The Future of U.S. and China Innovation and Tech Competitiveness

hello everyone thank you for joining today's webinar on a vital set of issues i'm clayton dube of the usc u.s china institute and we're delighted that today's program is a joint venture with our friends and colleagues at the usc center for transnational law and business today we're looking at innovation and competition policy innovation of course is of critical importance we must innovate if we are to increase productivity uh so that we can address pressing needs of course we all want innovation uh to bring us the the newest the latest uh greater convenience greater flexibility those sorts of things but productivity increases are vital if we want to raise living standards they're vital to address the needs of aging populations and shrinking labor pools and of course they're essential if we're going to address issues of environmental degradation we have to produce using fewer raw materials less energy and we have to make greater use of renewables competition is usually seen as a key driver of innovation and so today we're looking at american and chinese policies and actions regarding innovation and competition recent headlines of course highlight the centrality of these topics there is some common ground in both societies we're worried about the dominance of a few mega corporations there's concern about access to key components and technologies we're worried about how to develop the talent needed how to cultivate recruit this talent can future innovation and competition help us to reduce the inequalities in our societies or will innovation and competition policy uh and and progress further exacerbate that inequality in the us of course there are contentions over uh this government's support for innovation and competition aspects of various spending plans there's worries about appointments to regulatory bodies we have investigations into corporations and whether or not the size and spread of these corporations is good for the united states and of course there's concerns over protecting intellectual property created by american firms by americans in china of course we've seen the headlines alibaba meituan baidu didi and tencent household names have been fined or otherwise sanctioned for running a of various regulatory expectations and we have those kinds of concerns both countries see the other as a key rival in fields that may represent the 21st century's economic and strategic higher ground these are essential topics that we're looking in today and our discussion is going to address them leading the conversation is brian peck who teaches at the usc gold school for law school of law and directs the center for transnational law and business brian has worked in both international business and in government at the federal and state levels he'll introduce our speakers and we'll moderate the discussion brian the floor is yours great thank you very much clay i appreciate that warm introduction and for your setting the stage for our discussion this afternoon or this evening we really appreciate that and we appreciate the collaboration with your institute in our center and putting this program together and look forward to a very robust and interesting discussion our center has focused on innovation in ip and the role that competition policy and antitrust enforcement have in either fostering or hindering innovation and intellectual property rights and so we'll focus on that in our discussion this this afternoon i'm going to introduce each of our panelists individually i'm going to ask them to give some opening brief remarks and observations then we'll get into the moderated discussion and then open up the floor to questions so our first panelist is mark cohen mark is a distinguished senior fellow director and lecturer for asia ip project at the berkeley center for law and technology at uc berkeley law school he has a very long and distinguished career in both government and private sector as one of the leading experts if not the leading expert in the us on china ipr issues mark welcome thank you thank you for joining us we look forward to your expertise uh thank you thank you brian thank you clay it's a pleasure to be with kirty and elizabeth as well so i'm going to give a very brief overview of some of the ip issues particularly some of the ones that uh you may be less familiar with uh because there's plenty of them that are not on the headlines of the newspapers uh i'm gonna just give you kind of four or five central themes just to think about because these are also issues that very clearly affect innovation one is china has a very statist approach to intellectual property now intellectual property is a private property right and most people don't even think of a role the state other than perhaps if you have to go to court or go to customs to enforce your rights uh in china ip is part of state planning there are five year or 15-year ip plans and it's incorporated in a very granular way where china wants to go in technology particularly recently and addressing what china calls bottled neck technology technology controlled by foreign companies and it also has reflected in a second key aspect which is that there's a high level of public enforcement of intellectual property uh as you would expect in a statist approach uh a kind of socialist approach which is the way it's described in the patent law the antitrust law you have a lot of public enforcement you have about 70 times more criminal cases on intellectual property in china than in the united states even though the u.s complains about lack of criminal enforcement we have a very active anti-trust regime we'll be hearing about that later and you have a vast administrative enforcement regime that brings up well over a hundred thousand cases per year including in areas like patents which is probably 50 to 60 000 patent cases per year this is astronomical third point this is a complex regime china has more litigation than ip than the united states indeed i suspect that the rest of the world combined its patent office trademark office is planned for id office you go down the list are larger than everywhere else and in most cases probably larger than the rest of the world combined it's a sophisticated regime people are well trained many of them have phds in the field it's not to be underestimated and this it presents itself as a competitive rival with a high degree of sophistication at least on the