Why The U.S. And China Fight Over IP - YouTube

Imagine Nike without the swoosh, McDonald's with no golden arches or

Apple without the apple.

Trademarks and patents can make or break a company.

Most of the inventions that power the modern world started out as an

idea which was eventually patented.

Put the match in the lighter

and there you are. Over the past decade, there's been an explosion of

claims from companies and inventors hoping to carve out their own

slice of the digital age.

We are on the cusp of truly and extraordinarily revolutionary

technologies. Intellectual property is turning into a key

battleground between the world's biggest economic powers.

China now accounts for more than 10 percent of all trademark

applications filed in the U.S.

We now have a peer competitor in China and we are at a critical

moment for the future of intellectual property.

More than 14 million trademark applications were filed worldwide in

2018, up almost 160 percent from 2008.

At the same time, patent applications have surged more than 70

percent. In the U.S.

alone, intellectual property-intensive industries contribute

trillions of dollars to the economy every year.

So what makes trademarks and patents so valuable?

And why are the U.S. and China competing for them?

Intellectual property or IP refers to

patents, trademarks and copyrights.

Inventions, works of art, music, lyrics and logos are all examples of

IP. Protection for intellectual property rights in the U.S.

goes all the way back to the Constitution.

In fact, in the body of the Constitution itself, the word right is

actually mentioned only once and it's with respect to intellectual

property rights. Congress passed legislation laying the foundation

for the patent system in 1790.

And today, the U.S. Patent and Trademark Office is located here in

Virginia. The agency is part of the U.S.

Commerce Department. Right here, for example, we see Thomas Edison

with the electric light bulb.

Right under him, George Eastman.

What the patent system does is to create a perpetual innovation

machine, a pro-competitive system that forever creates more and more

innovation. Patents are one category of intellectual property in the

U.S. They give inventors exclusive rights for up to 20 years to make

and sell a product that offers a new solution to a problem.

Prescription drugs are a good example.

Once a company's patent for a drug expires, competitors can copy and

sell generics that include the same ingredients.

You need an inventor to get a monopoly over their invention for a

short period of time to recover the investment costs.

The second category of IP is trademarks.

Logos, slogans and brand names for a company or individual are all

trademarks. One of the most well-known trademarks comes from

Coca-Cola. The soda maker trademarked its signature logo in 1893 and

he does distinguished cans and bottles around the world ever since.

Trademarks are used to establish standards for brands for consumers.

So every time you buy a coke, you know it taste and quality to

expect. Trademarks a s long as you file periodic renewals and

continue to sell your goods and services will last forever.

Then there are copyrights.

They protect original works by authors or artists.

Songs, photographs or novels are all subject to copyright law.

Copyrights protect works of art.

So think of an entire movie.

You can't just copy a movie and sell it.

That's why you see the big FBI warnings when you start a DVD.

The U.S. Patent and Trademark Office has seen its fair share of

quirky innovations from Eddie Van Halen guitar support system to Bill

Nye's improved ballet pointe shoe.

Anyone who has an idea for an invention, except for employees at the

Patent and Trademark Office, can file an application for a patent.

Unlike trademarks, you don't even have to show that you're selling

the product. One of the main points of the patent system is to

encourage innovation from those who otherwise wouldn't do it.

For many entrepreneurs, investors and businesses says patents and

trademarks are the lifeblood of innovation.

They can help turn an idea into reality and generate millions of

dollars in returns.

Mark Zoske is the CEO of Seattle-based gourmet salt Company

SaltWorks. The company holds more than 60 trademarks.

You have the people and you have your product, your suppliers, but

then you have your trademarks, which are your territory.

In that space, in the salt space, it is everything.

Salt was such a commodity that we really wanted ours to be above a

commodity. So we started with name brands so that instead of just

promoting the sea salt industry, we were promoting our sea salt.

Zoske says the trademarks have helped boost brand loyalty and fend

off imitators. The smaller the company are, the more important that a

trademark is because if you really catch fire with something, that's

the only thing that's going to differentiate you from someone that

has a lot of money that can put out a nearly identical product.

The U.S. Commerce Department estimates IP-intensive industries

generated $6.6

trillion in value in 2014, more than one third of U.S.

GDP. That number is likely to go up in coming years.

Trademark applications in the U.S.

have roughly doubled over the past decade as companies place growing

importance on their brands and move sales online.

There's been a huge change in trademark registration in the last 10

years because of Amazon and Facebook and all the Internet commerce

that's going on. In 2008, there was just around 250,000 U.S.

trademark applications filed.

In 2019, t here was over 450,000.

