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What Chinese IP Violations Cost the US

What Chinese IP Violations Cost the US

The article titled “What Chinese IP Violations Cost the U.S.” by David R Butcher, elaborates on the economic impact of IP rights infringement in China, on American firms operating here. It goes on to provide a detailed account of the report furnished by the USITC, which further elaborates on the losses encountered as a result of the various categories of infringement. However, what has been the cumulative impact of this declaration?

According to the recent data available, American companies have reportedly encountered a loss of almost $48 billion as of 2009, on account of violations of American intellectual property rights in China. Therefore, an improvement in mechanisms of Chinese intellectual property rights protection could have a significant impact on the economy of china and available job opportunities in America.

Most of the American companies operating in the Chinese markets have tasted success. However, according to a fresh report from the United Stated International Trade Commission, many of these companies have claimed that they have had to compromise on their competitive positions in the global markets on account of infringement and illegal access to their IP rights in the Chinese markets.

This report titled, “China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy’ is the second part of a series of two reports released by the USITC on request from the U.S. Senate Committee on Finance. The report has analyzed the findings of a survey which was conducted among 5000 firms of US origin dealing in IPs. The attempt was to assess the effects of the indigenous policies with respect to innovation, on the American employment scenario and the US economy at large.

The USITC is an independent body which has estimated that the loss to US firms has been almost $48 billion in the year 2009 on account of IP rights infringement. Of this entire amount, $36.6 was accounted for lost sales and the balance $11.6 billion was blamed on royalties that have been lost, license payments and other more unspecified losses. According to the reports provided by the American firms, the losses they have incurred were maximum on account of the infringement into IP rights in Chinese markets. Monetarily, the losses have been valued at $23.7 billion, as of 2009.

The various forms of infringement were also studied individually. Among all, the ones associated with the infringement of trademarks seemed to be most prevalent, amounting to almost 31.5% of the cumulative losses. Almost 91.6% of firms operating in the segment catering to the manufacturing of consumer goods, reported loss of materials amounting to losses accrued from infringement of trademarks.

The results provided in China clearly stated that if China successfully strengthened its mechanism for enforcement and protection of IP rights in China, companies operating here could eventually increase the rate of employment in their respective countries by as many as 923,000 jobs. According to Agence France-Presse, statistical models adopted by the commission provide higher estimates. According to them, as many as 2.1 million jobs could be additionally supported only if China strengthened its crackdown mechanism against piracy, specifically in domains, such as movies and software.

The unexploited employment opportunities were considered to be the largest in the information sector, consumer goods manufacturing, heavy manufacturing and in high tech industries. According to the analyses put forth by the report, the innovation policies put forth by China were discriminatory in nature and were providing preferential support to companies of Chinese origin in a specific manner that eventually led to loss of job opportunities in the US.

A prominent example in this regard is the wind power market in China which is highly favored by the local firms. As a result, market shares belonging to companies of foreign origin have steadily dwindled over time. For the construction of brand new wind farms, China strategically places requirements of local content. Therefore, foreign firms are automatically left out of such mushrooming opportunities. In fact, the Chinese Government has not provided a new contract for wind farm manufacture to a foreign firm since 2005!

These proceedings have not gone down well with the American enterprises. In a stern statement, the Chairman of the finance committee, Max Baucus stated that repeatedly China has failed in protecting and enforcing American IP rights. Besides, it has not refrained from its discriminatory practices against the interests of American Businesses. According to him, the violations towards intellectual property rights can no longer be ignored on account of the fact that numerous American jobs are at stake.

The first half of the above report that was requested by the Senate Committee on Finance was released in the latter half of 2010. It primarily elaborated on the institutional and structural impediments responsible for undermining the enforcement of IP rights. It also described the innovation policies of China that were discriminatory, against companies of American origin.

The cumulative analyses of the report culminated into concrete developments in the month of June in 2010. The Joint Strategic Plan on Intellectual Property Enforcement was unveiled. It provided a complete outline for the protection of IP assets of American individuals and business houses. In June, the administration under the leadership of President Obama released a complete update pertaining to the results that have been achieved due to this roll out. Primary highlights included, seizures of counterfeit goods, coordinated partnerships and convictions on cases involving trade secrets.

Note: Preceding is a summary of an article found though our research, and is provided here with editorial comment for members only. See the full article at the following link –

The New Asia Innovation Team