Stealing Intellectual Property…The Rush to Tariffs and Trade Wars!

The phrase ‘they are stealing our intellectual property’…has become a consistent political refrain, exploited by this administration as a singular rationale to arouse – drive executive and possibly future legislative action, i.e. impose tariffs on specific Chinese manufactured – assembled goods imported to the U.S.

This particularly siloed tactic presumes…the Chinese government – communist party leadership possess the ability to merely ‘flip a switch’ and suddenly misappropriation and infringement of IP (intellectual properties) belonging – issued to U.S. parties, i.e., businesses, individuals, institutions, and organizations, etc., will stop.  As is often said, ‘that just ain’t gonna happen’!

Rooted in my experiences on this matter, it is wholly imprudent and signals poorly framed and short term thinking to… presume a culturally embedded and multi-generational ‘quick fix’ to trade imbalance directly correlates to theft of IP.  That said, there is absolutely no doubt, it has been proven countless times, my research included, that misappropriation – infringement of U.S. issued IP is one of myriad challenges (risks) U.S. businesses encounter when engaging mainland Chinese markets.

But, to imply – infer through shrill, uninformed rhetoric…that U.S. business leadership are either unaware or wholly accepting of this phenomenon or its exclusivity to China, is, at minimum, wrongheaded and disingenuous.

Through my lens, any administration which chooses to…politically exploit this specific issue as a singled-minded path – remedy to mitigate the more impactful and economically troublesome trade imbalance between the U.S. and China, represents a misunderstanding of the risks of conducting business while holding IP and/or its licensure. Trying to mix apples and oranges in hopes of producing a grape, at some point in the future, is just not credible strategy or policy.

I prefer not to frame this issue as a direct correlate to mitigating a multi-generational trade imbalance…which began taking root in the late 1970’s (between the U.S. and China) through their strategic planning pronouncements, in 10, 15, and 25-year increments…

  • doing otherwise, in my judgment, is far too simplistic, and
  • assumes other countries, i.e., Brazil, Russia, India, or China, will think, act, and respond in accordance with concerns and preferences expressed,
  • and/or (general, specific) deterrent’s – sanctions threatened or imposed by a U.S. administration.

On the other hand, a foreign government’s reaction, and that of various entities which stand to benefit…the leadership of individual U.S. corporations,

  • could-may seek (negotiate) a favorable environment for their IP, but probably, that would be framed in a case-by-case basis.

While favorable trade – business relationships with one U.S. corporation may not extend to others…rational – experienced U.S. business professionals know, in a large percentage of internationally negotiated business arrangements, there is a felt sense shared by all parties that a collaborative outcome is prudent to pursue.

It’s mindful perhaps to recognize, the phrase ‘they’re stealing our intellectual property’…is a frequent political refrain, in no small part because ‘citizen focus groups’ routinely express understanding of the word ‘theft’, irrespective of context or whether comparable understanding attaches to what’s being stolen, ala privately issued – held intellectual properties, i.e., patents, trademarks, copyrights, and trade secrets.

Let’s be clear, I am not suggesting…that this persistent, troublesome, and value laden risk to U.S. businesses warrants anything less than high level administration attention to even hope there can – will be some level of amiable mitigation or resolution.

With 20+ years of investigative research and study on this matter…beginning in the early 1990’s, I can confidently report to readers there is no simple – transactional fix that would wholly eliminate, or substantially mitigate this specific ‘risk of doing business’, nor its cultural, institutional, and economic (GDP) embedded underliers.

I, my colleagues, and most U.S. business leaders whom I am familiar…would much prefer the issue were addressed, strategies developed, and policy made rooted in objective context and understanding absent ‘fire breathing retaliatory rhetoric’. The latter of course, which quickly spiral beyond the ability of individual business leaders to mediate on behalf of their company’s interests or initiatives.

Ill-conceived understandings or misapprehensions about global economic competitiveness…and natural adversarial relationships, beyond personal trademarks, in 2019 and beyond, be it with China, Russia, India, Japan, Brazil, Germany, UK, or South Korea, etc., is seldom an effective starting point to negotiate (more) favorable trade relationships or practices relative to existing oversight entities, i.e., the World Trade Organization and/or regionally codified trade treaties.

I have been consistently engaged in safeguarding intellectual property and proprietary business information…along with other forms of (proprietary) business intangible assets, i.e., intellectual, structural, and relationship capital, since the early 1990’s.  My investigative research, study, and engagements, initially as an academic, and since 2006, as an intangible asset strategist and risk specialist, I genuinely understand why this administration and the multitudes of well versed, or something less than well versed pundits, portray China as the embodiment of economic espionage.  To be sure, China is a leading practitioner of economic espionage, but its far from being the only place or origin.

Why China…for starters, and let there be no doubt, this is where the largest trade imbalance emanates. But also, the rhetoric has a lot to do with a speakers’ felt presumption that flame throwing is a requisite to expediting public and political support for a political initiative, i.e., a best practice.

In this instance, the target (country) is China…for which, again, there is more than ample reason. Hence, publicly advocated – executive ordered sanctions and/or tariffs on targeted goods represent two debatable presumptions, i.e., this is a required path to (1.) achieving advantage, (2.) the target will act-respond as rationally or irrationally as the flame thrower, and (3.) the outcome will be strategic.

