Will Bush Go to Bat for Intellectual Property?

GM's charge of piracy of its Chevrolet Spark design spotlights broader overseas patent-protection anxieties for U.S. companies.
Ronald FinkDecember 10, 2003

General Motors executives are likely to be taking a keen interest in Chinese premier Wen Jiabao’s visit to the White House this week.

Days before the premier’s arrival, the Chinese government agreed to talk with the U.S. automaker about GM’s charges of intellectual property piracy by a company in which one of the auto company’s local joint-venture partners until recently had an interest, according to GM. The allegations, involving a manufacturing design for a model GM is about to unveil in China as the Chevrolet Spark, follow similar charges by GM of IP theft in China within the past year.

But other U.S. companies have as much intellectual property at stake in China as GM. Some 95 percent of the PCs there, for example, are said to be running on pirated software, much of that obviously based on Microsoft Windows. Cisco Systems also has a beef about Chinese IP theft. To be sure, the U.S. network router company has suspended a lawsuit filed last January charging Chinese rival Huawei Technologies with violations of Cisco’s intellectual property rights in the United States. But Cisco may go ahead with the suit if Huawei doesn’t change its technology to respect Cisco’s patents and copyrights both here and abroad. (For more on the challenges companies face in guarding patents abroad, look for “Battling the Property Pirates” in CFO in January.)

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The list of companies with anxieties about shielding their patents overseas extends far beyond the likes of GM and Cisco. Indeed, IP theft worldwide costs U.S. companies some $250 billion a year, according to the office of the U.S Trade Representative. Besides China, most of their concerns focus on piracy in Hong Kong and Taiwan, says Amy Xu, an attorney in the Minneapolis office of the law firm of Dorsey & Whitney. Among those “very concerned about their top-line products” in China, says Xu, are DuPont, IBM, Kodak, Procter & Gamble, and 3M.

Each of those companies has been aggressively filing patent applications with the Chinese office of intellectual property. As early as 2000, P&G had filed 516 applications, the most by any non-Chinese company except Japan’s Matsushita, according to a Web site maintained by the office. At the time, IBM was seventh on the list, with 324. Although more recent data on those U.S. companies isn’t available, the number of applications filed with the office by non-Chinese companies overall more than doubled in the past seven years, from 20,528 in 1996, to 47,087 at the end of last year.

Yet the number filed by Chinese companies has more than kept pace, growing from 102,735 to 252,631. At last count, Hauwei had filed the most of any single company, with nearly 1,200.

Still, China, now a member of the World Trade Organization, is a party to an agreement known as Trade Related Aspects of Intellectual Property Rights, which was signed at the 1994 trade talks known as the GATT Uruguay round. The agreement not only recognizes IP rights but also sets deadlines for enforcement.

Most of the enforcement deadlines, however, have passed without compliance. As recently as October, Robert Zoellick, the U.S. trade representative, cited his concern about counterfeiting in talks with the Chinese government in Beijing. But little besides the Chinese government’s attempt to deal with GM’s complaint seems to have come from the discussion. Other U.S. companies can only hope President Bush is more persuasive.