopefully she will present a more thorough approach towards addressing the opportunities and challenges of deeply integrating IP into US-China trade policies.

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