# Intellectual Property Violations and China: Legal Remedies > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR46532 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** September 17, 2020 - **Citation:** R46532 ## Text Intellectual Property Violations and China: Legal Remedies September 17, 2020 Congressional Research Service https://crsreports.congress.gov R46532 SUMMARY Intellectual Property Violations and China: Legal Remedies Concerns that the government of the People’s Republic of China (China) fails to protect and enforce intellectual property (IP) rights, and thus harms U.S. IP rights holders, have been one of the key issues in U.S.-China relations for decades. These concerns extend both to actions of China’s government itself and state-affiliated entities, as well as to actions of Chinese persons and entities not affiliated with the Chinese government. The primary issues raised by the U.S. government and U.S. businesses have evolved over time, from an earlier focus on the adequacy of Chinese domestic IP protection and enforcement (e.g., to counter piracy and counterfeiting), to more recent concerns about cyber intrusions and strategic acquisitions. R46532 September 17, 2020 Kevin J. Hickey, Coordinator Legislative Attorney Nina M. Hart Legislative Attorney Brandon J. Murrill Legislative Attorney During the Trump Administration, the U.S. Trade Representative (USTR) investigated China’s actions with respect to IP and concluded that a number of Chinese policies and practices violated Kevin T. Richards Section 301 of the Trade Act of 1974. In response, the United States initiated a World Trade Legislative Attorney Organization (WTO) dispute against China and imposed tariffs on billions of dollars of Chinese imports. China responded by imposing tariffs on U.S. goods and challenging the U.S. tariffs at the WTO. In January 2020, the United States and China reached a deal known as the “Phase One Agreement” that addressed some of the trade and IP issues between the parties. However, major issues—such as coerced technology transfer—were not resolved by the Phase One Agreement. Although the parties anticipated further negotiations, the onset of the Coronavirus Disease 2019 (COVID-19) pandemic has increased tensions between the nations and stalled progress toward a Phase Two Agreement. Violations of IP rights by Chinese persons and entities are not a monolithic phenomenon, and general terms like “IP theft” often obscure important distinctions that affect the legal options available to address IP violations. One such distinction is the type of IP at issue. Different varieties of IP—such as patents, copyrights, trademarks, or trade secrets—protect different types of intellectual creation, involve different procedures for obtaining rights, and grant the IP owner distinct rights that vary in scope and duration. A second important distinction is the type of IP violation at issue—that is, the particular policy, practice, or action that is alleged to undermine U.S. IP rights. Possible violations include a failure to provide adequate legal protection for IP, a failure to enforce existing IP laws, trade secret misappropriation (including via cyber intrusion), discriminatory IP licensing laws, coerced technology transfer as a condition of regulatory approval or market access, or bad-faith assertion of IP rights. The legal remedies available will depend on the type of violation, the type of IP, and where the violation occurred. Existing U.S. legal remedies for IP violations can be grouped into two broad categories. First, there are remedies for systemic violations, which are usually initiated by the executive branch to address widespread trade or IP violations by foreign actors. The executive branch possesses a number of constitutional and statutory authorities to protect IP rights. These include enforcement provisions in international agreements and authority to negotiate such agreements. U.S. law also contains several statutory provisions that allow the executive branch to investigate IP violations that affect international trade and then impose different types of remedies, including import and export controls, suspension of trade benefits, imposition of tariffs, and regulation or prohibition of certain transactions. Second, there are legal remedies for individual violations—that is, discrete IP violations by a particular person or entity. Several legal doctrines limit domestic legal remedies for violations involving foreign actors or activity, however. First, under the presumption against extraterritoriality, U.S. law generally does not reach activity that occurred outside of the United States unless a statute clearly indicates otherwise. Second, under the requirement of personal jurisdiction, U.S. courts may only adjudicate disputes involving a defendant who has a sufficient connection with the forum or who has submitted to the court’s power in some way. Presuming that U.S. law applies and any jurisdictional barriers can be overcome, possible remedies for individual violations include civil actions for infringement; import controls by the International Trade Commission and U.S. Customs and Border Protection agency; and criminal prosecutions for economic espionage, computer hacking, and, in some circumstances, IP infringement. Moving forward, Congress may consider whether these existing legal options are sufficient to deter or remedy continued practices or future IP violations by Chinese entities. Congressional Research Service Intellectual Property Violations and China: Legal Remedies Contents Intellectual Property Violations and China ...................................................................................... 5 Types of Intellectual Property ................................................................................................... 6 Basis and Rationales for IP Rights ...................................................................................... 6 Patents ................................................................................................................................. 7 Copyrights ........................................................................................................................... 8 Trademarks ......................................................................................................................... 9 Trade Secrets ...................................................................................................................... 11 Overlap and Interactions Among Different Forms of IP ................................................... 12 Forms of “IP Theft”................................................................................................................. 15 Under-Protection ............................................................................................................... 15 Infringement and Under-Enforcement .............................................................................. 17 Trade Secret Misappropriation and Cyber Intrusions ....................................................... 19 Coercive Technology Transfer .......................................................................................... 20 Discriminatory Restrictions on Contractual IP Licensing................................................. 21 Bad-Faith Assertion/Registration ...................................................................................... 22 State Sponsorship and IP Violations........................................................................................ 23 Existing Legal Remedies ............................................................................................................... 24 Systemic Violations: Foreign Affairs and Trade Remedies ..................................................... 24 TRIPS and WTO Disputes ................................................................................................ 25 Diplomacy and International Agreements......................................................................... 27 Section 301 of the Trade Act of 1974 ............................................................................... 28 Export Controls ................................................................................................................. 31 Section 232 of the Trade Expansion Act of 1962.............................................................. 32 Section 201 of the Trade Act of 1974 ............................................................................... 34 The International Emergency Economic Powers Act ....................................................... 35 Individual Violations: Civil, Criminal, and Administrative Remedies .................................... 37 Remedial Issues: Jurisdiction and Territoriality ................................................................ 37 Civil Actions ..................................................................................................................... 41 Import Controls ................................................................................................................. 47 Criminal Prosecutions ....................................................................................................... 50 Conclusion ..................................................................................................................................... 54 Tables Table 1. Comparison of Each Form of Federal Intellectual Property Protection .......................... 14 Contacts Author Information........................................................................................................................ 55 Congressional Research Service Intellectual Property Violations and China: Legal Remedies ntellectual property (IP) plays a critical role in the global economy by encouraging innovation, creativity, and the development of new and useful technologies, as well as facilitating international trade and investment.1 IP laws generally aim to encourage individuals and businesses to invest time, effort, and money into developing new technologies and creative works by providing legal protections for different forms of intellectual creation.2 As the U.S. economy has become increasingly knowledge-based and reliant on creativity and technological innovation as sources of competitive advantage, IP-intensive industries have become a significant and critical part of the U.S. economy.3 I Concerns that the government of the People’s Republic of China (China) fails to protect and enforce IP rights, and thus harms U.S. IP rights holders, have been key issues in U.S.-China relations for decades.4 These concerns extend both to actions of China’s government itself and state-affiliated entities, as well as to actions of Chinese persons and entities unaffiliated with the Chinese government. The primary concerns raised by the U.S. government and American businesses have evolved over time. In the 1990s, before China’s 2001 accession to the World Trade Organization (WTO), China’s failure to provide basic levels of legal protection for some forms of IP was a central concern.5 During China’s WTO accession process, its use of regulatory structures to coerce technology transfers from U.S. businesses to Chinese entities as a condition of doing business in China was another concern.6 In the early 2000s, China’s failure to adequately enforce its IP laws received significant attention, leading to a 2007 WTO dispute between the United States and China.7 Unauthorized cyber intrusions and trade secret misappropriation were—and remain—an area of concern.8 In recent years, the United States has increasingly focused on coercive technology transfers, strategic acquisitions, and cyber intrusions. On August 18, 2017, the U.S. Trade Representative (USTR) initiated an investigation under Section 301 of the Trade Act of 1974 (Section 301) into “whether acts, policies, and practices of the Government of China related to technology transfer, 1 See generally DANIEL C.K. CHOW & EDWARD LEE, INTERNATIONAL INTELLECTUAL PROPERTY 1–17 (3d ed. 2018). 2 See, e.g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480 (1974) (“The patent laws promote [technological progress] by offering a right of exclusion for a limited period as an incentive to inventors to risk the often enormous costs in terms of time, research, and development.”); Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975) (“The immediate effect of our copyright law is to secure a fair return for an ‘author’s’ creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good.”). 3 See generally U.S. PATENT & TRADEMARK OFF., INTELLECTUAL PROPERTY AND THE U.S. ECONOMY: 2016 UPDATE (2016), https://www.uspto.gov/sites/default/files/documents/IPandtheUSEconomySept2016.pdf; CRS Report RL34292, Intellectual Property Rights and International Trade, by Shayerah Ilias Akhtar, Ian F. Fergusson, and Liana Wong, at 6–9. 4 See CRS Report RL33536, China-U.S. Trade Issues, at 39–54 [hereinafter CRS China-U.S. Trade Report]. Enhancing IP protection and enforcement internationally is a long-standing and significant component of U.S. international trade policy as a general matter. See generally Ilias Akhtar et al., supra note 3. 5 See Donald P. Harris, The Honeymoon is Over: The U.S.-China WTO Intellectual Property Complaint, 32 FORDHAM INT’L L.J. 96, 106–08 (2008) (reviewing pre-WTO history of U.S.-China IP disputes). 6 See World Trade Organization, Report of the Working Party on the Accession of China, ¶¶ 48–49, WTO Doc. WT/MIN(01)/3 (Nov. 10, 2001). 7 See Requests for Consultations by the United States, China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WTO Doc. WT/DS362/1 (Apr. 16, 2007). 