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International intellectual property (IIP) theft occurs when foreign actors infringe upon, or outright steal, intellectual property (IP) owned by a domestic entity. IIP theft takes many forms, from the manufacture and export of counterfeit Birkin bags to sophisticated hacking attacks in which highly-trained intelligence operatives steal nuclear state secrets. IIP discussed here encompasses IP owned by entities in the United States and refers to copyrights, patents, trademarks, industrial designs, and trade secrets which are stolen or misappropriated by foreign actors.
This article lays out in general terms the international legal framework for registering, asserting, and enforcing IIP rights, explains the modern nature of IIP theft, and explores options for American IP owners who seek to enforce their IP rights through an illustrative hypothetical. The article adopts the point of view of an American company seeking to enforce their IP rights in China, though remaining sensitive to criticisms that previous Administrations’ enforcement attempts have been noted as xenophobic racial profiling. In particular, President Trump’s failed China Initiative has been subject to criticism for its overzealous prosecution of foreign nationals. At the same time, however, the United States’ Trade Representative’s annual Special 301 Reports consistently rank China as a chief source of IIP theft, and eighty percent of DOJ actions allege conduct that would benefit the Chinese state. Thus, this article will focus on the U.S. – China paradigm, specifically addressing private remedies for enforcing IIP rights and does not explore in depth the prosecution of IIP theft by the Department of Justice or other State actors.
Sources of Law: International Law
IIP law’s complexity is a result of the confluence of a network of multilateral treaty obligations with States’ own internal IP regulatory schemes. The overarching international regulatory framework is governed by the United Nations’ World Intellectual Property Organization (WIPO), a specialized international agency that administers 26 multilateral treaties affecting 193 Member States and 250+ Observers. Some of these WIPO treaties, such as the Hague Agreement (Industrial Design Patents) and the Madrid Protocols (Marks), function as multinational registration apparatuses, essentially streamlining the process of registering IP in multiple countries through one form and forum. Some of these treaties, like the Berne Convention or Rome Convention, prescribe basic protections that Member States are obligated to respect regarding IP, though enforcing those basic IP protections is a source of international dispute. Further, regional and transnational alternative dispute resolution forums, such as the Unified Patent Court in the European Union, seek to settle grievances between foreign companies and their domestic counterparts, as well as between States.
In addition to the complex network of multilateral treaties (each with its own reciprocal bilateral reservations network and accountability record) and international norms, each State has its own IP regulatory system that internalizes, to varying degrees, the prescriptive international norms set out in those 26 treaties. A consistent issue in enforcing locally-held IP rights stems from the imperfect internalization of these treaties, particularly the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, which sets out minimum standards of IP protection and enforcement to be provided by each Member. When a foreign actor infringes on local IP, the paths to enforcement are arboreal—each decision or instance will lead to a different set of branching paths that will determine enforcement options, whether they be domestic, foreign, or through the international organizations.
Sources of Law: U.S. IP Law & Agency Enforcement
While the path to enforcing domestic infringement on IP rights is relatively straightforward, the international outlook for protecting privately-held American IP is multifaceted, with a multitude of Agencies claiming their preeminence in the field and the prospect of international litigation daunting. Part of the confusion rests upon the many forms of IP one seeks to protect; enforcing trademark infringement, copyright piracy, counterfeiting, trade secret theft, patent infringement and cybertheft all require different avenues and agencies. For example, the U.S. State Department’s Office of Intellectual Property Enforcement negotiates international IP trade policy; the U.S. Trade Representative (USTR) prepares Congressionally-mandated annual reviews of the global state of IP rights; the International Trade Commission (ITC) brings Section 337 investigations for illicit importation of counterfeit goods in conjunction with U.S. Customs and Border Protection, which also seizes pirated media; the Department of Justice prosecutes the criminal importation of counterfeit goods, criminal theft of trade secrets and other criminal forms of IIP theft; the U.S. Patent & Trademark Office (USPTO) regulates all forms of local IP infringement and publishes guides for enforcing those rights abroad; WIPO treaties and conventions prescribe protection presumably afforded in WIPO Member States. This complex web of enforcement avenues obscures the relative simplicity of asserting U.S.-based IP rights internationally: a private entity may bring a claim either in a Federal Court under Federal IP law, or by initiating an investigation before the U.S. ITC. However, asserting IP ownership and enforcing IIP ownership are quite different issues, most notably the latter requiring foreign cooperation.
