Michael Komesaroff, a Sinologist and mining engineer based in Australia, has published an interesting article on the website of the Center for Strategic and International Studies on “Make the Foreign Serve China: How Foreign Science and Technology Helped China Dominate Global Metallurgical Industries.”
According to Mr. Komesaroff, China is now the world leader in metallurgical technologies as it has the largest and technically most efficient plants in the world. This was achieved through a number of strategies commencing with the purchase of obsolete western plants and extending to reverse engineering including the infringement of IP rights. As Michael notes at p. 11, Chinese practices “do not discriminate in their lack of respect for intellectual property; Chinese companies will infringe the proprietary technology of national champions as readily as they do to foreign competitors and the absence of an enforced intellectual property law accelerates diffusion of any new technology.” Furthermore, “with an endless supply of smart engineers and scientists, why pay for technology, something that you cannot touch, see, taste, or smell.” Michael’s points are especially interesting because they link innovation with capital intensive industries and state support, China’s past practices of acquiring obsolete Western plants and China’s IP practices and policies.
IP issues in the steel sector have also become more of a focus point with the institution in May of 2016 of a 337 litigation by US Steel against several Chinese steel companies, which alleges that Chinese steel companies have engaged in the “the misappropriation and use of U.S. Steel’s trade secrets” as well as “the false designation of origin or manufacturer, in violation of the Lanham Act, 15 U.S.C. § 1125(a).” This is not the first such trade secret related action involving steel and China. Two years prior to this 337 action, several PLA agents were indicted in a US court in Pittsburgh for cyber-espionage related activities, including trade secret theft, in several industries. US Steel and other iron and steel industries, as well as Alcoa, were alleged to be victims of these efforts.
There have also been numerous trade-related concerns expressed concerning China’s metallurgical industries over the decades since 1979, including a “Section 406” investigation that I was briefly involved in before China’s WTO accession (1987), that involved tungsten, and, more recently, trade discussions on Chinese excess capacity in the steel industry. A WTO case had also been brought by the United States against China regarding its export restrictions involving rare earth metals, including tungsten and molybdenum in 2012 . While the metallurgical industries have been a trade-sensitive area for some time, it now appears that IP-related issues have become of significant concern.