8 See OFF. OF THE U.S. TRADE REPRESENTATIVE, FINDINGS OF THE INVESTIGATION INTO CHINA’S ACTS, POLICIES, AND PRACTICE RELATED TO TECHNOLOGY TRANSFER, INTELLECTUAL PROPERTY, AND INNOVATION UNDER SECTION 301 OF THE TRADE ACT OF 1974 (2018), at 151–54, https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF [hereinafter SECTION 301 INVESTIGATION REPORT]. Congressional Research Service 1 Intellectual Property Violations and China: Legal Remedies intellectual property, and innovation” were unreasonable or discriminatory, and burdened or restricted U.S. commerce.9 On March 22, 2018, the USTR concluded its investigation, finding that four Chinese policies and practices violated Section 301: (1) use of foreign ownership restrictions and administrative licensing requirements to pressure technology transfer from U.S. companies to Chinese entities; (2) IP licensing restrictions that discriminate against foreign entities; (3) systematic investment in or acquisition of U.S. companies to acquire targeted technologies; and (4) unauthorized cyber intrusions into U.S. networks to obtain IP and other confidential business information.10 In light of the USTR’s conclusions, the President issued a memorandum directing the USTR to consider three responses: (1) increased tariffs on goods imported into the United States from China; (2) initiation of a WTO dispute settlement process with respect to China’s discriminatory licensing practices; and (3) executive branch actions to address concerns about Chinese inbound investment and acquisition.11 On March 26, 2018, the United States initiated a WTO dispute alleging that China’s discriminatory licensing practices violate its WTO commitments.12 Beginning in July 2018 and continuing through 2019, the United States imposed tariff increases on Chinese products worth over $200 billion in several stages.13 China responded by issuing retaliatory tariffs on U.S. goods worth over $100 billion and filing a WTO dispute challenging the United States’ actions.14 9 Initiation of Section 301 Investigation, Hearing, and Request for Public Comments: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 82 Fed. Reg. 40,213 (Aug. 24, 2017). The investigation followed an August 14, 2017, memorandum from the President directing the USTR to determine whether to investigate these practices. Id. at 40,213. 10 SECTION 301 INVESTIGATION REPORT, supra note 8. For a summary of the USTR’s conclusions, see CRS Legal Sidebar LSB10109, Tricks of the Trade: Section 301 Investigation of Chinese Intellectual Property Practices Concludes (Part II), by Brandon J. Murrill. 11 Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation of China’s Laws, Policies, Practices, or Actions Related to Technology Transfer, Intellectual Property, and Innovation, 2019 DAILY COMP. PRES. DOC. 1 (Mar. 22, 2018), https://www.whitehouse.gov/presidential-actions/presidentialmemorandum-actions-united-states-related-section-301-investigation/. 12 See Request for Consultations by the United States, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/1 (Mar. 26, 2018); see infra notes 231–237 and accompanying text (summarizing the dispute and its current status). To address concerns about inbound foreign investment, Congress passed the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which the President signed into law on August 13, 2018. See Pub L. No. 11232, tit. XVII, subtit. A, 132 Stat. 1636, 2174–2207 (2018). FIRRMA is intended to modernize the processes and authority of the Committee on Foreign Investment in the United States (CFIUS) to review the national security effects of certain transactions. Id. at 2175–76; Statement on Congressional Action on Legislation to Reduce the National Security Risks Posed by Certain Types of Foreign Investment, 2018 DAILY COMP. PRES. DOC. 1 (June 27, 2018), https://www.whitehouse.gov/briefings-statements/statement-president-regarding-investment-restrictions/ (urging Congress to pass FIRRMA to address the foreign investment concerns raised in the Section 301 investigation). 13 See CRS In Focus IF10708, Enforcing U.S. Trade Laws: Section 301 and China [hereinafter CRS Section 301 and China]; CRS Report R45529, Trump Administration Tariff Actions (Sections 201, 232, and 301): Frequently Asked Questions, coordinated by Brock R. Williams, at 3. 14 See Williams et al., supra note 13, at 7; see also CRS Insight IN10971, Escalating U.S. Tariffs: Affected Trade, coordinated by Brock R. Williams; CRS Section 301 and China, supra note 13; CRS In Focus IF10708, Enforcing U.S. Trade Laws: Section 301 and China; CRS In Focus IF11085, China’s Retaliatory Tariffs on U.S. Agricultural Products; Request for Consultations by China, United States—Tariff Measures on Certain Goods from China, WTO Doc. WT/DS543/1 (Apr. 5, 2018). On September 15, 2020, a WTO panel issued a report finding that the United States violated several WTO obligations by imposing the Section 301 tariffs. Panel Report, United States—Tariff Measures on Certain Goods from China, WTO Doc. WT/DS543/R (Sept. 15, 2020). Congressional Research Service 2 Intellectual Property Violations and China: Legal Remedies On January 15, 2020, the United States and China signed a trade deal known as the “Phase One Agreement” intended to address issues relating to the Section 301 investigation and other trade concerns.15 The Phase One Agreement touches on several areas in China-U.S. trade relations, including agriculture, financial services, macroeconomic policy, currency exchange rates, and trade purchases.16 With respect to IP, China makes several commitments in the Phase One Agreement, agreeing to      increase enforcement against trade secret misappropriation by expanding the scope of persons who may be sued for trade secret theft, providing broader preliminary and criminal penalties, and addressing unauthorized disclosures of trade secrets by Chinese regulatory authorities;17 strengthen patent protections for pharmaceuticals by creating a mechanism for the early resolution of pharmaceutical patent disputes, and providing for patent term extensions and adjustments based on regulatory delays in the grant of patents or marketing approval for pharmaceutical products;18 improve procedures to counter copyright infringement online and counterfeiting on major e-commerce platforms;19 take effective enforcement actions against counterfeit medicines and other counterfeit goods with health and safety risks;20 and provide for procedures to improve border enforcement actions against counterfeit goods, such as requirements that customs and judicial authorities generally destroy such goods.21 The Phase One Agreement did not resolve technology transfer issues—one of the central focuses of the Section 301 investigation—leaving the matter for future negotiations.22 The Phase One Agreement does contain general commitments by the parties not to “require or pressure” technology transfer, but it avoids details on implementing that commitment.23 15 OFF. OF THE U.S. TRADE REPRESENTATIVE & U.S. DEP’T OF THE TREASURY, ECONOMIC TRADE AGREEMENT BETWEEN THE UNITED STATES OF AMERICA AND THE PEOPLE’S REPUBLIC OF CHINA: PHASE ONE, Jan. 15, 2020, https://ustr.gov/ sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_Uni ted_States_And_China_Text.pdf [hereinafter Phase One Agreement]. For a summary of the Phase One Agreement, see CRS Insight IN11208, U.S. Signs Phase One Trade Deal with China, by Karen M. Sutter. For an analysis of the legal basis for the President to enter into this agreement without congressional involvement, see CRS Legal Sidebar LSB10403, The Legal Basis for the U.S.-China “Phase One” Agreement and Implications for Implementation, by Nina M. Hart. 16 See Phase One Agreement, supra note 15, chs. 3–6. 17 Id. arts. 1.2–1.9. 18 Id. arts. 1.10–1.23. 19 Id. arts. 1.13–1.14. 20 Id. arts. 1.18–1.19. 21 Id. arts. 1.20–1.22. 22 See David J. Lynch, Trump Signs off on Deal to Ease China Trade War, WASH. POST (Dec. 12, 2019), https://www.washingtonpost.com/business/2019/12/12/trump-says-trade-deal-with-china-is-very-close-just-daysahead-tariff-deadline/ (“[The] so-called ‘phase one’ agreement would leave the thorniest issues in the U.S.-China trade dispute to future negotiations[, including China’s] practice of forcing foreign companies to surrender technology secrets in return for access to the Chinese market . . . .”). 23 Phase One Agreement, supra note 15, arts. 2.1–2.4. Congressional Research Service 3 Intellectual Property Violations and China: Legal Remedies Observers have noted that many of the Phase One Agreement’s IP provisions reflect changes or commitments that China had made before,24 or are phrased at high levels of generality without specific timelines for implementation.25 After the Phase One Agreement was reached, however, the United States and China agreed to attempt to deescalate their trade conflict. In February 2020, both sides agreed to delay imposition of the next round of proposed tariff increases: the United States agreed to reduce some tariffs it imposed in 2019, and China agreed to suspend some of its retaliatory tariffs.26 Since the onset of the Coronavirus Disease 2019 (COVID-19) pandemic, a number of events and issues have increased tensions between the nations. This has led to a delay of the planned sixmonth review of the Phase One Agreement27 as well as an apparent halt to further negotiations of a Phase Two Agreement.28 Observers are uncertain whether the Phase One Agreement will prove lasting and whether a further agreement will emerge.29 In the meantime, the United States continues to raise concerns about IP theft by Chinese entities, including recent criminal allegations of Chinese state-sponsored hacking of COVID-19 vaccine research.30 This report seeks to place these developments into a broader legal context by reviewing the various legal options available to address IP violations by Chinese entities. First, it describes various forms that “IP theft” by Chinese entities may take, depending on the form of IP at issue (e.g., patents, copyrights, trademarks, or trade secrets) and the nature of the violation. These 24 See Sutter, supra note 15 (“China’s commitments on counterfeiting, patent and trademark, and pharmaceutical protections reflect domestic actions China already took and similar language from earlier commitments, according to former U.S. government negotiators.”). 25 See, e.g., Phase One Agreement, supra note 15, art. 1.34 (“Each party shall determine the appropriate method of implementing the provisions of this Agreement within its own system and practice.”); Sutter, supra note 15 (“[The] IP commitments appear to be more open-ended and are not linked to corresponding changes required in existing Chinese laws, regulations, rules, practices and industrial policies.”); Ningling Wang et al., Phase 1 China Trade Deal: Patent Provisions, FINNEGAN (Jan. 27, 2020), https://www.finnegan.com/en/insights/blogs/prosecution-first/phase-1-us-chinatrade-deal-patent-provisions.html (“The value of [the Phase One Agreement’s patent] provisions will not be known until more details are known in terms of how [they] will be implemented . . . .”); Bill Donahue, US-China Trade Deal Aims to Bolster IP Protection, LAW360 (Jan. 15, 2020) (“While substantively ambitious, Wednesday’s agreement is loose on time frames for Chinese action. The deal requires an ‘action plan’ within [thirty working days] but lacks any other hard deadlines.”). 26 Williams, Escalating U.S. Tariffs, supra note 14; Sutter, supra note 15; David Lawder et al., What’s in the US-China Phase 1 Trade Deal, REUTERS (Jan. 15, 2020), https://www.reuters.com/article/us-usa-trade-china-details-factbox/ whats-in-the-us-china-phase-1-trade-deal-idUSKBN1ZE2IF. 27 Jenny Leonard, U.S., China Postpone Weekend Talks on Trade Deal, BLOOMBERG (Aug. 14, 2020), https://www.bloomberg.com/news/articles/2020-08-14/u-s-china-postpone-weekend-talks-on-tradedeal?sref=iK6sCltL. 28 Grace Segers, Trump Says He’s “Not Interested” in Talking to China About Trade, CBS NEWS (July 14, 2020), https://www.cbsnews.com/news/trump-china-trade-deal-phase-2-not-interested-talking/. 29 U.S.-China Trade Deal Is ‘Fine,’ Trump Advisor Kudlow Says, BLOOMBERG (Aug. 12, 2020), https://www.bloomberg.com/news/articles/2020-08-12/u-s-china-trade-deal-is-fine-trump-adviser-kudlowsays?sref=iK6sCltL; Claire Reade, Commentary: Trade May Still Be the Ballast in U.S.-China Relations—At Least for Now, CSIS (Aug. 10, 2020), https://www.csis.org/analysis/trade-may-still-be-ballast-us-china-relations-least-now; Scott Lincicome, Trump’s China Trade Deal was Designed to Fail, CATO INST. (June 26, 2020), https://www.cato.org/ publications/commentary/trumps-china-trade-deal-was-designed-fail; Eamon Barrett, ‘Unrealistically High:’ Experts Doubt China Can Fulfill Its Targets in ‘Phase One’ of the U.S. Trade Deal, FORTUNE (Jan. 16, 2020), https://fortune.com/2020/01/16/us-china-trade-deal-details-purchases/. 30 Ellen Nakashima & Devlin Barrett, U.S. Accuses China of Sponsoring Criminal Hackers Targeting Coronavirus Vaccine Research, WASH. POST (July 21, 2020), https://www.washingtonpost.com/national-security/us-china-covid-19vaccine-research/2020/07/21/8b6ca0c0-cb58-11ea-91f1-28aca4d833a0_story.html; see infra notes 499–501 and accompanying text. Congressional Research Service 4 Intellectual Property Violations and China: Legal Remedies distinctions are significant because the remedies available to the U.S. government and individual rights holders will depend on the nature and circumstances of the IP violations. Second, the report reviews the scope and requirements of the legal remedies available under U.S. and international laws. These remedies fall into two broad categories: (1) remedies for systemic IP violations, which are initiated by the U.S. executive branch to target widespread IP violations by foreign actors by relying on trade or international law; and (2) remedies for individual IP violations, which seek to redress discrete IP violations by particular entities by relying on domestic civil, administrative, and criminal processes. Intellectual Property Violations and China Although news reports and U.S. entities often accuse China of “stealing IP,”31 this general usage conflates both different types of IP and different types of IP violations. For example, in several reports,32 the USTR has found that Chinese corporations, individuals, and its government (collectively, Chinese entities), have, among other things,      used legal and regulatory requirements, such as foreign ownership restrictions and administrative approval processes, to require or pressure technology transfer from U.S. companies seeking to do business in China;33 imposed discriminatory technology licensing restrictions that impair U.S. companies’ ability to negotiate fair, market-based terms when they seek to license IP or transfer technology to Chinese companies;34 conducted and supported unauthorized intrusions into U.S. computer networks to acquire valuable confidential business and technical information,35 as well as misappropriating such confidential information through other means;36 manufactured, marketed, and exported counterfeit trademarked goods;37 and permitted and facilitated online piracy of copyrighted music, television, movies, and other creative works.38 31 See, e.g., Erik Sherman, One in Five U.S. Companies Say China Has Stolen Their Intellectual Property, FORTUNE, (Mar. 1, 2019), https://fortune.com/2019/03/01/china-ip-theft/; Grant Clark, What Is Intellectual Property, and Does China Steal It?, WASH. POST (Jan. 21, 2019), https://www.washingtonpost.com/business/what-isintellectual-propertyanddoes-china-steal-it/2019/01/21/180c3a9e-1d64-11e9-a759-2b8541bbbe20_story.html; Robert Boxwell, How China’s Rampant Intellectual Property Theft, Long Overlooked by U.S., Sparked Trade War, SOUTH CHINA MORNING POST MAG. (Oct. 28, 2018), https://www.scmp.com/magazines/post-magazine/long-reads/article/2170132/how-chinasrampant-intellectual-property-theft. 