Intellectual Property Act: Why Does Congress Need an Annual Report on Stolen Intellectual Property – Can they Rely on What They Receive?

Congress has been busy with legislative activity surrounding adverse foreign influence in the US research enterprise and the theft of US intellectual property associated with critical infrastructure innovation. One of the more recent initiatives is the Protecting American Intellectual Property Act (PAIP), sponsored by Senators Von Hollen and Sass. The Act was introduced in June 2020, re-introduced in April 2021, passed in both the House and Senate unanimously in December 2021, and finally signed into law on January 5, 2023. The Act is another among several legislative actions focused on the issue of foreign influence, theft of intellectual property, and foreign state actors stealing cutting-edge technology. The objective of these nefarious efforts is to beat out American innovation and replace the United States as a dominant global force in research and innovation as well as diminish its status as an economic leader in the world.

Intellectual Property Act: Why does Congress need an annual report on stolen intellectual property?

This legislation responded to China and other countries seeking unfair advantage and harming the US economy through predatory practices and theft of intellectual property. The Intellectual Property Act mandates an initial report from the President within 180 days from enactment and annually thereafter. Specifically, the Act requires the President report on:

(A) identifying any foreign person the President determines, during the period specified in paragraph (2)—

(i) has knowingly engaged in, or benefitted from, significant theft of trade secrets of United States persons, if the theft of such trade secrets occurred on or after such date of enactment and is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States.

(ii) has provided significant financial, material, or technological support for, or goods or services in support of or to benefit significantly from, such theft;

(iii) is an entity that is owned or controlled by, or that has acted or purported to act for or on behalf of, directly or indirectly, any foreign person identified under clause (i) or (ii); or

(iv) is a chief executive officer or member of the board of directors of any foreign entity identified under clause (i) or (ii);

(B) describing the nature, objective, and outcome of the theft of trade secrets each foreign person described in subparagraph (A)(i) engaged in or benefitted from; and

(C) assessing whether any chief executive officer or member of the board of directors described in clause (iv) of subparagraph (A) engaged in, or benefitted from, activity described in clause (i) or (ii) of that subparagraph.

Providing context for the rationale behind the Act, it is important to recognize the history of Chinese activity in the publication and patent process. When looking at China and their patent applications over the past ten years, America seems to be falling well behind. A Bloomberg graphic illustrates that between 2008 and 2018, China first outpaced American filings beginning in 2011 and each year after increased the gap. While American filings remained nearly flat each year, at an estimated six hundred thousand, China increased exponentially. By 2018, their filings were at 1.6 million or approximately three times American’s patent filings.

What does this mean?

Is the PRC that much more innovative? China has increased research production and spending on R&D and has made major contributions to science and technology advancement in the past twenty years. But China has also exploited the US research environment and been caught working to increase its R&D standing using non-traditional methods, including improper collection of ideas, compromising other nation research, researchers, and even theft of intellectual property.

The US research enterprise, with all the brilliant and gifted researchers, tremendous success, altruism, and innovation has also somewhat devolved into a contact sport where the winners achieve funding, prestige, and positions. A few researchers also seek self-enrichment through monetization of research activities funded by US grant dollars. “Competition for funding, publications, scientific priority, and overall career success leads scientists to describe their work in terms of strategies one might use in a game (Anderson 2006). The US has undertaken several initiatives to address foreign influence in the US research enterprise to avoid the risk of lost intellectual property, manipulation of peer review, and the grant funding system. Funding agencies are finally realizing their stewardship obligation to provide oversight of US taxpayer funding. Emphasis has been placed on reminding awarded organizations and researchers that grants are awarded to institutions, not individuals. Although requirements for reporting support, gifts, and other activities, which may constitute a conflict of interest or commitment, were well established. Under Section 117 of the Higher Education Act of 1965, lax oversight and only doing what is directed and checked as a business plan allowed a permissive environment where US research enterprises have been exploited, and some researchers have benefited themselves for status, prestige, and even self-enrichment.

