The Political and Economic Impacts of Patent Competition and IdeaJacking in the International Arena: A Commentary
Several unfortunate conditions in today’s global trade arena are making gifted inventors and creators of the arts fearful that the integrity of their work cannot be protected. If left unchecked, I worry that these circumstances could very well motivate inventors to keep their critical ideas and creative works secret and proprietary, which would in turn deny the knowledge transfer that derives from the patent publishing and copyright processes and stifle the advancement of inventions and the creative arts.
I would like to call attention to three of these threats that are particularly serious and should be dealt with quickly by diverse groups from the international community.
The most serious and by far the biggest threat is China’s cavalier intellectual property philosophy that combined with a lack of commercial trading ethics and judicial integrity in the country has created a global business crisis. The second threat comes from Europe, where policies allow granted patents to be challenged, prior to the issuance of a final patent award, at little cost or risk to protesting companies. This practice allows entrenched and powerful businesses to suppress and potentially squash the introduction of brilliant AAA ideas and even helpful grade A or grade B inventions. A third threat is brewing here in the U.S., where the U.S. Patent and Trademark Office has created a multi-year backlog of patent examinations, prompting a new generation of U.S. computer technology oligarchs to seek the establishment of a public review system of patent applications. As it has in Europe, this approach will put innovators of disruptive technologies at a complete competitive disadvantage against the incumbent oligarchs.
Indeed, one of the primary reasons the U.S. is a world leader in per capita wealth has been our innovators’ culture of creating a continuous stream of mega-revenue generating companies like IBM, Xerox, Intel, Genentech, Qualcomm, Cisco, Amazon, eBay and Google. These companies, as well as tens of thousands of others, have succeeded in great part because of confidence in the American judicial and patent system. These companies have prospered because we have historically enjoyed a trusted system of inventive ownership and judicial enforcement of contracts, especially public intellectual property rights (such as patents, trademarks and copyrights) and non-public or proprietary intellectual property. The multi-trillion dollar question: Can we sustain our historical system of inventive ownership in a world swamped with ethical-trade challenges?
The China Factor
China, representing its 1.3 billion people, has become both a large and significantly difficult trading partner for the developed economies of the world. It is no secret that despite its membership in the World Trade Organization (WTO) since 2001, China has conveniently ignored most of its ethical trading commitments, yet it is happily taking advantage of global market access and the privileges that WTO membership brings. The country has enjoyed a greater-than-7-percent economic growth rate that is unleashing dynamic forces of progress and destruction in the global market. The country has accumulated a currency reserve of nearly $2 trillion dollars from its staggering merchandise trade surplus, which in 2006 exceeded $223 billion with the U.S. alone, and used its cash to buy billions of dollars worth of U.S. mortgage-backed securities and Treasury bonds, which helped American consumers to continue to buy cheap and oftentimes IdeaJacked Chinese consumer goods. We have fallen into this self-perpetuating cycle at a cost to our own jobs and economy. During the past few decades Americans have often been shortsighted and foolishly over-consumptive; I am hopeful the 2008 and 2009 economic reset will rebalance the country in a more progressive and less-consumptive direction.
Cellport has spent more than 18 challenging years investing in and advancing pioneering wireless and telematics industry technologies. With three portfolios of core intellectual property under our belt, I feel strongly about just how critical it is for all WTO member governments to protect the private ownership of intellectual property and to enforce penalties for unethical trade practices that IdeaJackers introduce to the system. China’s exporting of and internal consumption of IdeaJacked goods and technologies is out of control. The country is widely recognized as by far the worst violator in the $650 billion in trade of counterfeit goods globally. Unfortunately, that number continues to grow.
The hundreds of thousands of businesses and factories in developed countries that have shut their doors or suffered reduced profits and the many lower- and middle-class workers who are losing their jobs because of this problem are paying the price for China’s trade in IdeaJacked goods just as that illicit trade has helped fuel the rapidly growing Chinese economy. Another negative consequence that many IdeaJacked companies also suffer is what I call DoubleJacking. The practice is common: First, the company suffers the loss of its product designs to a counterfeiter. Then it realizes it has lost its customers, too, to the pirates who used the stolen designs to win the original company’s domestic and international customers. DoubleJacking forces the entrepreneur who produced the original design to lower their prices — and profit margin — to compete against the lower-cost pirated products. The reduced profits, in turn, diminish the entrepreneur’s ability to invest in future innovation. Being DoubleJacked is a world-class nightmare of diminished expectations for the company, employees, suppliers and for the host government; being IdeaJacked has a very unwelcome ripple effect.
IdeaJacking has a big impact at the societal level, in the form of decreasing tax revenues paid by companies and employees to their governments, which in turn affects their countries’ abilities to sustain educational, healthcare, military and other governmental services needed to provide for the quality of life and safety people desire.
The Chinese government does know how to stop piracy and to respect intellectual property, when that property is its own. In 2002, China was awarded the 2008 summer Olympic Games and shortly after that announced a logo for the 2008 Beijing games. Within days of revealing the Beijing Olympic Games logo, street merchants throughout China were selling t-shirts, key chains and mugs decorated with the logo design. Aghast at being IdeaJacked, the Chinese government quickly passed a special law protecting the Beijing Olympic logo against unlicensed copying and within days after the law went into effect, the merchandise disappeared from the streets. Strict enforcement by the communist government officials put a halt to the practice. By the time the 2008 Olympic Games began, merchandise adhered to very stern licensing requirements and used anti-pirating devices such as holograms and radio ID tags to prove its legitimacy for sale.
I observed this first hand during the summer of 2006 when my sons and I shopped Beijing’s famous Silk Market. I asked a shopkeeper there where I could purchase some Beijing Olympic Games trinkets as souvenirs and was told that the items are available “only from licensed companies, those products are restricted.” Yet this very merchant was selling counterfeit Louis Vuitton and Gucci hand bags.