32 See, e.g., OFF. OF THE U.S. TRADE REPRESENTATIVE, 2019 SPECIAL 301 REPORT (2019), https://ustr.gov/sites/default/ files/2019_Special_301_Report.pdf [hereinafter 2019 SPECIAL 301 REPORT]; SECTION 301 INVESTIGATION REPORT, supra note 8; OFF. OF THE U.S. TRADE REPRESENTATIVE, 2017 REPORT TO CONGRESS ON CHINA’S WTO COMPLIANCE (2018), https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20WTO%20Report.pdf [hereinafter 2017 CHINA WTO COMPLIANCE REPORT]. 33 SECTION 301 INVESTIGATION REPORT, supra note 8, at 19–43; 2019 SPECIAL 301 REPORT, supra note 32, at 17, 46–47. 34 SECTION 301 INVESTIGATION REPORT, supra note 8, at 48–61. 35 Id. at 153–76; 2019 SPECIAL 301 REPORT, supra note 32, at 18, 46. 36 2019 SPECIAL 301 REPORT, supra note 32, at 18, 40; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 16–17, 115. 37 2019 SPECIAL 301 REPORT, supra note 32, at 24–26, 42–43; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 116–17. 38 2019 SPECIAL 301 REPORT, supra note 32, at 21–22, 44; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 18, Congressional Research Service 5 Intellectual Property Violations and China: Legal Remedies IP violations by Chinese entities are thus not a monolithic phenomenon, and general terms like “IP theft” often obscure important legal distinctions. Different actions by Chinese entities implicate distinct IP or trade laws, which affects the various legal remedies that may be available. To better understand these distinctions, this section presents a taxonomy of IP violations along two dimensions: (1) the particular type of IP at issue, and (2) the type of violation—that is, what is meant by “theft.” It also briefly notes a third distinction—the degree to which the IP violation is committed by the Chinese government or state-affiliated entities (or with their support), or instead by Chinese individuals or entities not affiliated with the Chinese government. Types of Intellectual Property IP law comprises a set of legal rights to exclude others from making, copying, misappropriating, selling, disclosing, or using certain intangible creations of the human mind.39 There is no universally accepted definition of what qualifies as “intellectual property.” Sometimes, IP is used as an umbrella term to refer, at least primarily, to three distinct forms of legal protection: patents, copyrights, and trademarks.40 Other times, IP is used more broadly to include related areas of law, including trade secrets, rights of publicity, misappropriation, and moral rights, as well as narrower legal regimes protecting plant varieties, industrial design, circuit design, geographical indications, and the like.41 Based on their primarily federal nature and commercial importance, this report focuses on four types of IP: patents, copyrights, trademarks, and trade secrets. Each of these forms of IP protects a different type of intellectual creation, involves different procedures for obtaining rights, and grants the IP owner distinct rights that vary in scope and duration. After a brief discussion of the purposes and rationales for IP, this section overviews these four major forms of IP protection. Basis and Rationales for IP Rights Federal IP laws are legally grounded in one of two constitutional provisions. First, the U.S. Constitution’s IP Clause provides Congress with the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”42 The IP Clause provides the constitutional basis for U.S. patent and copyright law.43 Under the IP Clause, patents and copyrights are intended to 115–16. 39 See Intellectual Property, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining IP as a “category of intangible rights protecting commercially valuable products of the human intellect”). 40 See, e.g., id. (“[IP] comprises primarily trademark, copyright, and patent rights, but also includes trade-secret rights, publicity rights, moral rights, and rights against unfair competition.”); JAMES BOYLE & JENNIFER JENKINS, INTELLECTUAL PROPERTY: LAW & THE INFORMATION SOCIETY ix (4th ed. 2018) (defining IP as “the set of private legal rights that allows individuals and corporations to control intangible creations and marks” and stating that trademarks, copyrights, and patents are “the three main forms of US federal intellectual property”). 41 See, e.g., TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 301 (1994) [hereinafter TRIPS] (defining IP for purposes of the Agreement as comprising patents, copyrights, trademarks, geographical indications, industrial design protections, trade secrets, and integrated circuit design protection); Rochelle C. Dreyfuss & Justine Pila, Intellectual Property Law: An Anatomical Overview, in THE OXFORD HANDBOOK OF INTELLECTUAL PROPERTY LAW 5–6 (Rochelle C. Dreyfuss & Justine Pila eds., 2018) (defining IP as “the area(s) of law concerned with the recognition and protection of exclusionary rights in” a number of categories of subject matter, including authorial works, inventions, plant varieties, signs of commercial origin, designs, and confidential information). 42 U.S. CONST. art. I, § 8, cl. 8. 43 See generally Copyrights and Patents: Origins and Scope of the Power, in CONSTITUTION OF THE UNITED STATES: Congressional Research Service 6 Intellectual Property Violations and China: Legal Remedies encourage innovation and the spread of knowledge by providing incentives to create new creative works and generate useful technological inventions.44 Other federal IP laws, covering subjects such as trademarks and trade secrets, are enacted under the Commerce Clause, which grants Congress authority “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”45 These IP laws are less centrally concerned with promoting creative activity, but are an aspect of Congress’s power to regulate economic activity and establish rules for fair competition. For example, trademarks protect consumers and lower search costs by preventing businesses from misrepresenting the source of goods or services,46 while trade secrets serve both to encourage innovation and to prevent unfair means of competition between businesses.47 Patents Any person who invents or discovers “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” may apply for a patent under U.S. law.48 Patents may be granted for almost any type of technology made by humans, save for laws of nature, abstract ideas, and natural phenomena.49 For example, innovations in pharmaceutical drugs, biotechnology, chemistry, computer hardware and software, electrical engineering, agriculture, mechanical engineering, and manufacturing processes may be patented.50 To obtain a patent, the inventor must file a formal application with the U.S. Patent and Trademark Office (PTO).51 The process for obtaining a patent, called “patent prosecution,”52 is fairly demanding. The patent application must contain a written specification that describes the claimed invention with enough detail that a person skilled in the relevant technical field can make and use the invention.53 During prosecution, a PTO patent examiner reviews the application to determine whether the claimed invention is (1) directed at patent-eligible subject matter, (2) useful, (3) new, ANALYSIS AND INTERPRETATION, CONG. RSCH. SERV., https://constitution.congress.gov/browse/essay/artI_S8_C8_1_1/ (last visited Aug. 10, 2020). 44 See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984) (“[Copyrights and patents are] intended to motivate the creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired.”). 45 U.S. CONST. art I., § 8, cl. 3. Protection for trademarks and trade secrets may also be available under state laws. 46 Qualitex Co. v. Jacobson Prod. Co., 514 U.S. 159, 163–64 (1995) (“[T]rademark law, by preventing others from copying a source-identifying mark, reduces the customer’s costs of shopping and making purchasing decisions . . . . At the same time, the law helps assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product.” (citations and internal quotations omitted)). 47 Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481 (1974) (“The maintenance of standards of commercial ethics and the encouragement of invention are the broadly stated policies behind trade secret law.”). 48 35 U.S.C. § 101. 49 See Alice Corp. Pty. v. CLS Bank Int’l, 573 U.S. 208, 216–17 (2014); Diamond v. Chakrabarty, 447 U.S. 303, 309– 10 (1980); see generally CRS Report R45918, Patent-Eligible Subject Matter Reform in the 116th Congress, by Kevin J. Hickey, at 10–20 (reviewing current law of patent-eligible subject matter). 50 See Patent Technology Centers Management, U.S. PATENT & TRADEMARK OFF., https://www.uspto.gov/patent/ contact-patents/patent-technology-centers-management (last visited Aug. 10, 2020) (listing technological divisions for PTO examiners). 51 35 U.S.C. § 111. 52 See General Information Concerning Patents, U.S. PATENT & TRADEMARK OFF. (Oct. 2015), https://www.uspto.gov/ patents-getting-started/general-information-concerning-patents. 53 35 U.S.C. § 112(a); Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1343–45 (Fed. Cir. 2010) (en banc). Congressional Research Service 7 Intellectual Property Violations and China: Legal Remedies (4) nonobvious, and (5) adequately disclosed and claimed in the patent application.54 If the examiner finds these requirements met, the PTO will issue (i.e., grant) the patent.55 If the PTO grants the patent, the patent holder has the exclusive right to make, use, sell, offer to sell, or import the invention in the United States until the patent expires.56 Patents typically expire twenty years after the initial patent application is filed.57 Any other person who makes, uses, sells, or imports the invention without the patent holder’s permission is said to “infringe” the patent and is potentially legally liable.58 To enforce the patent, the patent holder may sue alleged infringers in federal court to seek an injunction (i.e., a judicial order to cease infringing activity), damages, and other remedies.59 Patents are presumed to be valid,60 but accused infringers may defend against lawsuits by asserting, among other things, (1) noninfringement (i.e., their allegedly infringing actions were not covered by the patent), or (2) invalidity (i.e., the patent should not have issued because, for example, the claimed invention was not new).61 Copyrights Copyright grants creators of “original works of authorship” a set of exclusive rights in their creative works.62 Forms of expression that are copyrightable include literary works (such as books and computer code); musical works and sound recordings; pictorial, graphic, and sculptural works; audiovisual works (such as movies and television); and architectural works.63 The key requirements for a copyright are that the work is independently created, at least minimally creative, and fixed in some tangible form.64 Copyright does not extend to ideas, processes, systems, discoveries, or methods of operation.65 Copyright attaches once a work is created and fixed in a tangible medium of expression (e.g., recorded in a computer file or on a piece of paper).66 In contrast to patents, the author of a copyrightable creative work need not apply with the government to obtain a copyright.67 However, for U.S. works, copyright holders must register their copyrights with the U.S. Copyright Office before they can sue in federal court.68 The registration process requires 54 35 U.S.C. §§ 101–103, 112. 55 Id. § 131. 56 Id. § 271(a). 57 Id. § 154(a)(2). 58 Id. 59 Id. §§ 281, 283–285. 60 Id. § 282(a); Microsoft Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 95 (2011). 61 35 U.S.C. § 282(b). 62 17 U.S.C. §§ 102(a), 106. 63 Id. § 102(a)(1)–(8). 64 Id. § 102(a); Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345–47 (1991). 65 17 U.S.C. § 102(b); see also Baker v. Selden, 101 U.S. 99, 102–04 (1880). 66 Id. § 102(a). 67 Id. §§ 102(a), 408(a). 68 Id. § 411(a). Although a copyright holder may bring a claim in court even if the Copyright Office refuses to register the work, see id., the Copyright Office must either register the work or refuse registration before the copyright holder can file suit. Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 886 (2019). Congressional Research Service 8 Intellectual Property Violations and China: Legal Remedies submitting an application, paying a fee, and sending a copy or copies of the work to the Copyright Office.69 Copyright holders generally have the exclusive right to reproduce the work, publicly perform and display it, distribute it, and prepare derivative works from it.70 Any person who takes one of those actions without the permission of the copyright owner is potentially legally liable for copyright infringement.71 For most works created today, copyright does not expire until seventy years after the death of the work’s author.72 Once a copyright holder registers the copyright, she may sue infringers in federal court to seek injunctions, damages, and other legal remedies.73 In addition to these civil remedies, certain willful copyright infringements may be criminal offenses.74 The exclusive rights of a copyright holder are subject to many specific limitations and exceptions.75 The most important limitation is the doctrine of fair use, which permits certain socially valuable uses that would otherwise be infringements (e.g., using portions of a copyrighted work in a criticism, parody, or educational instruction).76 Courts consider a number of factors to evaluate whether a use is fair, such as (1) the purpose and character of the use; (2) the nature of the original work; (3) the substantiality of what was copied; (4) any market harm from the use; and (5) whether the use is “transformative,” that is, whether it adds new expression, has a different purpose, or alters the original work with new expression or meaning.77 Trademarks In general, any “word, name, symbol, or device” may be used as a trademark or service mark to identify a particular business’s goods or services.78 Familiar examples of trademarks include brand names and logos such as NIKE and its “swoosh” symbol. The availability of trademark protection depends on the distinctiveness of the proposed mark.79 Generic terms (i.e., a common descriptive name for a particular type of product80) and deceptive terms (i.e., those that materially misrepresent the product81) may not be registered or protected as a trademark.82 Descriptive terms (i.e., those that convey information about the qualities of the product83), surnames, and geographically descriptive marks generally cannot be registered or 69 17 U.S.C. §§ 407–410; U.S. COPYRIGHT OFFICE, CIRCULAR 2: COPYRIGHT REGISTRATION (2019), https://www.copyright.gov/circs/circ02.pdf. 70 17 U.S.C. § 106(1)–(6). 