More Action, Less Talk Needed On Chinese Tech Theft

In the run-up to President Xi Jinping’s visit to the U.S., the issue of Chinese theft of American intellectual property has been prominent. High-level envoys shuttled back and forth and the Obama administration leaked reports of imminent sanctions. Then came the payoff in Xi’s Wednesday speech to American businessmen in Seattle. 

“The Chinese government will not, in whatever form, engage in commercial thefts or encourage or support such attempts by anyone,” he said. “Both commercial cyber theft and hacking against government networks are crimes that must be punished in accordance with law and relevant international treaties.”  

Victory for the U.S.? High fives? Victory laps? Not so fast.  

Two years ago, we co-chaired the Commission on the Theft of American Intellectual Property (IP Commission). Since our report was published, $600 billion worth of damage has been done to the U.S. economy. The extent of the administration’s action, however, has been continued jawboning and the May 2014 indictment of five low-level officers of the People’s Liberation Army for IP theft, a completely symbolic gesture. Finally, on April 1 of this year, the administration issued an executive order to punish cyber thieves, but no action has been taken under its provision.

Congress had directed more. In the 2015 defense authorization bill lawmakers provided the administration authority to sanction foreign persons and entities engaged in economic or industrial espionage in cyberspace, and directed the president to submit an annual report to Congress. The report is to list foreign countries engaged in cyber espionage targeting American intellectual property, including those engaged in the most egregious cyber espionage, as well as U.S. technologies, proprietary information, and articles produced using U.S. technologies or proprietary information. The report has not been delivered.

Meanwhile, the damage to the U.S. economy continues. Just this week, an American company has brought a case against a major Chinese telecommunications company, providing the latest evidence of behind-the-scenes-collusion among key Chinese players—government, enterprises, and courts—to ignore intellectual property rights and favor domestic business.

This arterial bleeding of American intellectual property, revenue and jobs needs to be stopped by deeds, not words. Our commission made 21 recommendations to stop international IP theft on the U.S. economy. Among them, we urged that the administration should deny offenders any access to American banks. The president should designate the national security advisor as the IP policy coordinator.  Congress should give the secretary of commerce authority and the budget to implement measures to protect IP. Congress should fast track the Defend Trade Secrets Act of 2015 to create a federal civil cause of action for the misappropriation of trade secrets. The International Trade Commission should have easier ability to impound goods suspected of containing or benefitting from stolen IP, with due process to follow. Other key commission recommendations deserve reiteration: Make a company’s IP protection record an important criterion for approving foreign investments; enforce strict accountability for suppliers to the U.S. Government; require the Security and Exchange Commission to judge whether companies’ use of stolen IP ought to be publicly reported.

Our strategy ought to include positive, non-punitive actions as well. We should, for example, greatly expand the number of green cards available for foreign students who earn degrees here in science, technology, engineering, and mathematics, so that their training and knowledge benefits America. We should also support the success of institutions in priority countries that contribute toward a “rule of law” environment in ways that protect intellectual property.

President Xi’s words are welcome. However, it will take American deeds and a comprehensive program of relentless action to achieve real results.