New report reveals growing concerns over China's IP theft and forced technology transfers

Posted by scapozzola on 11/17/2011

Yesterday, the Congressionally-created, bipartisan U.S.-China Economic and Security Review Commission (USCC) released its 2011 Annual Report to Congress.

Here are a few worrying items from the report:

Despite having promised in 2001 to sign an agreement to treat imports fairly and equitably in making government procurement decisions, China has failed to live up to its promise.   If China continues this policy, it will mean that a substantial portion of the Chinese economy will be closed to foreign competition, particularly when China’s state-owned and controlled corporations and industries join in discriminating against foreign goods and services.

A secondary goal of China’s Indigenous Innovation policy is to force foreign corporations and their China-based affiliates to transfer technology to Chinese competitors. The Chinese government hopes to accomplish this, in part, by making sales to the government contingent on the products being patented in China.  Because intellectual property protections in China are woefully inadequate, this raises the likelihood that critical technology will be stolen or easily obtained during the insecure registration process.

The Chinese government has utterly failed to provide an internationally acceptable standard of intellectual property protection despite years of passing laws and issuing regulations and staging raids on counterfeiting operations.  This lack of protection provides Chinese companies with a large advantage, especially when Chinese companies are able to obtain pirated business software at a small fraction of the cost paid by their foreign competitors.  The U.S. economy is heavily dependent on companies that have developed intellectual property. For example, IP-intensive industries in the United States accounted for 60 percent of all U.S. exports in 2007.  Salaries in those industries were on average about 60 percent higher than in non IP-intensive industries.

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