71 Id. §§ 106, 501(a). 72 Id. § 302(a). Copyright in works made for hire (which often have corporate authors) as well as anonymous or pseudonymous works last for 95 years after the work’s publication or 125 years after its creation, whichever term is shorter. Id. § 302(c). 73 Id. §§ 501–505. 74 Id. § 506(a); 18 U.S.C. § 2319. 75 See 17 U.S.C. §§ 108–122. 76 See id. § 107; Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575–78 (1994). 77 17 U.S.C. § 107(1)–(4); Campbell, 510 U.S. at 579. 78 5 U.S.C. § 1127 (defining “trademark” and “service mark”). 79 Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992); Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9–11 (2d Cir. 1976) (Friendly, J.). 80 Park ’N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 194 (1985). 81 In re Budge Mfg. Co., Inc., 857 F.2d 773, 775 (Fed. Cir. 1988). 82 15 U.S.C. §§ 1052(a), 1052(e), 1064(3); Two Pesos, 505 U.S. at 768–69. 83 Park ’N Fly, 469 U.S. at 194. Congressional Research Service 9 Intellectual Property Violations and China: Legal Remedies protected as a trademark unless such terms acquire an association by consumers with a particular source of a product: so-called “secondary meaning.”84 For example, Coca-Cola (a drink originally made with coca leaves and cola nuts) might not have been initially protectable because its brand name was descriptive of the product. Yet, the mark subsequently became protectable when the public began to associate the mark with a particular producer.85 Arbitrary terms (i.e., terms that in no way describe the goods or service86) and merely suggestive terms are “inherently distinctive” and may be registered and protected as marks without a showing of secondary meaning.87 Certain federal trademark rights are available based on actual use of (or a bona fide intent to use) a mark in commerce.88 Because federal law does not generally preempt state laws protecting trademarks,89 rights under applicable state trademark laws may be available as well, based either on use of the mark or state registration.90 To obtain presumptive nationwide federal trademark rights, a business must first register the mark with the PTO.91 Along with the distinctiveness requirements discussed above, the PTO will only register marks that are not confusingly similar to marks that others have already registered.92 Each trademark registration is tied to the use of a mark with particular categories of goods or services (e.g., clothing, vehicles, or telecommunications services).93 Thus, different owners may use an identical or similar mark for different types of products (e.g., Delta Airlines and Delta faucets), so long as this parallel use would not confuse consumers.94 Owners of valid trademarks generally have the right to prevent other businesses or persons from using similar marks to identify their products if the use is likely to cause consumer confusion as to the product’s source.95 Trademark owners may sue in federal or state court to obtain 84 15 U.S.C. § 1052(e)(1)–(2), (e)(4), (f); Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205, 210–11 (2000); Two Pesos, 505 U.S. at 769. 85 See Coca-Cola Co. v. Koke Co. of Am., 254 U.S. 143, 146–47 (1920). 86 See 2 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 11:11, What Are Arbitrary Word Marks? (5th ed. 2019). 87 Wal-Mart Stores, 529 U.S. at 210–11; Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 11 (2d Cir. 1976). 88 See 15 U.S.C. §§ 1125(a), 1127; Two Pesos, 505 U.S. at 768. 89 See Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 232 (1964); Dorpan, S.L. v. Hotel Melia, Inc., 728 F.3d 55, 62 (1st Cir. 2013); BOYLE & JENKINS, supra note 40, at 106. 90 See generally 3 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION ch. 22, State Protection and Registration of Marks (5th ed. 2019); State Trademark Information Links, U.S. PATENT & TRADEMARK OFF., https://www.uspto.gov/ trademarks-getting-started/process-overview/state-trademark-information-links (last visited Aug. 18, 2020). 91 See 15 U.S.C. §§ 1051, 1057(b). 92 Id. § 1052(d). Moreover, certain types of marks may not be registered pursuant to specific statutory exceptions, including (1) marks that falsely suggest a connection with persons or institutions; (2) the names of living persons without their consent; and (3) marks consisting of the U.S., state, or municipal flags. See id. § 1052(a)–(c). Federal law also purports to bar the registration of marks that contain “immoral, deceptive, or scandalous matter” or those that “may disparage” persons and institutions, but the Supreme Court has invalidated these provisions on First Amendment grounds. Iancu v. Brunetti, 139 S. Ct. 2294, 2297 (2019); Matal v. Tam, 137 S. Ct. 1744, 1751, (2017). 93 15 U.S.C. § 1051(a)(2); see 37 C.F.R. §§ 2.85(a), 6.1. 94 15 U.S.C. § 1052(d); BOYLE & JENKINS, supra note 40, at 104–05; Barton Beebe & Jeanne C. Fromer, Are We Running Out of Trademarks? An Empirical Study of Trademark Depletion and Congestion, 131 HARV. L. REV. 945, 952 & n.22 (2018). 95 15 U.S.C. §§ 1114(1), 1125(a); KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 117 (2004). In determining whether consumers are likely to be confused by two similar marks, courts consider a number of factors, such as (1) strength of the mark; (2) similarity of the marks; (3) proximity of the products; (4) evidence of actual confusion; (5) the defendant’s intent in selecting the mark; (6) the type of goods and sophistication of the Congressional Research Service 10 Intellectual Property Violations and China: Legal Remedies injunctions, damages, and other legal remedies.96 In addition to civil remedies, intentional trafficking in goods or services using a counterfeited mark is a federal criminal offense.97 If properly renewed and maintained, trademark rights may last indefinitely.98 Trade Secrets Trade secret law protects competitively valuable, confidential information. Trade secrets include “all forms and types of financial, business, scientific, technical, economic, or engineering information” where (1) the owner has taken reasonable measures to keep the information secret; and (2) the information derives actual or potential independent economic value from not being generally known or readily ascertainable to another person (usually, a business competitor).99 Examples include secret recipes, formulas, financial information, source code, or manufacturing processes. Matters of public knowledge or information generally known in an industry may not be a trade secret.100 Until recently, trade secret protection was mainly a matter of state law.101 In 2016, Congress passed the Defend Trade Secrets Act (DTSA), which created a federal civil remedy for trade secret misappropriation.102 The DTSA built upon the Economic Espionage Act of 1996, which criminalized economic espionage and certain thefts of trade secrets.103 Under the DTSA, the misappropriation of a trade secret is a federal civil violation that may be remedied through a lawsuit by the trade secret’s owner.104 Protection for trade secrets is also available under state laws, which are generally similar to federal requirements.105 consumers; and (7) similarity of advertising or marketing. See, e.g., AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348– 49 (9th Cir. 1979); Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cit. 1961); see generally Barton Beebe, An Empirical Study of the Multifactor Tests for Trademark Infringement, 94 CAL. L. REV. 1581, 1587–90, 1591 tbl. 1 (2006) (summarizing the factors considered by different federal courts of appeals to determine the likelihood of consumer confusion in trademark cases). 96 15 U.S.C. §§ 1116–1117; 28 U.S.C. § 1338(a). 97 See 18 U.S.C. § 2320(a). A “counterfeit mark” is a “spurious” mark that must be (1) identical to, or substantially indistinguishable from, a registered mark; (2) used in connection with the same good or services as the registered mark; and (3) likely to cause confusion, to cause mistake, or to deceive. Id. § 2320(h)(i)–(iv). 98 15 U.S.C. § 1058(a)–(b). 99 18 U.S.C. § 1839(3). Factors that courts may consider in determining whether information is a trade secret include (1) the extent to which the information is known outside of the business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the owner to guard the secrecy of the information; (4) the value of the information to the owner and the owner’s competitors; (5) the amount of effort or money expended by the owner in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. See RESTATEMENT (1ST) OF TORTS § 757 cmt. b. (AM. LAW INST.1939). 100 18 U.S.C. § 1839(3)(B); Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974) (“The subject of a trade secret . . . must not be of public knowledge or of a general knowledge in the trade or business.”). 101 See BOYLE & JENKINS, supra note 40, at 769. 102 Pub. L. No. 114-153, § 2, 130 Stat. 376, 376–82 (2016) (codified at 18 U.S.C. §§ 1836(b)–(d), 1839). 103 Pub. L. No. 104-294, tit. I, 110 Stat 3488, 3488–91 (1996) (codified as amended at 18 U.S.C. §§ 1831–1839). 104 18 U.S.C. § 1832(b)(1). 105 Almost all the states have adopted the Uniform Trade Secrets Act in some form. See UNIF. TRADE SECRETS ACT (Unif. Law Comm’n 1985) [hereinafter UTSA]; 1 MILGRIM ON TRADE SECRETS § 1.01[2][c][i] (2019) (noting that fortyeight states have adopted UTSA, with local variations, as of 2018). The federal definitions of “trade secret,” “misappropriation,” and “improper means” generally follow the UTSA. 1 MILGRIM ON TRADE SECRETS § 1.01[5] (2019). Congressional Research Service 11 Intellectual Property Violations and China: Legal Remedies Owners of commercially valuable information need not formally apply with federal or state governments to obtain legal protection for an asserted trade secret. However, the owner must take “reasonable measures” to keep the information secret.106 For example, an owner may restrict access to the information within the business, require confidentiality agreements of employees or any others who receive the information, or place the information on secure computer systems.107 Whether the measures taken are reasonable depends on the factual circumstances and the nature of the information.108 The owner of a valid trade secret may not legally prevent all acquisitions, uses, and disclosures of the information. Rather, federal and state law provide a remedy only when a trade secret is “misappropriated.”109 There are two main forms of misappropriation. First, misappropriation occurs when an unauthorized person acquires a trade secret through “improper means,” such as theft, bribery, electronic espionage, or a breach of a duty to maintain secrecy (e.g., violation of a nondisclosure agreement).110 Acquiring a trade secret through lawful means, such as reverse engineering, or independently discovering the trade secret, is not a misappropriation.111 Second, a person may not use or disclose a trade secret if that person knows or has reason to know that (1) knowledge of the trade secret derives from a person who used improper means to acquire the trade secret; (2) the trade secret was acquired under circumstances creating a duty to maintain secrecy; or (3) knowledge of the trade secret derives from a person owing a duty to maintain secrecy.112 Owners of trade secrets may sue in state or federal court to enjoin actual or threatened misappropriations and obtain monetary damages for losses caused by misappropriations.113 Civil seizures of property necessary to prevent the dissemination of a trade secret may be available in extraordinary circumstances.114 The EEA also criminalizes two forms of trade secret misappropriation: (1) economic espionage, which includes the unauthorized appropriation or transmission of a trade secret with the intent to benefit a foreign government;115 and (2) theft of a trade secret, which includes the unauthorized appropriation or transmission of a trade secret when the offender knows that the act will injure the owner of a trade secret for the economic benefit of another person.116 Overlap and Interactions Among Different Forms of IP Table 1 summarizes the differences between patents, copyrights, trademarks, and trade secrets. Although this section has presented each form of IP separately because they are legally distinct, there is a degree of overlap in the subject matter that each form of IP protects. This can lead to situations in which an owner must choose between different forms of IP protection. For example, 106 18 U.S.C. § 1839(3)(A). 107 See generally 1 MILGRIM ON TRADE SECRETS § 1.01[c][iii][D] (2019). 108 Id. 109 18 U.S.C. § 1836(b)(1); UTSA §§ 2(a), 3(a). 110 18 U.S.C. § 1839(5)(A), (6)(A). In addition, a person who used improper means to acquire a trade secret may not disclose or use the trade secret without authorization. Id. § 1839(5)(B)(i). 111 Id. § 1839(6)(B). 112 Id. § 1839(B)(ii)(I)–(III). 113 Id. § 1836(b)(3)(A)–(B). 114 Id. § 1836(b)(2). 115 Id. § 1831(a). 116 Id. § 1832(a). Congressional Research Service 12 Intellectual Property Violations and China: Legal Remedies the owner of a novel discovery may strategically decide whether to protect that information as a trade secret or instead seek a patent.117 While trade secret protection covers a broader range of information and potentially lasts longer than a patent, it provides narrower rights because it lacks any protection against independent discovery or reverse engineering by third parties.118 By applying for a patent, however, the owner gives up any claim to trade secret protection because issued patents and patent applications are publicly available.119 In other situations, an individual may be able to protect the same information or product by relying on multiple forms of IP protection. For example, computer code is eligible for copyright protection as a literary work, yet the owner may also choose to keep the code as a trade secret. Moreover, different aspects of a product may be protected by different types of IP rights, such as a patented pharmaceutical product with a trademarked brand name. There is no general one-to-one correspondence between IP protection and a particular consumer product. For example, the various technologies within a typical smartphone (e.g., computer hardware and software, design, and networking) are protected by many thousands of different patents,120 along with the copyrighted computer code of the operating system and various applications. Valuable pharmaceutical products are often protected by dozens of different patents relating to the active ingredient, formulations, administration, methods of treatment, or methods of manufacturing the drug.121 117 See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 485–92 (1974). 