This problem in the US is very much a compliance and oversight issue. According to IPTalons, Inc. internal data referencing over 400 investigations on insider threat, up to 85% of US-funded researchers have some form of unreported foreign affiliation. Of that 85%, nearly all, or about 95% of those affiliations inure to the benefit of the People’s Republic of China. IPTalons, Inc. believes the issue is about conduct and not culture (IPTalons, Inc. 2023). The government of China is committed to a program of accessing proprietary and protected critical data and benefiting from it. The People’s Republic of China has taken advantage of this permissive, sometimes negligent oversight climate. The PRC has increased research production and spending on R&D and has made major contributions to science and technology advancement in the past twenty years. But China has also exploited the US research environment and been caught working to increase its R&D standing using non-traditional methods, including the collection of ideas, compromising other nation research and researchers, and even theft of intellectual property.

“Right or Wrong” Seems to Be a Matter of Perspective

It’s important to understand the differences between Western and Eastern philosophy in relation to following US intellectual property rules. It has been said that from the PRC government's perspective that it is not their task to obey US rules, but it is the US who has to enforce them. In other words, in a competition, you cannot blame someone for taking the advantage when the rules are not enforced. In fact, only a willing victim would play by the rules when the other team is not or the referees do not enforce them.

According to Dr. Shogo Suzuki, a distinguished lecturer on Chinese politics, the Chinese government follows a “realist” theory of international norms which varies from the “English School” approach. Realists see the international arena as an anarchic, competitive realm. According to Realist theory, since there is no higher authority to regulate states’ behavior in international politics, states live in a state of insecurity: Their primary interest is survival. In order to ensure their survival, states will seek either to maximize their power or prevent the emergence of any state that could threaten their existence (Suzuki 2004).“From Beijing’s point of view, everything that the Chinese leadership has done, both domestically and internationally, has been completely justified, as it serves the long-term goal of preserving the Communist Party’s rule, which in turn serves the interest of the whole Chinese nation” (Jisi 2019). What they have done is target researchers and research of critical importance. Which often led to the theft of this information and compromised US research enterprises.

What Can Congress Expect from Funding Agencies?

Can Congress rely upon what they receive from the funding agencies? It will be interesting to see what the funding agencies report in response to the Act because much of the data will be captured from the technical transfer (TTO) and Technology Licensing Offices (TLO) which seldom track misallocated transfers of intellectual property. It is, in some cases, standard practice to assume any misallocation to be an innocent oversight if and when it occurs, with no further investigation into the circumstances of the event. Therefore, it is unlikely that the funding agencies will know, or even believe, they can identify “foreign persons knowingly engaged in, or benefitted from, significant theft of trade secrets.”

Congress will need a validation process or risk under-reporting from the funding agencies, few of which have the capacity to accurately or completely identify intellectual property theft or unreported affiliations which can result in such theft. Utilizing subject-matter experts and experience, IPTalons, Inc has developed the tools and solutions to verify information associated with the theft of intellectual property, so relevant organizations can certainly increase the fidelity of the funding agency reports under the Protecting American Intellectual Property Act. 

Sources

Anderson MS, Ronning EA, De Vries R, Martinson BC. The perverse effects of competition on scientists' work and relationships. Sci Eng Ethics. 2007 Dec;13(4):437-61. doi: 10.1007/s11948-007-9042-5. Epub 2007 Nov 21. PMID: 18030595.

IPTalons, Inc (2023) IPTalons.com

Jisi, Wang. “Assessing the Radical Transformation of US Policy Toward China.” China International Strategy Review 1.2 (2019): 195–204. Web.

Suzuki, Shogo, (2004) China’s Perceptions id International Society in the 19th Century: Learning More About Power Politics? Asian Perspective, Volume 28, Number 3, 2004, pp. 115-144 (Article) Published by Johns Hopkins University Press DOI: https://doi.org/10.1353/apr.2004.0015