law the trade rules etc and i say this because many americans if we had this program 20 years ago would think china has no laws it's a wallace place the judges don't know anything and that kind of underestimation uh uh will only serve to harm you as an academic or as a business official it's a sophisticated machine uh next point i wanna make is about the enforcement environment and just to break this down into a couple of points first of all in general based on published data a foreigner will win litigation in china more often than a chinese entity and more often in many cases than he would win incomparable cases in his home country the win rate if you will on patent litigation for foreigners about three years ago was about 84 this is very very high uh uh yet china also has a low utilization rate foreigners do not litigate much in china in fact foreigners are a relatively small part of the chinese ip environment and we can speculate we could probably have a whole separate program on this topic uh but it's fascinating to observe that currently according to official data foreigners are probably less than one percent of the chinese civil intellectual property docket so this is really uh an unusual and perhaps unhealthy environment the last point i'd like to make and i'm going to make this simply because it's counterintuitive even though it doesn't uh greatly affect uh american enterprises particularly big ones that are concerned about the huge chinese market is that another distinguishing characteristic of china's ip regime and even as this enforcement regime is a uh focus on small enterprises china has more individuals owning paths in a given year applying for patents in a given year then the u.s files patents in total from all places at the u.s patent trademark office uh and it's also true of litigation uh uh that uh uh there's a about a thirty percent cohort of small inventors the final patent cases and there's a big focus on making the system available to the little guy china's utility model system which is kind of a petty patent system is the largest in the world by a long shot and similarly uh uh is intended to facilitate small inventors filing for ip all of this makes the chinese ip environment actually rather different from what you hear in the press and maybe if you think about it a little more trouble uh this is a sophisticated environment uh uh where foreigners can sometimes win but at the same time it seems that when they lose they lose big and i suspect that part of the reason for that is when the state has its finger on its innovation needs you may find that the scales of justice get a little bit distorted but hopefully we'll have more time to talk about that after the next speakers thank you brian thank you very much mark i really appreciate your insights and expertise and peeking in a little bit more in depth and what's going on in china in terms of the ipr's situation over there so appreciate that and look forward to your participation our discussion our next panelist is elizabeth wang she's the executive vice president for compass lexicon which is a global economics consulting firm she specializes in antitrust and ip issues elizabeth welcome thank you many thanks to usc for hosting this important event and special thanks to brian for inviting me to join this distinguished panel it's truly a privilege to me especially to be part of this mark and kirti when i was asked to to talk on this panel i immediately remembered my several talk with mark cohen in the spring of 2017 and we have covered similar issues back then and here are some of the the topics uh back then u.s china competition and collaboration strategies for years ahead here's another one innovation and ip in china what american business need to know so four years four and a half years has passed a lot have happened since then we have the pandemic we had a new administration and we have china us tension increased um but i think it may make sense to revisit some of the principles or from the fundamentals what we were talking four years ago and that may help to facilitate our discussion later in the guided topics so i want to make two point two observations about china the first one is that um china chinese economy as of now similar as four years ago is still in the transition stage from the planned economy to the market economy so what does it mean two things at least one um chinese government agency still have very much a strong flavor of the mindset of planning so we will talk about that much later and it so it makes what in the america the invisible hands the market will work things out that mindset is still many times quite foreign to try and chinese mindset so that's one implication the second implication is that in china there are two very very different group of companies the state-owned enterprises and the private owned companies so you may have heard um and clay mentioned earlier to opening this program the alibaba maitran didi those are private owned companies and you have heard of them quite a bit and there are the state-owned enterprises in the tech space you've probably not heard as much but i'll give you uh some some quick examples they're not in tax base but china mobile and uh china first auto work faw and that's one of the uh the top chinese auto space station enterprise so those two groups are quite different so we need to be aware they're such that they're they're different animals out there the second observation i would like to make is more along the line of the ip issues historically for many years chinese companies entities individuals they are primarily ip users and not really ip creators being ip creators is something relatively new even though it in the last decade also it changed very very fast like mark has mentioned earlier but um this um changes of using ip versus creating ip and that changed the incentive of enforcing or protecting ipr's significantly i just want to mention that many of the differences we see we need to think about is it truly a china issue or is it just owning creating versus using issue so i want to make those two points um and about the context of the chinese economy and chinese companies and then later when we talk about specific topics it may make sense a lot of discussion where i come from going get back to you brian great thank you very much elizabeth and we certainly look forward and appreciate your perspective from the china side and our discussions later on during the