118 Compare 35 U.S.C. § 271(a) (patentee has the exclusive right to make, use, and sell the patented invention), with 18 U.S.C. § 1839(6) (permitting reverse engineering and independent derivation of trade secrets). 119 35 U.S.C. §§ 10, 122(b), 153; 37 C.F.R. §§ 1.11(a), 1.211. 120 Steve Lohr, Apple-Samsung Patent Battle Shifts to Trial, N.Y. TIMES (July 29, 2012), https://www.nytimes.com/ 2012/07/30/technology/apple-samsung-trial-highlights-patent-wars.html. 121 See CRS Report R45666, Drug Pricing and Intellectual Property Law: A Legal Overview for the 116th Congress, coordinated by Kevin J. Hickey, at 12–14. Congressional Research Service 13 Intellectual Property Violations and China: Legal Remedies Table 1. Comparison of Each Form of Federal Intellectual Property Protection Patent Copyright Trademark Trade Secret Constitutional Basis IP Clause (U.S. CONST. art. I, § 8, cl. 8) IP Clause (U.S. CONST. art. I, § 8, cl. 8) Commerce Clause (U.S. CONST. art. I, § 8, cl. 3) Commerce Clause (U.S. CONST. art. I, § 8, cl. 3) Statutory Basis 1952 Patent Act, as amended, 35 U.S.C. §§ 1–390 1976 Copyright Act, as amended, 17 U.S.C. §§ 101–1332 1946 Lanham Act, as amended, 15 U.S.C. §§ 1051– 1141n DTSA and Economic Espionage Act of 1996, 18 U.S.C. §§ 1831–1839 Initial Rights Holder Inventor Author Business or person using mark to identify goods or services Owner of commercially valuable, confidential information Subject Matter New and useful processes, machines, manufactures, or compositions of matter Original works of authorship Any word, name, symbol, or device used to identify goods or services Financial, business, scientific, technical, economic, or engineering information Subject Matter Examples Pharmaceuticals, engineering, manufacturing processes Books, musical works, movies, fine art, architecture, software Brand names, logos, distinctive trade dress Formulas, source code, prototypes, customer lists, financial information Requirements for Protection Novelty; nonobviousness; utility; first to file Independent creation; minimal creativity; fixation Use in commerce; registration (for presumptive nationwide rights) Information derives economic value from not being generally known Excluded From Protection Laws of nature, natural phenomena, and abstract ideas Any idea, procedure, process, system, method of operation, concept, principle, or discovery Generic terms; deceptive terms; descriptive terms that lack secondary meaning Information generally known, independently discovered, reverse engineered, or lawfully acquired Process to Secure Rights PTO patent application process (patent prosecution) Create and fix the work (registration is required to sue) PTO trademark registration process Take reasonable measures to keep information secret Exclusive Rights Granted To make, use, offer to sell, sell, and import the patented invention To reproduce, distribute, or publicly perform/display the work, and make derivative works Prevent confusingly similar uses of the mark Prevent others from misappropriating trade secret (e.g., acquisition through improper means) Duration 20 years from date of application Life of author plus 70 years Potentially indefinite Potentially indefinite Infringement Test Practice the claimed invention Substantially similar to original Likely to confuse consumers Misappropriation Main Defenses Invalidity; noninfringement; inequitable conduct Fair use; lack of substantial similarity Fair use; nominative use; lack of confusion Information was not a trade secret or was not misappropriated Source: Congressional Research Service. Congressional Research Service 14 Intellectual Property Violations and China: Legal Remedies Forms of “IP Theft” “IP theft” and “stealing IP” are colloquial terms, not legal concepts. Strictly speaking, most forms of IP (with the important exception of trade secrets) cannot be “stolen.” A patent, for example, is a publicly available legal document granting the patent holder certain exclusive rights; another person might infringe the patent (e.g., by making and selling the patented invention without permission), but infringers do not “steal” the patent. Nor does IP law necessarily preclude persons other than the IP owner from using or acquiring protected information without permission; third parties may lawfully reverse engineer a trade secret, for example, or make a fair use of a copyrighted work.122 Rather, the colloquial usage of “IP theft” usually seeks to capture concerns about varied laws, policies, and practices of—in the context of this report—the Chinese government and other Chinese entities related to IP and technology transfer, which harm U.S. IP rights holders.123 This section describes several forms that these IP-related violations may take. Under-Protection One way in which a foreign nation might undermine IP rights is through a lack of substantive legal protections for IP available under that country’s domestic law. Under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), all members of the WTO (including the United States and China) agree to certain minimum standards for IP protection and enforcement.124 First, members agree to provide, under their domestic laws, a basic level of substantive protection for copyrights, trademarks, patents, trade secrets, and other forms of IP.125 Second, members agree to ensure that certain minimum civil, criminal, and administrative procedures to enforce IP rights are available to permit effective action against infringements.126 Members further agree to provide “national treatment,” a nondiscrimination principle under which each WTO member must treat nationals of other members no less favorably than they treat their own citizens with respect to IP rights.127 TRIPS’s substantive provisions set forth required minimum levels of IP protection. For example, with respect to trademarks, members agree that “any sign . . . capable of distinguishing [the] goods or services” of a business shall be eligible for trademark registration, subject to limited exceptions.128 Owners of valid registered trademarks must have the right to exclude others from “using in the course of trade identical or similar signs for goods or services [where] such use would result in a likelihood of confusion.”129 Initial trademark registrations must last for at least 122 See 17 U.S.C. § 107; 18 U.S.C. § 1839(6)(B). 123 See, e.g., SECTION 301 INVESTIGATION REPORT, supra note 8, at 4. 124 See TRIPS, supra note 41; see generally Ilias Akhtar et al., supra note 3, at 15–17. 125 TRIPS, supra note 41, pt. II. Geographical indications, industrial design, and integrated circuit design are the other forms of IP that must be protected by WTO members under TRIPS. Id. TRIPS explicitly incorporates by reference many of the provisions of earlier (and still in force) IP treaties, such as the Paris Convention for the Protection of Industrial Property, Mar. 20, 1883, revised at Stockholm July 14, 1967, 21 U.S.T. 1583, 828 U.N.T.S. 305, and the Berne Convention for the Protection of Literary and Artistic Works, Sept. 9, 1886, revised at Paris July 24, 1971, 1161 U.N.T.S. 3. See, e.g., TRIPS, supra note 41, arts. 1–3, 9, 15–16, 39. 126 TRIPS, supra note 41, pt. III. 127 Id. arts. 1, 3. A similar but distinct nondiscrimination principle required by TRIPS is known as “most-favored nation treatment,” which generally requires that if a member extends to the nationals of one country any advantage relating to the availability, acquisition, scope, maintenance, and enforcement of IP, it must also extend that same privilege to the nationals of all other members. Id. art. 4. 128 Id. art. 15. 129 Id. arts. 16–17. Congressional Research Service 15 Intellectual Property Violations and China: Legal Remedies seven years, and must be renewable indefinitely.130 If a WTO member were to, for example, provide a shorter initial term or a nonrenewable term of trademark registration, that nation would fail to meet the minimum substantive standards set forth in TRIPS. Concerns about China failing to meet its WTO obligations with respect to IP are long-standing. TRIPS, which first went into effect in 1996, became applicable to China after its accession to the WTO in 2001.131 In 2007, the United States initiated a dispute against China before the WTO, alleging inadequacies in China’s substantive IP laws and its enforcement of those laws.132 After the United States prevailed on several of its claims,133 China agreed to implement the WTO’s ruling in the dispute by March 2010.134 U.S. stakeholders continue to lodge complaints about whether China’s domestic laws meet TRIPS’s substantive requirements,135 while acknowledging progress by China in recent years.136 Since 2005,137 the USTR has placed China on the Priority Watch List, indicating “that particular problems exist in that country with respect to IP protection, enforcement, or market access for persons relying on IP.”138 Specifically, the USTR found that China has an “urgent need for fundamental structural changes to strengthen IP protection and enforcement, including as to trade secret theft, online piracy and counterfeiting, the high volume manufacture and export of counterfeit goods, and impediments to pharmaceutical innovation.”139 The USTR has also designated many online or physical markets based in China as “notorious markets”140 that are “prominent and illustrative examples of online and physical marketplaces that reportedly engage in and facilitate substantial piracy and counterfeiting.”141 In its most recent Special 301 Report,142 the USTR concluded that although China reorganized its IP protection and enforcement authorities and made progress in some areas, ultimately its actions “fell short of needed fundamental changes to the IP landscape in China.”143 130 Id. art. 18. 131 See 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 2, 107. 132 Request for Consultations by the United States, China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WTO Doc. WT/DS362/1 (Apr. 16, 2007). 133 Panel Report, China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WTO Doc. WT/DS362/R (adopted Jan. 26, 2009). 134 Communication from China and the United States concerning Article 21.3(b) of the [WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)], China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WTO Doc. WT/DS362/13 (July 3, 2009); see generally CRS China-U.S. Trade Report, supra note 4, at 53; Devon Spencer, Not in It for the Long Run: China’s Solution for Compliance with TRIPS Requires More Than a Nine-Month Campaign, 19 U. MIAMI INT’L & COMP. L. REV. 197, 211–18 (2012). 135 See generally 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 107–13 136 See, e.g., CRS China-U.S. Trade Report, supra note 4, at 40–41 (citing surveys of IP holders finding that, although many find the IP enforcement environment in China to be ineffective or inadequate, over 90% believed the IP environment in China had improved between 2009 and 2016). 137 International Intellectual Property Alliance, History of USTR’s Special 301 Decisions Since 1989 (Feb. 7, 2019), https://iipa.org/files/uploads/2019/02/2019SPEC301HISTORICALCHART.pdf. 138 2019 SPECIAL 301 REPORT, supra note 32, at 8. 139 Id. at 6. 140 OFF. OF THE U.S. TRADE REPRESENTATIVE, 2018 OUT-OF-CYCLE REVIEW OF NOTORIOUS MARKETS 16–17, 22–23, (2019), https://ustr.gov/sites/default/files/2018_Notorious_Markets_List.pdf. 141 Id. at 2. 142 See discussion infra in “Section 301 of the Trade Act of 1974” (discussing Special 301 authority). 143 2019 SPECIAL 301 REPORT, supra note 32, at 41. Congressional Research Service 16 Intellectual Property Violations and China: Legal Remedies For example, as to the substantive level of IP protection afforded by Chinese law, the USTR has asserted that     China fails to provide adequate patent protection for pharmaceutical products by imposing unduly restrictive and “opaque” patent examination procedures;144 China fails to impose adequate criminal liability for copyright infringement through high monetary thresholds and profit motive requirements;145 China’s trade secret law may exclude some types of proprietary information, and is limited to actions of commercial entities (rather than any legal person);146 and China has failed to make clear that sports and other live broadcasts are eligible for copyright protection in China.147 Such substantive legal shortcomings could conceivably be the basis of a WTO complaint based on TRIPS noncompliance,148 or other remedies discussed below. Notably, the Phase One Agreement addresses some of these issues.149 Infringement and Under-Enforcement Together with its provisions for minimum levels of substantive IP protection, TRIPS also sets forth minimum standards for IP enforcement by WTO members.150 Presuming that a nation’s IP laws meet TRIPS’s minimum substantive standards, IP rights may still be undermined if a nation does not adequately enforce those IP laws. For example, a nation may lack adequate institutions or procedures, such as an effective and fair court system, that are necessary to vindicate IP rights. TRIPS requires that WTO members have enforcement procedures that “permit effective action” against infringements of IP rights.151 For example, members must make “fair and equitable” civil judicial procedures available to IP rights holders.152 These judicial authorities must have authority to grant effective and adequate relief, including injunctions and damages.153 For counterfeit trademarked goods and pirated copyrighted goods, members must establish border control procedures through which rights holders may apply to customs authorities to block the importation of infringing goods.154 For cases of willful trademark infringement or copyright piracy “on a commercial scale,” members must establish criminal procedures and penalties.155 144 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 110–11; 2019 SPECIAL 301 REPORT, supra note 32, at 44– 45. 145 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 108. 146 Id. at 109; 2019 SPECIAL 301 REPORT, supra note 32, at 41–42. 147 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 108; 2019 SPECIAL 301 REPORT, supra note 32, at 45. 148 See discussion infra in “TRIPS and WTO Disputes.” 149 See supra notes 15–29 and accompanying text. 150 TRIPS, supra note 41, pt. III. 151 Id. art. 41.1. 152 Id. arts. 41–42. 153 Id. arts. 44–45. 