The digital economy has also contributed to a surge in patent

applications, especially in fields like computer technology.

In 2018, more than 600,000 patent applications were filed in the U.S.

compared to around 260,000 two decades earlier.

There is now a backlog of more than 500,000 applications at the

patent office. It took 125 years to issue 1 million patents and it

only took five years to issue the last million patents.

That tells you a little bit about the speed of innovation in the

United States. Many of today's biggest innovations are in the form of

software, machine learning or artificial intelligence instead of

tangible physical objects.

This can make evaluating patents harder.

You want to make sure that there are actual practical inventions that

have a technical character to them.

Tech companies are capitalizing on intellectual property rights for

computers, smart devices and software.

California-based chip maker Qualcomm, for example, generates a large

portion of its sales by licensing patents.

Tech giants like IBM, Samsung, Microsoft and Apple apply for

thousands of patents every year.

Patents have the ability to play a vital role in the economy and in

innovation, but that the bad patents can also do a huge amount of

damage. Some people, companies and even countries are trying to

stretch the legal limits when it comes to cashing in on IP.

The rise of fraudulent trademarks is one concern among lawmakers in

Washington. The U.S.

trademark register has been inundated with applications in recent

years, with many coming from China.

The significant concern here is that a lot of these applications are

fraudulent, meaning that they're making claims that there's actually

being goods or services sold under the trademarks in United States

when in fact there are not.

They are essentially photo shopping, digital photographs that begin

off the Internet, submitting these to the PTO, saying here is

evidence of our use in commerce.

Barton Beebe, a law professor at NYU, testified about the growing

number of fraudulent Chinese trademark applications in the U.S..

In a hearing last year in front of the Senate Judiciary Subcommittee

on Intellectual Property.

Beebe estimates about 67 percent of the trademark applications from

China in the apparel goods category in twenty seventeen were

fraudulent, meaning they didn't correspond with a real brand.

The problem, he says, is that these applications are clogging up the

system. We have clients that have had trademark applications denied

because of these fraudulent registrations, and we've had to take

additional steps, which typically costs thousands of dollars to

remove those fraudulent registrations from the U.S.

trademark register. The U.S.

Patent and Trademark Office implemented a new rule in August 2019

that required any foreign company registering for a trademark to use

a U.S.-licensed attorney.

The agency says those steps have helped reduce the number of

fraudulent filings from China.

Legislation is also on the table.

Senator Chris Coons is co-chair of the Congressional Trademark

Caucus. There are some compelling initial proposals about how to deal

with the clouding of the trademark registry.

But I think we need to take more active measures.

China's push for trademarks in the U.S.

is just one example of a bigger fight over IP between the world's two

biggest economies. As part of China's rapid economic development, the

government has pursued policies like force technology transfers,

which require foreign companies to share their technology, often in

the form of IP in order to get access to the Chinese market.

What that really means is we'll give you five or 10 years to sell

your product to our more than billion consumers.

But 10 or 20 years from now, that technology is going to be

manufactured here by our companies and then export it to the rest of

the world. Many American business leaders warn policies like force

technology transfers have resulted in IP theft, posing a major risk

to business. A 2017 report by the IP Commission estimated IP theft

from China and other countries cost the U.S.

economy between $225 billion and $600 billion per year.

Basically, what's happened over the last at least 30 years is one of

the single greatest transfers of wealth from one country to another.

The intellectual property theft that has occurred between the United

States and China is historic in scale.

That's why IP is a key sticking point in the trade war between the

U.S. and China. The agreement we signed today includes groundbreaking

provisions in an area of critical importance to the United States

protecting intellectual property.

The Phase 1 trade agreement between the two countries pledged

stronger protection against patent and trademark infringement.

But how it will be enforced remains to be seen.

Intellectual property theft has been a major source of contention

between the United States and China and really is the most important

unresolved issue in our current trade dispute.

Politicians, policymakers, academics and investors say economic

success will be determined by who owns and develops new technologies

like artificial intelligence and 5G.

China has made it no secret it aims to be the global leader in these

technologies, and intellectual property is key to that goal.

Of the 3 million patent applications filed worldwide in 2018, China

accounted for roughly half.

Its Made in China 2025 industrial policy funnels investment in areas

like information technology and high tech robots.

Imagine if instead of Facebook, Amazon and Google all being American

companies with American headquarters and mostly American employees.

If all of those companies in those technologies were

Chinese-developed, Chinese-owned, Chinese-led, all that additional

wealth and opportunity and influence on the world stage goes to China

rather than the United States. That is exactly the competition that

we are in the middle of right now.