What Does IIP Theft Look Like?
The main four forms of IIP theft addressed here are import of counterfeit goods and digital piracy, economic espionage, hacking, and “Forced Technology Transfers.”
The most prolific form of IP theft is also the oldest: the importation of goods bearing counterfeit IP is thought to cost the U.S. economy at least $500 billion annually. In 2019 alone, U.S. Customs officials seized $1.5 billion worth of counterfeit goods of the .014 percent of total imports that Customs possesses the operational capacity to search.
Counterfeit goods are those manufactured and distributed using some form of protected IP. Those goods may be manufactured using a protected patent, branded with a false mark or trade dress, or contain copyrighted material, all of which require separate import detection methods. The nature of customs enforcement means that many infringing goods slip through the cracks, both through those controlled ports of entry and through smuggling markets, and these illicit channels, some experts claim, amount to a significant portion of global commerce. Digital piracy is notoriously difficult to measure, but some experts estimate that global online piracy costs the U.S. economy at least $29.2 billion annually.
Another pernicious form of IIP theft is international economic espionage that targets U.S.-based corporate IP. In recent years, investigations have increasingly uncovered foreign State-backed espionage operations seeking to outright steal privately-owned trade secrets and industrial designs. For example, a routine trespass investigation in a rural Iowa cornfield may unearth a foreign-sponsored scheme to steal proprietary industrial secrets to Monsanto’s genetically-modified corn. Economic espionage takes many forms: an Apple employee who downloaded proprietary Apple firmware and booked a suspicious last-minute trip out of the country later plead guilty to trade secret theft; a Coca-Cola chemist was alleged to have been passing trade secrets to a Chinese company; four Chinese companies were indicted for their efforts to photograph the design floor of DuPont Chemicals. Industrial espionage is known to cost the U.S. economy $100 billion per year and is not limited to foreign agents operating in a shadow network of spies— IIP economic espionage can be the result of sophisticated hacking techniques that target the data of private citizens as much as they target industrial trade secrets related to national defense.
One aspect of economic espionage that is of particular importance to the United States is the rise in foreign State-sponsored economic espionage, which is particularly difficult for private entities to address without invoking diplomatic protection or escalating the issue to a criminal Department of Justice investigation. However, the U.S. military-industrial complex blurs the line between private companies and national defense: in 2021, the United States Department of Justice convicted a Chinese Intelligence Officer of espionage crimes for the attempted theft of trade secrets belonging to multiple U.S. aviation companies. Experts have linked China’s new Fifth-Generation fighter jet, which bears multiple similarities to United States’ Fifth Generation fighters, to a 2008 alleged CCP-sponsored hack of the Pentagon’s Joint Strike Fighter project. Of notable concern are reports that China has been threatening families of overseas critics and coercing its citizens living abroad into committing IP theft. While the social utility of enforcing private IP rights may be debatable, State-sponsored IIP theft of national security secrets through intimidation and coercion presents a different sort of existential threat to American-owned IP. Economic espionage and related IIP hacking espionage encompass a wide range of activities that seek to steal the intellectual property of American corporations, national security secrets, and personal data, and these activities’ clandestine nature present severe IP security issues for U.S. companies who seek to protect their IP, particularly as these types of attacks can range from simple phishing attacks to sophisticated information-gathering networks using State-sanctioned spy techniques.
Another source of IIP theft takes the form of forced technology transfers, the practice in which a government compels foreign businesses to share their tech in exchange for market access. If you want to do business in China, the CCP says, you must turn over your IP. While forced technology transfers are not unique to China,(in fact, voluntary technology transfers are relatively common) criticism springs from accusations that the Chinese government is exploiting unique features of its economy to force multinational corporations to do technology transfers on terms that “they would likely not accept anywhere else.” To note, international commentators have lauded China’s improvement on this front, though there is still much progress to be made before China fully conforms with the WIPO Treaties and WTO norms.
How Can We Measure IIP Theft?
IP theft is incredibly hard to quantify: the black market, by its nature, does not fit within conventional measurement tools and relies on extrapolation from successful enforcement measures. IP, as a metaphysical thing of value, is also very difficult to track: IP law seeks to protect ideas, by their nature not actionable until some manifestation of that idea takes shape.