154 Id. arts. 51–60. 155 Id. art. 61. Congressional Research Service 17 Intellectual Property Violations and China: Legal Remedies As with the substantive aspects of TRIPS, U.S. rights holders have long maintained that Chinese authorities fail to enforce existing IP laws adequately, or that China lacks effective procedures and institutions for rights holders to enforce their IP rights.156 Two areas of continuing concern about China’s IP enforcement environment are (1) the manufacture, sale, and export of counterfeit trademarked goods (counterfeiting); and (2) unauthorized copying, performance, and distribution of copyrighted works, particularly online (piracy). As to trademark counterfeiting, a 2019 study of customs seizures by the Organization for Economic Co-operation and Development (OECD) and the EU Intellectual Property Office (EUIPO) found that China was the world’s leading source of counterfeit goods.157 Together with Hong Kong (through which exported Chinese merchandise often transships), China was the source of over 63% of counterfeited and pirated exports, representing $322 billion in value.158 The United States was the largest victim of these infringements, with nearly 25% of seized counterfeits affecting IP rights registered in the United States.159 Looking just at seizures by U.S. authorities, China (together with Hong Kong) was the origin of 87% of the goods seized by U.S. Customs and Border Protection for IP violations in FY2018, representing $1.2 billion in retail value.160 Trademark counterfeiting by Chinese entities encompasses a vast array of goods, including apparel and footwear, toys, sporting goods, and other consumer products.161 On top of the harms that counterfeiting has on trademark holders, counterfeit goods may also create health and safety concerns, as in the case of counterfeit pharmaceuticals, food and beverages, semiconductors, and automotive parts.162 Piracy of copyrighted works is a second area of long-standing concern for U.S. rights holders. The internet is an efficient vehicle enabling the unauthorized distribution of copyrighted movies, music, software, and television programs in China, as well as other nations.163 The USTR reports that copyright piracy is “widespread” in China, particularly online.164 For example, the Business Software Alliance’s most recent study found that 66% of all software in China is unlicensed (that is, used without permission from the copyright holder), representing $6.8 billion in commercial 156 See generally CRS China-U.S. Trade Report, supra note 4, at 39–43. 157 OECD & EUIPO, TRENDS IN TRADE IN COUNTERFEIT AND PIRATED GOODS 12, 27–28 (2019). OECD defines “counterfeit and pirated goods” broadly, see id. at 14, so its estimates include goods that violate patents, design rights, and copyrights, as well as trademarks. The study’s list of the most affected industries (footwear, clothing, leather, watches, cosmetics), id. at 31, suggests that trademark infringements are a substantial component of these estimates. 158 Id. at 46. 159 Id. at 32–33. 160 U.S. CUSTOMS & BORDER PROT., INTELLECTUAL PROPERTY RIGHTS: FISCAL YEAR 2018 SEIZURE STATISTICS 16, 24 (2019), https://www.cbp.gov/sites/default/files/assets/documents/2019-Aug/IPR_Annual-Report-FY-2018.pdf [hereinafter FISCAL YEAR 2018 SEIZURE STATISTICS]. These statistics aggregate seizures for both trademark and copyright infringement, see id. at 6, 13, but the top categories of products seized (apparel, footwear, watches, handbags), id. at 17, suggest that trademark infringements are a substantial component of these estimates. 161 2019 SPECIAL 301 REPORT, supra note 32, at 24. 162 Id. at 24–25; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 116–17. 163 2019 SPECIAL 301 REPORT, supra note 32, at 22; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 18. 164 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 116. Congressional Research Service 18 Intellectual Property Violations and China: Legal Remedies value.165 China is also a leading source and exporter of websites and software that facilitate copyright piracy.166 Trade Secret Misappropriation and Cyber Intrusions Improper acquisition and disclosure of trade secrets represents another way that Chinese entities and its government may harm U.S. IP rights holders. Because trade secret law generally requires a misappropriation to be actionable—such as acquisition of a trade secret through theft, bribery, breaches of contractual duties, or electronic espionage167—this type of IP violation fits more naturally within a “theft” paradigm than other IP infringements. Trade secret misappropriation by Chinese entities takes many forms. Perhaps the most direct means of improperly acquiring a trade secret is through unauthorized intrusion by Chinese entities into U.S. firms’ computer networks to obtain confidential business information.168 The USTR has found that China’s government conducts or supports many of these cyber intrusions.169 Several industries targeted by China—such as information technology, aerospace, and energy— match those identified as key areas in China’s state-led industrial policies.170 According to the USTR, “[a]s the global economy has increased its dependence on information systems . . . cyber theft became one of China’s preferred methods of collecting commercial information because of its logistical advantages and plausible deniability.”171 Trade secret misappropriations by Chinese entities extend beyond hacking and cyber intrusions, however. In other situations, current or former employees of a business, such as locally hired engineers of U.S. entities doing business in China, may disclose trade secrets to Chinese authorities or competitors without authorization.172 Chinese entities also allegedly use means such as physical intrusions, bribery, fraud, breach of confidentiality agreements, or misrepresentation to acquire trade secrets.173 For example, U.S. authorities have raised concerns about unauthorized disclosures to Chinese entities of confidential biomedical research proposals submitted to the National Institutes of Health, allegedly in violation of peer review confidentiality agreements.174 Although trade secret misappropriation is itself a civil and potentially criminal violation under U.S. law,175 other civil and criminal laws may be implicated as well, depending on the means used to acquire the trade secret. For example, as discussed below, unauthorized cyber intrusions may 165 SOFTWARE ALL., SOFTWARE MANAGEMENT: SECURITY IMPERATIVE, BUSINESS OPPORTUNITY, BSA GLOBAL SOFTWARE SURVEY 7, 10, 12 (2018), https://gss.bsa.org/wp-content/uploads/2018/06/2018_BSA_GSS_Report_A4_ en.pdf. 166 2019 SPECIAL 301 REPORT, supra note 32, at 44. 167 18 U.S.C. §§ 1836(b), 1839(5)–(6). 168 SECTION 301 INVESTIGATION REPORT, supra note 8, at 153–76. 169 Id. at 153. 170 See id. at 11–13, 156. 171 Id. at 154. 172 See 2019 SPECIAL 301 REPORT, supra note 32, at 18; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 115. 173 See Keith Bradsher, How China Obtains American Trade Secrets, N.Y. TIMES (Jan. 15, 2020), https://www.nytimes.com/2020/01/15/business/china-technology-transfer.html; CRS China-U.S. Trade Report, supra note 4, at 42–43; 18 U.S.C. § 1839(5)–(6). 174 See CRS Insight IN11207, Foreign Interference in NIH Research: Policy Implications, by Kavya Sekar; Gina Kolata, Vast Dragnet Targets Theft of Biomedical Secrets for China, N.Y. TIMES (Nov. 4, 2019), https://www.nytimes.com/2019/11/04/health/china-nih-scientists.html. 175 See 18 U.S.C. §§ 1831–1832, 1836. Congressional Research Service 19 Intellectual Property Violations and China: Legal Remedies be a crime under the Computer Fraud and Abuse Act or other anti-hacking laws.176 Similarly, obtaining trade secrets through unauthorized physical intrusions or bribery may violate various state or federal laws (e.g., burglary or fraud), depending on the circumstances. As discussed below, however, the ability of U.S. authorities to exercise jurisdiction over the person and violation represents a significant limitation on remedies for these crimes.177 Traditional trade secret misappropriation does not reach all of the various means that Chinese entities use to obtain technology and other know-how from U.S. firms. Coercive technology transfer and regulatory extraction, discussed below,178 may or may not be a trade secret violation depending on the circumstances. Strategic acquisition of U.S. firms by Chinese corporations to acquire technology is another means of acquisition that does not generally represent a trade secret violation, but still may raise national security or other legal concerns.179 Coercive Technology Transfer Acquisition of trade secrets and technology by Chinese entities may take somewhat subtler forms than outright misappropriations like cyber intrusions or physical theft. In its 2018 investigation report conducted under Section 301,180 the USTR describes China’s industrial policies and practices concerning IP and other technological know-how as an “unfair technology transfer regime.”181 The USTR characterizes this “regime” of coerced technology transfer, applicable to U.S. and other foreign entities seeking to do business in China, as taking two main forms. First, China uses formal and informal foreign ownership restrictions to pressure transfer of technology to Chinese entities, effectively as a condition of foreign companies doing business in China.182 Second, China uses regulatory licensing requirements to force technology transfer in exchange for various administrative approvals needed to conduct business in China.183 The first form of coercive technology transfer concerns Chinese foreign investment restrictions, such as requirements that foreign businesses seeking to enter the Chinese market form a joint venture (JV) with Chinese entities or state-owned enterprises. Under Chinese law, foreign companies in certain industries may not enter the Chinese market unless they partner with a Chinese company.184 The Chinese JV partner or Chinese governmental entities may, informally or formally, require or pressure technology transfer from the foreign entity to the Chinese partner as a condition of concluding the partnership deal and obtaining access to the Chinese market.185 Moreover, in some cases, the Chinese JV partner or its employees may have ties to the Chinese 176 See discussion infra in “Computer Fraud and Abuse Act.” 177 See discussion infra in “Remedial Issues: Jurisdiction and Territoriality.” 178 See discussion infra in “Coercive Technology Transfer.” 179 See CRS China-U.S. Trade Report, supra note 4, at 28–29. 180 See discussion infra in “Section 301 of the Trade Act of 1974.” 181 SECTION 301 INVESTIGATION REPORT, supra note 8, at 19. The Report uses the term “technology” broadly to encompass not just information protected by patents, copyrights, trademarks, and trade secrets, but also “know-how” such as “production process, management techniques, expertise, and the knowledge of personnel” even if not legally protected as IP. Id. at 6. 182 Id. at 19. 183 Id. 184 Id. at 23–24. Depending on the industry, the Chinese party may be required to be the controlling shareholder. Id. at 24–29. 185 Id. at 21–24. Congressional Research Service 20 Intellectual Property Violations and China: Legal Remedies partner’s existing operations, which may compete with the JV operation.186 In such a situation, the JV’s technology or trade secrets may be misappropriated or leaked to the firm’s Chinese competitors.187 The second form of coerced technology transfer relates to administrative licensing and regulatory approvals required by China for companies to establish or expand operations in many industries, such as food, drugs, mining, or telecommunications.188 In the abstract, there is nothing inherently improper about the government regulating industries for health, safety, or environmental reasons. However, the USTR has alleged that China leverages necessary regulatory approvals as a tool to force technology transfer.189 For example, a company may disclose proprietary formulas and designs to regulatory authorities to receive marketing approval, only to find that this sensitive information is passed along to Chinese competitors.190 In other cases, the “expert panel” to which companies submit sensitive technical information for regulatory approval consists not only of governmental officials, but also of representatives from Chinese industry or academia with a competitive interest in the technology.191 Discriminatory Restrictions on Contractual IP Licensing Owners of most forms of IP can assign or license their rights to another person, just as tangible property may be sold or leased to another party.192 For example, ownership of a copyright may be transferred from one person to another by signed, written contract,193 usually in exchange for compensation. The IP owner may also retain ownership and grant a license to another person, that is, either exclusive or nonexclusive permission to use the IP.194 Thus, for example, a patent owner may grant permission to another person to use and sell the patented invention through a contract in exchange for money or other compensation (e.g., royalties), or a musician may sell or license the rights in his work to a record company or a music publisher.195 Sale or licensure can be an important way for IP owners to make money from their creations, especially for smaller entities that may not have the resources to commercialize their IP themselves. If IP owners cannot freely license their works at market rates, this may diminish the IP’s value. In its Section 301 investigation report, the USTR found that Chinese laws, policies, and practices preclude foreign entities from fairly negotiating market-based terms when licensing technology to Chinese entities.196 Under Chinese law, foreign entities negotiating technology transfers or 186 Id. at 28. 187 Id. 188 Id. at 36–39. 189 Id. 190 Id. at 42–43 191 Id. 192 See, e.g., 17 U.S.C. § 201(d) (copyrights); 35 U.S.C. § 261 (patents); Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002 (1984) (trade secrets). Trademarks may be assigned or licensed as well, but subject to limitations such as prohibitions on “naked licensing” and “assignments in gross.” See generally 3 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION ch. 18, Assignment and Licensing of Trademarks (5th ed. 2019). 193 17 U.S.C. § 204(a). 193 17 U.S.C. § 204(a). 194 See License, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining a license as “permission . . . to commit some act that would otherwise be unlawful”). 195 See, e.g., MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 121–22 (2007) (patent license agreement); Cohen v. Paramount Pictures Corp., 845 F.2d 851, 852 (9th Cir. 1988) (copyright license agreement). 