Review of Intellectual Property Law Blog

Can You Spot the Knock-Off? The Dangers of China’s Intellectual Property Violations and America’s Response

By Jessica Pavlock, J.D. Candidate 2017 on Tuesday, September 5th, 2017
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Last Friday the United States launched an investigation into China’s alleged theft of United States intellectual property.[1]  As the country’s leading trading partner, and at a time when the relationship between China and the U.S. is necessary to contain the North Korean nuclear threat,[2] many questions if such an investigation is truly necessary.  However, the impact of the theft may be higher than you expect.

Intellectual property theft costs Americans up to $600 billion a year, and China accounts for the majority of that loss.[3]  The methods most commonly used are counterfeiting of American fashion designs, pirating movies and video games, patent infringement, and stealing proprietary technology and software.[4]  Many sectors of American economy are affected by trade secret misappropriation including automobiles, aviation, chemicals, consumer electronics, biotechnology, and pharmaceuticals.[5]

The vast majority of Americans have likely fallen victim of Chinese counterfeiting, often from purchasing popular products[6] from places like Amazon.[7]  In China, the town of Shenzen is known as the “Mecca” for cheap knockoffs, including popular brands like North Face,[8] Michael Kors, and Adidas.[9]  You may purchase a pair of North Face gloves from a store that claim to be waterproof, but the product is fake and has no waterproof technology whatsoever.[10]  Studies have shown that a quarter of Duracell and Energizer batteries are fake, and a large percentage of other popular brands are cheap knockoffs including American Standard Toilets, Head & Shoulders shampoo, Gillette razors, and Skippy peanut butter.[11]  Counterfeit MAC products, a high-end cosmetics line, have been found to contain ingredients like paint thinners, mercury, carcinogens, and dangerous levels of bacteria.[12]

Piracy is not just committed by outlaw groups in China, but has “become a part of Chinese culture and a large part of local towns.”[13]  The laws against copyright and trademark infringement are substantially similar in China and America, but the main difference boils down to a lack of enforcement of those laws in China.[14]  One solution may be to convince Chinese leaders that economic integration will benefit China and improve its standing in the international community.[15]  Alternatively, intellectual property enforcement in China could be incentivized in some way.[16]

If the recent investigation into China proves extensive Chinese government support for the intellectual property theft, it could trigger retaliatory action by the American government under the Economic Espionage Act, Section 5 of the Federal Trade Commission Act, and the National Defense Authorization Act.[17]  Furthermore, Section 301 of the Trade Act of 1974 allows President Trump to unilaterally impose tariffs or other trade restrictions to protect U.S. industries from unfair trade practices if the investigation yields Chinese government support for the intellectual property theft.[18]

The problem of China’s theft of U.S. intellectual property is a problem for the American economy, and places the safety of the general population at risk.  The relationship between China and the U.S. must remain stable, but action must also be taken to prevent our economy from being jeopardized by these practices. For more information on intellectual property issues between the U.S. and China, check out Kevin Fleming’s comment in Volume 15, Issue 3 of RIPL.

[1] Tim Ahmann, U.S. Formally Launches Probe of China’s Intellectual Property Practices, Reuters, (Aug. 18, 2017), https://www.reuters.com/article/us-usa-trump-trade-china-idUSKCN1AY2CD.

[2] Ana Swanson & Simon Denyer, Trump to Launch Investigation into China Trade Violations, The Washington Post, (August 12, 2017), https://www.washingtonpost.com/business/economy/trump-to-launch-investigation-into-china-trade-violations/2017/08/12/4eaaeb70-7fa1-11e7-83c7-5bd5460f0d7e_story.html?utm_term=.95264f3f46e7.

[3] Dennis Blair & Keith Alexander, China’s Intellectual Property Theft Must Stop, The New York Times, (Aug. 15, 2017), https://www.nytimes.com/2017/08/15/opinion/china-us-intellectual-property-trump.html?mcubz=0.

[4] Id.

[5] Id.

[6] Mark Litke, China Big in Counterfeit Goods, ABC News, (April 21, 2017), http://abcnews.go.com/WNT/story?id=130381&page=1.

[7] Ari Levy, Amazon’s Chinese Counterfeit Problem is Getting Worse, CNBC, (July 8, 2016), https://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-problem-is-getting-worse.html.

[8] Mark Litke, China Big in Counterfeit Goods, ABC News, (April 21, 2017), http://abcnews.go.com/WNT/story?id=130381&page=1.

[9] Wade Shepard, How Chinese Counterfeiters Continue Beating Amazon, Forbes, (Jan. 12, 2017), https://www.forbes.com/sites/wadeshepard/2017/01/12/why-amazon-is-losing-its-battle-against-chinese-counterfeiters/.

[10] Mark Litke, China Big in Counterfeit Goods, ABC News, (April 21, 2017), http://abcnews.go.com/WNT/story?id=130381&page=1.

[11] Id.

[12] David Gauvey, Cracking the Case of the Counterfeit Makeup, Bloomberg, (Feb. 22, 2017), https://www.bloomberg.com/features/2017-counterfeit-makeup/.

[13] Kevin Fleming, Let it Go? A Comparative Analysis of Copyright Law and Enforcement in the United States of America and China, 15 J. Marshall Rev. Intell. Prop. L. 584, 600 (2016).

[14] Id. at 592.

[15] Id. at 600.

[16] Id. at 601.

[17] Dennis Blair & Keith Alexander, China’s Intellectual Property Theft Must Stop, The New York Times, (Aug. 15, 2017), https://www.nytimes.com/2017/08/15/opinion/china-us-intellectual-property-trump.html?mcubz=0.

[18] Trump Orders an Investigation Into China’s Intellectual Property Practices, Fortune, (Aug. 14, 2017), http://fortune.com/2017/08/14/trump-china-probe-intellectual-property/.

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