In my view, each represents an imperfect understanding of diplomacy and negotiation…in todays ‘go fast, go hard, go global’ business commerce arena.  First, and perhaps most important, if – when there may be favorable gains, they are highly likely to be tactical, certainly not strategic. Second, flame throwing street rhetoric, frequently sparks a bevy of in-kind (retaliatory) responses, in no small part because few leaders, especially one in such a commanding lead as China, want to appear appeasing to a term limited public flame thrower. Third, responses will almost assuredly be framed in the target countries’ interest, which, as conveyed above are pursued in 10, 15, and 25-year strategic increments.

A better-informed requisite to (politically) maximize…such felt presumptions which underlie current business aggressivity should commence with articulate…

  • evidence of specific and distinguishable bad actors, i.e., governments – corporations which variously sponsor – reap benefits of that type and level of bad acting, coupled with
  • tangible – quantifiable, albeit ‘best guesstimates’ of the range and types of losses experienced by U.S. businesses engaged in some manner of foreign trade, i.e., the who, what, when, where, how, and why, and
  • the various ways misappropriation and infringement of legally owned, issued, and/or licensed intellectual capital and property adversely affect a U.S. business.

…I advocate there is a diplomatic obligation to portray each of the above in an objective and understandable manner specifying strategic and reasonably amiable outcomes which are desirable for all parties that genuinely recognizes (country) economies, trade, and GDP’s are no longer singular, rather globally intertwined, and that’s irreversible!

Yes, China and numerous other countries…are indeed bad (trade) actors insofar as being consistently positioned to misappropriate and apply any IP presumed to provide competitive advantages while degrading others.

Let’s avoid assuming those engaged in theft of IP held by U.S. businesses only seek…the ingredients of say, pharmaceutical ‘wonder drugs’ or the ‘process’ for rendering military aircraft ‘stealthy’ or other potentially ‘game changing’ secrets…

  • be assured, China, and numerous other competitive advantage adversaries via their respective underground – off-the-books ‘private sector’ economies, are also positioned to legitimately purchase a desirable product, then, reverse engineer it, i.e., copy it, and produce, distribute, and sell (illegal) counterfeits, which, by the way, are not solely the relatively simple-mundane, low cost goods.

Just consider how 3D imaging and manufacturing technology, readily available through open sources…facilitates – enables product counterfeiting operations globally. This relatively recent phenomenon adds complicated twists to conventional – overly simplistic perspectives regarding the misappropriation of IP…

  • to be sure, there are numerous other technologies developed with legitimate – good intentions, but which, can also be applied for illegitimate purposes when the inclinations to do so already exist and comprise a not insignificant percentage of a country’s GDP and employment.

On that note, its instructive to remind ourselves to…consider the ‘made in China’ label affixed to countless products – goods we routinely buy and use. After all, there are mutual economic benefits to China, India, Mexico, and Viet Nam, etc., as U.S. businesses seek lower (labor) cost locales for product manufacturing, assembly, and shipping.

That is not too even remotely suggest, U.S. business are witting contributors…to challenges related to IP infringement, misappropriation, and loss in the name of revenue and margins. There are and should be certain expectations insofar as engaging in international trade, yesterday, today, and tomorrow, which is respecting the rightful ownership of another’s expensive and valuable intellectual properties and proprietary information ala intangible assets.

  • after all, it is an economic fact today that 80+% of most businesses value, revenue generation, and competitive advantage lie in – emerge directly from intangible, not tangible, assets.

Readers wishing to pursue paths to mitigate these business risks and challenges are…encouraged to avoid focusing exclusively on IP only losses, i.e., ‘game changing’ structural secrets to technology, etc. Instead, perhaps direct attention to the realities associated with…

  • the growing percentage of business development and trade transactions which occur in an extraordinarily aggressive, competitive, and often, ‘winner-take-all’ environments, and
  • wrapped in diverse sets of international legalities conceived and marketed to address myriad potentialities, probabilities, and eventualities, but often
  • overlook the straightforward realities of ‘go fast, go hard, go global’!

Respectfully then, naively presuming these circumstances – this environment can be easily or wholly reversed and overcome to…

  • create the elusive and intangible ‘level playing field’,
  • absent an objective understanding of the cultural and policy drivers for how and why these challenges initially – historically emerged and persist,
  • is, at minimum, naïve as is any ‘flame throwing political rhetoric’ associated with such an important cause.

Either way, readers who wish to pursue paths to…mitigate these business risks and challenges are also obliged to recognize the asymmetric brands of economic espionage various ‘bad actor’ countries – corporations engage globally and at all stages of a business’s development and trade transactions it may eventually engage.

The global phenomena of economic espionage represent issues…which I have devoted many years of investigative research, writing, publishing, and public speaking, including trips to China and EU countries to better understand how, why, and when it occurs, and equally important, apply the same questions to it being variously perceived, perhaps subordinated, as merely ‘another risk of doing business’.

Michael D. Moberly  St. Louis June 27, 2019 [email protected], the ‘Business Intangible Asset Blog’ since May 2006, 650+ published (long form) blog posts, ‘where one’s attention span, business realities, intangible assets, and solutions converge’.

Readers are invited to explore other posts, video, position papers, and books at https://kpstrat.com/blog

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