196 SECTION 301 INVESTIGATION REPORT, supra note 8, at 48–61. Congressional Research Service 21 Intellectual Property Violations and China: Legal Remedies licenses are subject to different contractual restrictions than comparable provisions applicable to Chinese entities.197 For example, Chinese regulations mandate that, in a technology license, a foreign licensor cannot stop the licensee from making improvements to the technology, and the Chinese licensee must own any such improvements made to the licensed technology. 198 Thus, the licensor cannot preclude the licensee from altering the licensed technology and then seeking a patent on that improvement.199 In the context of JVs with Chinese entities, Chinese regulations mandate that the contract be limited to a ten-year duration, but the Chinese entity must nonetheless be granted the rights to use the technology in perpetuity.200 The USTR alleges that these legally mandated licensing terms in effect put U.S. companies at a disadvantage relative to Chinese entities, decrease the value that U.S. companies can obtain from licenses, and limit foreign IP rights holders’ ability to control future uses of licensed technologies.201 As discussed in further detail below,202 on March 26, 2018, the United States filed a complaint with the WTO over these discriminatory licensing practices, alleging that China (1) imposes mandatory adverse contract terms that discriminate against and are less favorable to imported foreign technology; and (2) denies foreign patent holders the ability to enforce their patent rights against a Chinese JV partner even after a technology transfer contract ends.203 The proceedings have been suspended since June 2019 at the request of the United States, although with brief periods of activity to ensure the WTO panel’s authority does not lapse.204 Bad-Faith Assertion/Registration Another form of harm to U.S. IP rights holders concerns the bad-faith over-enforcement of IP rights. In some ways, this issue is the inverse of concerns about under-enforcement of IP rights; instead of ignoring widespread infringement, the issue here relates to exploitation of the IP system using specious claims that harm the legitimate interests of IP rights holders and users. For example, bad-faith trademark registrations in China are an area of “growing concern.”205 Many U.S. brand owners have complained that third parties are registering large numbers of marks in China that are identical or similar to existing, well-known U.S. brands.206 This practice may harm the U.S. trademark holder in two ways. First, if the registrant uses the mark to establish a business in China passing off its goods as those of the U.S. brand, this may confuse Chinese consumers and harm U.S. rights holders in ways analogous to ordinary trademark infringement.207 Second, some bad-faith registrants have sought to “ransom” the mark to the U.S. rights holder, forcing U.S. trademark holders to purchase their “own” rights back to avoid damage to their 197 Id. at 49–51. 198 Id. at 49. 199 Id. 200 Id. at 50. 201 Id. at 51–54. 202 See infra notes 231–237 and accompanying text. 203 Request for Consultations by the United States, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/1 (Mar. 26, 2018). 204 See Communication from the Panel, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/14 (June 18, 2020); Communication from the Panel, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/10 (June 14, 2019). 205 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 110. 206 2019 SPECIAL 301 REPORT, supra note 32, at 42. 207 Id. Congressional Research Service 22 Intellectual Property Violations and China: Legal Remedies brand.208 U.S. stakeholders do not view the existing trademark opposition process in China as adequate to address concerns about bad-faith registration.209 Bad-faith assertion issues may also occur within the U.S. IP system. Chinese applications for trademarks in the United States have surged recently, rising from 0.07% to 10.5% of all trademark registration applications between 1985 and 2017.210 A recent empirical study found that nearly 67% of trademark applications originating from China in 2017 in the apparel category showed signs of being fraudulent because the registrants did not appear to intend to use the mark in commerce.211 Even so, fraudulent trademarks harm U.S. rights holders through trademark depletion (i.e., a decrease in the supply of available, effective trademarks) and “clutter” in the Principal Register, the primary U.S. trademark registry.212 While the motivation for these fraudulent trademark applications is unclear, some speculate it results from the cash incentives offered by Chinese provincial governments for the registration of trademarks,213 and it may be intended to harm U.S. competitiveness.214 State Sponsorship and IP Violations IP violations also differ in terms of the actor who committed the alleged violation. In the context of this report, a potentially relevant distinction is whether the IP violation was committed or supported by the Chinese government or government-affiliated entities, or instead by private Chinese individuals or entities not affiliated with or supported by the Chinese government. The discussion above has generally used the term Chinese entities to include both governmental and nongovernmental actors, in part because the complex relationship between the private sector in 208 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 110. 209 2019 SPECIAL 301 REPORT, supra note 32, at 48. 210 See Fraudulent Trademarks: How They Undermine the Trademark System and Harm American Consumers and Businesses: Hearing Before the S. Subcomm. on Intellectual Property of the S. Comm. on the Judiciary, 116th Cong. 17–18 (statement of Profs. Barton Beebe and Jeanne Fromer) (showing increase from 42 trademark applications originating from China in 1985 to 51,312 applications in 2017), https://www.judiciary.senate.gov/imo/media/doc/ Beebe%20Testimony.pdf [hereinafter Beebe & Fromer Statement]. 211 Id. at 18–20. Such fraudulent trademark applications relied on “specimens of use” that, for example, consisted of multiple, nearly identical images of the same consumer product digitally altered with a different brand name on the tag, or relied on a product image associated with another company. Id. at 19 (laying out indicia of fraudulent specimens of use); see also Jacob Gershman, Flood of Trademark Applications From China Alarms U.S. Officials, WALL ST. J. (May 5, 2018), https://www.wsj.com/articles/flood-of-trademark-applications-fromchinaalarms-u-s-officials-1525521600. 212 See Beebe & Fromer Statement, supra note 210, at 32–33. 213 Gershman, supra note 211; Trade Relations: Bringing in the Big Guns, WORLD INTELL. PROP. REV. (Apr. 11, 2019), https://www.worldipreview.com/contributed-article/trade-relations-sending-in-the-big-guns (“As part of a national effort to drive growth and IP ownership, China’s provincial governments began paying citizens for each trademark registered in the US, in some cases paying $790 for each US trademark application, according to reports.”). 214 See Fraudulent Trademarks: How They Undermine the Trademark System and Harm American Consumers and Businesses: Hearing Before the S. Subcomm. on Intellectual Property of the S. Comm. on the Judiciary, 116th Cong. 8 (responses to questions for the record by Megan K. Bannigan), https://www.judiciary.senate.gov/imo/media/doc/ Bannigan%20Response%20QFRs.pdf (“I cannot say concretely why China is doing this and can only assume it is to negatively impact the American economy and competitiveness, while bolstering the Chinese economy and competitiveness.”); Bruce Berman, 12-Fold Increase in China’s U.S. Trademark Apps; Many Are Said to Be Fraudulent and Improperly Filed, IP CLOSEUP (Sept. 4, 2018), https://ipcloseup.com/2018/09/04/12-fold-increase-inchinas-u-s-trademark-apps-many-are-said-to-be-fraudulent-and-improperly-filed/ (overviewing debate over whether “China may be attempting to ‘disrupt’ the U.S. [trademark] system by flooding it with huge numbers of applications”). Congressional Research Service 23 Intellectual Property Violations and China: Legal Remedies China and the government can make these distinctions more difficult to draw than in other countries.215 For some types of IP violations—such as a failure to provide adequate IP protection216 or discriminatory IP licensing regulations217—the actor at issue is necessarily a governmental entity, as the complaint concerns the legal provisions of Chinese domestic law. In most cases, however, the varieties of IP violations discussed above may be committed either by entities affiliated with the Chinese government, or by private entities acting without state sponsorship. For example, U.S. authorities have alleged that certain cyber intrusions are committed with the support of the Chinese government, but this is not necessarily true in every case.218 With respect to IP infringements such as piracy or counterfeiting, the infringers may be primarily nongovernmental entities, although U.S. rights holders complain of a lack of effective enforcement by Chinese authorities.219 In other cases, it may be unclear whether a particular IP violation is supported by the Chinese government. Existing Legal Remedies The legal remedies available for IP violations by Chinese entities depend on many factors, including the nature of the violation, the type of IP at issue, where the violation occurred, the availability of personal jurisdiction over the accused, and whether the violation is part of a larger pattern of IP violations.220 This section reviews some of the principal legal remedies available under current law. First, it reviews remedies to address systemic violations, which are usually initiated by the executive branch to address widespread IP violations by foreign actors. These remedies generally rely on the President’s authority over foreign affairs or Congress’s statutory delegation of its authority over trade to the executive branch. Second, this section reviews the civil, criminal, and administrative remedies available for individual IP violations—that is, discrete IP violations affecting a particular rights holder—such as infringement suits or import controls. This section does not address the policy considerations relevant to pursuing these various remedies.221 Systemic Violations: Foreign Affairs and Trade Remedies This section examines actions that the executive branch could initiate against China’s alleged violations of U.S. IP rights under international trade agreements, through the use of its constitutional authority over foreign affairs, and under domestic international trade statutes. 215 SECTION 301 INVESTIGATION REPORT, supra note 8, at 25 (noting that the “complex relationship between China’s private sector and the government” is a “particular challenge”). 216 See discussion supra in “Under-Protection.” 217 See discussion supra in “Discriminatory Restrictions on Contractual IP Licensing.” 218 See SECTION 301 INVESTIGATION REPORT, supra note 8, at 153; 2017 CHINA WTO COMPLIANCE REPORT, supra note 32, at 115. 219 See discussion supra in “Infringement and Under-Enforcement.” 220 Although this report focuses on China, these legal remedies are not restricted to addressing IP violations by Chinese entities, but are available to address IP violations more generally. 221 For more on these policy aspects, see Ilias Akhtar et al., supra note 3. Congressional Research Service 24 Intellectual Property Violations and China: Legal Remedies Although this section also examines remedies under some national security-related authorities,222 it does not address potential remedies under U.S. sanctions laws.223 TRIPS and WTO Disputes The United States could consider challenging China’s IP practices by bringing cases against China before a WTO dispute settlement panel. To initiate a WTO dispute, a complaining member requests consultations with the respondent member in an effort to settle the dispute.224 If these consultations fail, the member initiating a dispute may request the establishment of a dispute settlement panel composed of trade experts to determine whether a country has violated WTO rules.225 Prior to December 2019, if a WTO panel rendered an adverse decision against China, it would be expected to bring its practices in line with its WTO obligations, generally within a reasonable period of time, or face the possibility of paying compensation to the complaining member or being subject to countermeasures allowed under the rules.226 Such countermeasures could include the United States imposing higher duties on imports of selected products from China.227 As of December 11, 2019, the WTO’s Appellate Body—the entity that considers appeals from dispute settlement panel decisions—lost its quorum of three members necessary to decide such appeals.228 Accordingly, if a WTO member appeals a panel report, the Dispute Settlement Body (DSB) (i.e., the committee composed of all WTO members that oversees the dispute settlement mechanism) can no longer adopt panel reports in line with the WTO’s Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).229 Unless WTO members agree to 222 See, e.g., NAT’L COUNTERINTELLIGENCE & SEC. CTR., NATIONAL COUNTERINTELLIGENCE STRATEGY OF THE UNITED STATES OF AMERICA 2020–2022, at 1, 8 (2020), https://www.dni.gov/files/NCSC/documents/features/20200205National_CI_Strategy_2020_2022.pdf [hereinafter COUNTERINTELLIGENCE STRATEGY REPORT] (listing as one of three primary goals the promotion of “American prosperity by protecting our economy from foreign adversaries who seek to steal our technology and intellectual property” and noting that “[t]he theft of our most sensitive technologies, research and intellectual property harms U.S. economic, technological, and military advantage in the world”). 223 This section also does not examine whether the use of such authorities against China would violate U.S. obligations under international agreements. 224 WTO Understanding on Rules and Procedures Governing the Settlement of Disputes arts. 3–6 [hereinafter DSU]. The texts of the DSU and other WTO agreements discussed in this report are available at https://www.wto.org/english/ docs_e/legal_e/final_e.htm. 225 Id. 226 DSU, supra note 224, arts. 21–22. Prior to the Appellate Body’s loss of a quorum in December 2019, WTO members whose measures were deemed inconsistent with its WTO obligations and unjustified under one of the GATT exceptions were expected to implement the panel or Appellate Body’s report. Id. art. 21.3. That is, the defending member had to withdraw, modify, or replace its inconsistent measures. See id. If a disagreement arose as to whether the defending member had, in fact, implemented the report, a WTO panel could be convened to hear the dispute over compliance. Id. art. 21.5. The WTO Appellate Body also heard appeals of these compliance panel reports. Id. art. 17.1. 