Senate puts focus on specter of ‘innovation war’ between US, China

WASHINGTON (CN) — The U.S. patent system is “under attack” by China and other interests looking to sidestep intellectual property rights, Congressman Darrell Issa told the House’s legal panel in a hearing Wednesday.

Issa, a California Republican, said that Chinese companies apply for dubious patents and then leverage the U.S. International Trade Court to sue domestic companies for intellectual copyright infringement. This technique is “the seed for companies that otherwise would never have been able to catch up [to U.S. firms] to catch up or even pass us," he said.

Chinese companies can use such a strategy to outcompete U.S. companies by providing cheaper goods to foreign markets, Issa explained. “Instead of buying a product to sell or license, they simply produce a competing product … and essentially put the U.S. innovator out of business by flooding the market with products that are the fruit of a patent that was not paid for but given away,” he said.

Issa has long been a proponent for protecting domestic intellectual property rights. The congressman in April sponsored legislation that would have, if made law, barred the White House from negotiating, waiving or modifying trade-related intellectual property agreements without prior approval from Congress.

“American national security is at risk because of the Chinese government’s quest to achieve superiority using both internal and externally-gotten technology,” Issa said.

Democratic lawmakers on the House Judiciary Committee also expressed concern about Chinese exploitation of the U.S. patent system.

“We know that the scale of China’s IP theft is enormous,” said Representative Hank Johnson, a Georgia Democrat. “We know that it hurts our country’s ability to compete and succeed, and we know that we need to improve our laws and policies to not only protect Americans’ intellectual property from the Chinese government, but to mitigate the damage already done.”

Representative Jerry Nadler, a New York Democrat, said that China is using its approach to intellectual property to “leapfrog the rest of the world” and “create an uneven playing field for other nations.”

The House Democrats also cautioned that criticism of Chinese government interests should avoid discrimination against Asian Americans.

“We are in an innovation war with China, but we don’t win that war by giving up our valued and giving in to hate,” Johnson said. “We win by strengthening our intellectual property laws and policies.”

Nadler added that “the nature of the Chinese government should in no way be interpreted as calling into question the patriotism” of Asian Americans.

Issa meanwhile railed Tuesday on efforts to do away with noncompete agreements — contracts mandated by some companies that bar employees from working for a competing employer in a similar industry. The Federal Trade Commission has said noncompete agreements restrict employees from pursuing better work opportunities, and it is considering a rule that would ban them.

Issa argued that, without noncompete agreements, employees could take trade secrets and other proprietary information overseas, to China and elsewhere, giving foreign companies an unfair advantage over U.S. business. “We support the idea that people should be able to leave a job and go to another — no noncompete should bar somebody from being able to continue to operate with the knowledge and training that they came in with,” Issa said. “But, there’s a huge difference between a salesman going from one company to another and a salesman leaving a company with a priceless customer list and all its data.”

Follow @BenjaminSWeiss

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