First are issues of detecting IIP infringement: an entire cottage industry has sprung up track in order to track IP infringement that occurs internationally. If the infringed right relates to a physical good, the owner’s ability to discover the infringing good depends on vigilant Customs officials around the world. Many IP-infringing goods are never sold in the United States, compounding this issue of notice and requiring multinational cooperation and vigilant oversight of the international registries pursuant to the treaties introduced in Section I. Related are issues brought about by the digital age—IP can be stolen via a simple copy-paste function and sophisticated forms of digital IIP theft, such as cybersquatting or phishing, are even more difficult to uncover and quantify.
Compounding this issue is the ‘soft’ nature of intellectual property; in the United States, there is much ambiguity and subjectivity in, for example, proving the likelihood of consumer confusion in Trademark-Infringement cases. General Motors’ high-profile lawsuit alleging Chinese car manufacturer ‘Chery’ infringes on the trademark ‘Chevy’ (Chevrolet), is one example of the vague nature of detecting and litigating infringing IIP.
In quantifying IIP theft, companies often include the cost of research and development in their product, though in many cases, this is an imperfect analogy to the value that the infringer is extracting. In addition, wild overestimations based on questionable research stoke extremism and xenophobia in the IIP realm. These issues are tied to the simple math that is used to calculate the value of stolen IP; should one measure use a formula that measures the net present value of future sales? Should one include the value of research and development necessary to create the IP? If the stolen IP creates more wealth in its transplanted market, should that be added to the value of the IIP theft? Should counterfeit goods be valued at the price of the counterfeit or the original? These questions are far from settled and only help to obscure the importance of this issue and stoke animosity in the already-fraught U.S. – China trade relationship.
Illustrative Hypothetical
Putting the above into a hypothetical will help one view the abstract legal and economic principles through the lens of practical international enforcement. Here, the hypothetical company seeks to enforce their U.S.-held IP rights against a Chinese infringer.
An inventor develops a special type of widget (at great personal expense), for which they secure a design patent and a contract to license that widget to AA Corp. for use in airplanes. A year passes, and a U.S. Customs office notifies the inventor that their widget was recently found in an infringing shipment; after a bit of digging, they find that their widget is being manufactured by a Chinese company. Their email server informs them that they have recently been subject to a hack, and they realize that they sent the designs for the widget through that email.
The inventor could sue the company in China using Chinese lawyers in Chinese courts (already an expensive process), but Chinese courts have a reputation for their reticence to enforce or issue infringement injunctions related to international IP infringement claims, issuing controversial Anti-Suit Injunctions, restricting discovery, and complicating service of notice and process. However, since 2021, China has made marked advances in promoting foreign litigation, though it is too early to measure the efficacy of the new legislation.
The inventor could bring the claim in U.S. federal courts, but unless the infringing company has an office or employee in the U.S. the inventor may be out of luck—there is no bilateral treaty between the United States and China on recognition and enforcement of foreign court judgements, and affecting service abroad is expensive and requires substantial local cooperation. Moreover, because the claim is civil in nature, there would be no comity through the doctrine of Mutual Legal Assistance without invoking diplomatic protection.
Under these circumstances, the inventors’ rights are likely without efficient remedy. Although the United States Department of Justice occasionally extradites criminal IIP offenders, the cost and risk of civil litigation in China can be high, especially for small companies. Additionally, under these circumstances, the inventor has already suffered harm and it is possible the inventor may never have discovered the infringing product– it would be common for one’s hacked designs to be sold to multiple manufacturers, or their widget might not have been shipped for use in the United States. Valuation issues arise when attempting to quantify the cost of the theft – should the inventor be compensated for the value of the widgets, the value of their contract with A.A. Corp, or the value of the counterfeit widgets on the international market?
Ultimately, enforcement of IIP rights depends on the quality of local enforcement in the foreign State and the strength of that States’ own IP regulatory scheme, as enforcement cannot be affected in most cases without substantial foreign cooperation. As seen in the hypothetical above, in the case of U.S.-China IIP theft, the lack of foreign cooperation will leave many abridged rights without proper remedy. While China has been noted for its increasing cooperation with TRIPS and the WIPO treaties, redressing IIP theft by Chinese actors will require substantial investment in this trade relationship.
Author’s Note: Alec Goodrich is a Senior Moderator of the International Law Society’s International Law and Policy Brief (ILPB), and a J.D. candidate at the George Washington University Law School. He has a Bachelor of Arts in Political Science and International Relations concentrating in International Security from Tufts University.