227 See id. art. 22.3. Prior to the Appellate Body’s loss of a quorum, when a defending Member failed to implement a panel or Appellate Body report within the established compliance period, the prevailing member could request that the defending member negotiate a compensation agreement. Id. art. 22.2. If such negotiations were not requested or if an agreement was not reached, the prevailing member could also request authorization to impose certain trade sanctions against the noncomplying member. Id. art. 22.2–22.3. Specifically, the WTO could authorize the prevailing member to suspend tariff concessions or other trade obligations that it otherwise owed the noncomplying member under a WTO agreement. Id. 228 Alan H. Price, Real WTO Reform Now Possible with Demise of Appellate Body, BLOOMBERG LAW (Dec. 20, 2019). For more on this issue, see CRS Legal Sidebar LSB10385, The WTO’s Appellate Body Loses Its Quorum: Is This the Beginning of the End for the “Rules-Based Trading System”?, by Brandon J. Murrill. 229 DSU, supra note 224, art. 16. Congressional Research Service 25 Intellectual Property Violations and China: Legal Remedies consider panel reports as final, the DSB can no longer oversee the losing member’s implementation of a panel report or authorize the prevailing member to engage in trade retaliation if the losing member ignores the dispute panel’s recommendations.230 Thus, even if the United States obtained a favorable ruling against China from a dispute panel, there are doubts as to whether the ruling would be enforceable under WTO procedures. As an example, in March 2018, the United States initiated the WTO dispute process against China based on its laws and implementing measures for importing and exporting technology and for foreign JVs.231 Specifically, the United States alleged that these Chinese laws and regulations were inconsistent with TRIPS’s national treatment principle,232 because they treated foreign IP rights holders less favorably than Chinese IP rights holders.233 The United States also alleged that Chinese regulations permitting a Chinese JV partner to continue using licensed technology even after a contract’s expiration violate TRIPS article 28.1 because they deny the foreign patentee the “exclusive” right to her invention.234 In other words, these Chinese laws and regulations allegedly favor Chinese IP holders, while preventing U.S. IP rights holders from enforcing their valid IP rights. On June 14, 2019, at the request of the United States, the WTO panel handling the dispute suspended the proceedings.235 The suspension remains in effect at the request of the United States and with China’s consent, although the panel resumed work for several brief periods between June 14, 2019, and June 8, 2020. The most recent request for a suspension was filed in June 2020.236 Under the DSU, a panel retains its authority so long as it has not been suspended for more than twelve months.237 The United States and China appear to interpret this rule as permitting suspensions to extend beyond a year overall if the panel has resumed work, even briefly, during that period. WTO rules under the TRIPS Agreement are arguably inadequate for addressing China’s IP violations because WTO members retain some flexibility with regard to implementation and enforcement. In addition, there can be difficulties in collecting sufficient evidence to support a WTO dispute. The executive branch’s decision to impose tariffs under domestic law to address some of China’s IP practices identified in the USTR’s Section 301 Report may reflect this concern.238 230 Some U.S. trading partners have agreed to an interim appeal system that does not—at least yet—include the United States. See In Davos, DG Azevêdo Hears Support—and Urgency—for WTO Reform, WTO.ORG (Jan. 24, 2020), https://www.wto.org/english/news_e/news20_e/minis_24jan20_e.htm. 231 Request for Consultations by the United States, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/1 (Mar. 26, 2018). 232 TRIPS, supra note 41, art. 3; see supra note 127 and accompanying text. 233 Request for Consultations by the United States, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/1 (Mar. 26, 2018), at 2. 234 Id. 235 Communication from the Panel, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/10 (June 14, 2019). 236 Communication from the Panel, China—Certain Measures Concerning the Protection of Intellectual Property Rights, WTO Doc. WT/DS542/14 (June 18, 2020). 237 DSU, supra note 224, art. 12.12. 238 Memorandum of March 22, 2018, Actions by the United States Related to the Section 301 Investigation of China’s Laws, Policies, Practices, or Actions Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 13,099 (Mar. 27, 2018); see also, e.g., Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 28,710, 28,711 (June 20, 2018). Congressional Research Service 26 Intellectual Property Violations and China: Legal Remedies Diplomacy and International Agreements239 The President possesses constitutional authority over diplomacy and foreign affairs.240 This includes constitutional power to negotiate international agreements241 and non-legally binding international pacts.242 The executive branch may use this authority to negotiate more extensive protections for U.S. IP than is currently offered by TRIPS. Such protections may be contained within a comprehensive bilateral free-trade agreement or as part of a multilateral agreement among several countries.243 To the extent that international engagement with China may result in international pacts that are not legally binding, the President historically has claimed the power to conclude such pacts without congressional authorization.244 If a negotiation produces a binding international agreement, however, Congress’s role varies depending on the final agreement’s form (i.e., whether it is an Article II treaty that requires the Senate’s advice and consent, a congressional-executive agreement that requires congressional approval, or a sole executive agreement for which the President claims constitutional authority to conclude without Congress).245 The executive branch has used this constitutional authority, in conjunction with statutory authority under Section 301,246 to negotiate certain “structural reforms” to China’s IP practices to protect U.S. IP rights holders as part of the Phase One Agreement.247 As explained by the USTR, the Phase One Agreement was designed, in part, to address the issues identified during the Section 301 investigation, and thus relied partly on statutory authority to enter into binding agreements with a country “that commits it to eliminate or phase out the act, policy or practice in question.”248 Issues not addressed by the Section 301 investigation (e.g., market access for agriculture and purchase requirements) may have relied instead on the President’s authority over foreign affairs. Unlike a number of other Section 301 agreements, the Phase One Agreement does not include a binding obligation on the parties to remove tariffs or other countermeasures 239 Steve Mulligan, CRS Legislative Attorney, contributed to this section. 240 While recognizing that the Constitution divides the foreign affairs power between Congress and the Executive, Zivotofsky v. Kerry, 576 U.S. 1, 16 (2015) (“In foreign affairs, as in the domestic realm, the Constitution ‘enjoins upon its branches separateness but interdependence, autonomy but reciprocity.’” (quoting Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring))), the Supreme Court has stated that the President possesses the “vast share” of foreign relations authority. Am. Ins. Ass’n v. Garamendi, 539 U.S. 396, 414 (2003) (quoting Youngstown Sheet & Tube Co., 343 U.S. at 610–11 (Frankfurter, J., concurring)). 241 See Zivotofsky, 576 U.S. at 13 (“The President has the sole power to negotiate treaties . . . .”); CONG. RSCH. SERV., TREATIES AND OTHER INTERNATIONAL AGREEMENTS: THE ROLE OF THE UNITED STATES SENATE, S. REP. NO. 106-97, at 96–97 (2001) (discussing negotiations of treaties and other international agreements). 242 See CRS Report RL32528, International Law and Agreements: Their Effect upon U.S. Law, by Stephen P. Mulligan, at 12–15 (discussing authority to negotiate and complete nonlegal pacts). The President also possesses specific statutory authority over certain trade agreements, discussed in more detail below. See discussion infra in “Section 301 of the Trade Act of 1974.” 243 Currently, the WTO and the World Intellectual Property Organization (WIPO) represent the primary fora for global cooperation on protecting IP. WIPO is a “self-funding agency of the United Nations, with 192 member states.” See TRIPS, supra note 41; Inside WIPO, WORLD INTELL. PROP. ORG., https://wipo.int/about-wipo/en/ (last visited Aug. 18, 2020). 244 See Mulligan, supra note 242, at 12–15. 245 For a discussion of the forms of international agreements and the role of Congress, see id. at 2–15. 246 See discussion infra in “Section 301 of the Trade Act of 1974.” 247 Hearing on U.S.-China Trade Before the H. Comm. on Ways and Means, 116th Cong. 22 (2019) (statement of Robert E. Lighthizer, U.S. Trade Rep.) (“The President is using his power under Section 301, which has been delegated. And it is an executive agreement which the Constitution gives the President the right to enter into.”). 248 19 U.S.C. § 2411(c). Congressional Research Service 27 Intellectual Property Violations and China: Legal Remedies imposed during the trade dispute. Moreover, the Phase One Agreement is somewhat unusual in that it addresses a dispute outside the context of the WTO; by contrast, other recent uses of this Section 301 negotiating authority have sought to resolve long-standing WTO disputes.249 As discussed above, the increased tensions between the United States and China have led to more uncertainty as to whether the Phase One Agreement will be fully implemented (or terminated) and whether the contemplated Phase Two Agreement may ever be negotiated. Section 301 of the Trade Act of 1974 To address China’s IP practices, the executive might also consider using authority under domestic trade statutes. As noted, one broad authority that might be used is known as “Section 301.” The statutory framework governing “Section 301” investigations is based in Sections 301 through 310 of the Trade Act of 1974, as amended.250 This framework is one of the principal means by which the United States enforces U.S. rights under trade agreements and addresses “unfair” trade barriers to U.S. exports.251 Investigations can be initiated as a result of a petition filed by an interested party with the USTR or by the agency itself.252 If the USTR initiates an investigation under Section 301, then Section 303 requires that, on the date of initiation, the USTR must “request consultations with the foreign country concerned” to reach a settlement within a set time frame.253 Section 303 also requires the USTR to determine whether the Section 301 investigation “involves a trade agreement” and, if so, must then follow the formal dispute settlement process under that agreement should consultations with the other country fail.254 If the USTR makes an affirmative determination of “unfair” barriers to U.S. trade, it generally must implement the action it determines to take, subject to any specific direction of the President, no later than thirty days after the date of the affirmative determination.255 249 See Hart, supra note 15. 250 19 U.S.C. §§ 2411–2420. This memorandum does not discuss all of the procedures the USTR must follow under Section 301. See generally CRS Legal Sidebar LSB10108, Tricks of the Trade: Section 301 Investigation of Chinese Intellectual Property Practices Concludes (Part I), by Brandon J. Murrill (discussing the executive branch’s use of Section 301 against China and the procedures that the USTR follows when conducting a Section 301 investigation). 251 For a discussion of the policy considerations in Section 301 investigations and the history of their use with regard to China specifically, see CRS Section 301 and China, supra note 13. For a discussion of the policy considerations related to the Trump Administration’s tariff actions under Section 301, see Williams et al., supra note 13. For an overview of Section 301 and policy considerations, see CRS In Focus IF11346, Section 301 of the Trade Act of 1974, by Andres B. Schwarzenberg. 252 19 U.S.C. § 2412. 253 Id. § 2413. 254 Id. 255 Id. § 2415(a). Under certain circumstances, the agency may temporarily delay action. See id. Section 301 provides that the action taken “to eliminate an act, policy, or practice shall be devised so as to affect goods or services of the foreign country in an amount that is equivalent in value to the burden or restriction being imposed by that country on United States commerce.” Id. § 2411(a)(3). Section 301 defines two types of executive action—mandatory or discretionary—that can result from Section 301 investigations. Under Section 301(a)—the “mandatory action” provision—the USTR must take action as specified by the statute, subject to certain exceptions, if he determines that • “the rights of the United States under any trade agreement are being denied,” or • “an act, policy, or practice of a foreign country . . . violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement,” or • “an act, policy, or practice of a foreign country . . . is unjustifiable” (defined to mean conduct that “is in violation of, or inconsistent with, the international legal rights of the United States”) “and burdens or restricts United Congressional Research Service 28 Intellectual Property Violations and China: Legal Remedies The statute authorizes the USTR to, among other things,256  suspend, withdraw, or prevent the application of certain benefits of trade concessions in a trade agreement with the country under investigation;257  impose duties or other import restrictions on goods or fees or restrictions on services;258 States commerce.” Id. § 2411(a), (d)(4)(A). The provision further states that in order to enforce U.S. rights under a trade agreement or obtain the elimination of certain unfair practices, “[a]ctions may be taken that are within the power of the President with respect to trade in any goods or servic [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR46532. Public record. Not legal advice.