program our third panelist is kirti gupta kirti is the vice president for technology and economic strategy at qualcomm incorporated where she and her team provide economic analysis and thought leadership on global technology intellectual property and anti-trust economic policy issues she's a very seasoned economist engineer and industry expert with around 20 years of fortune 500 companies so kierti very well welcome it's great to have you with us and we look forward to your opening observations thank you brian and everybody else at team usc cleaning this up i think it's a really timely event we're obviously here today because you know we're in a technological race with china um and i would like to just start this conversation from the point of view of wireless technologies that is what we do at qualcomm uh we've been transforming the world with wireless technologies over 30 years and i would you know bring it back to the innovation economy and the ip trends that we're talking about um look i mean with every generation of wireless g i think there has been sort of this major shift in the industry and now there are more uh mobile subscriptions today than people on the planet that has been the wireless revolution but right now we are at the cusp of this technology we call 5g uh fifth generation g or 5g that i think is a paradigm shift it's different from other generations or g's in the world in the sense in the past in the sense that it isn't just about connecting people it's about connecting everything everywhere from your smart homes to smart cities enterprises cars uh hospitals uh in in that way it is the universal fabric of connectivity the infrastructure of our future connected world if you will and you know when clay was giving this talk about innovation is the key to driving economic growth i think 5g is coming at such an important time in the world because it it it's exactly that kind of general purpose technology that we need right now you know economists have been concerned about innovation being on the slow down productivity being on the slow down over the last half century because it's as if those kinds of technologies that create that multiplier effect you know are few and far between but 5g is one of them it transforms industries so why am i talking about this in a you know panel on us in china because from 1g to 4g you know these kinds of foundational critical technologies have been developed in global standards 5g is same thing is happening 6g same thing is going to happen and we've seen an increasing rise in participation from china investment from china to be sure you know governments around the world understand the importance of these critical technologies you know from uh us eu china india japan vietnam everybody recognizes the importance of leading in 5g having that 5g competence as a part of their tech sovereignty program but right now when it comes to going to the standards bodies where rubber meets the road let me just share with you you know this is a real uh technological arms race there's a real competition the us is in the lead right now eu is in the lead right now as it has been for 1g to 4g standards but that leadership is ours to lose if you're not careful and i think we you know being careful is important right now because uh although we understand the importance of leadership in these technologies that's you know understood by this administration it's understood by the previous administration it's written in you know the recent executive order of uh president biden on promoting competition in the united states you know exactly at the same time we are missing some important pillars that enable leadership in these kinds of critical technologies not just 5g but other emerging technologies and that is intellectual property how is all this innovation happening you know i think elizabeth you pointed out you know we there's sort of this kind of a different mechanism in which innovation happens in different economic structures we have been living in this economic structure where innovation happens based on a market-based economy we need returns on investment we are not you know companies like ours aren't depending on state subsidies or some kind of big government grants we are depending on returns from the market so what we do is you know we invest over 20 percent of our revenues back in r d every year and uh that enables us to take very risky long term bets 10 years 12 years 15 years in advance before you think of hear about the next g the tinkering in the lab has already begun and some of those risks are uh those that don't uh become successful others become successful but if they do we can then broadly license intellectual property patents and get some return on the investment for those early risky bets and then continue to basically the cycle of investment if that virtuous cycle is broken you can't really reconstruct it back there is it's a kind of a one-way slippery slope for losing leadership in these sort of critical technologies that develop over generations so i think if we don't understand that ip is the linchpin to driving competitiveness driving technology leadership in very important technology areas like 5g and many others that leadership is ours to lose i hope we can continue this discussion um as the panel progresses great thank you very much kiriti appreciate your comments and observations and we will appreciate your perspective of these discussions from your technology and policy and business expertise so thank you for that and actually you segue into our first question with your opening remarks caret and that is um you know is is the us at risk in losing his leadership in innovation and competitiveness in tech sectors to china or has it already lost its competitiveness in certain areas at least maybe charity if you want to pick up from what you started with your opening remarks yeah so i i think what we're seeing is you know real as real um investment in effort from china across various kinds of technology standards and i'm sure you know others can remark in other technologies leading you know starting from 5g to ai video codecs connected cars a whole range um there's a difference between quality and quantity and i think elizabeth was alluding to that there's still sort of this you know currently china net net tech user not ip user not ip creator um at least that's what we are seeing in the data i think that's that's true uh but again given the level of investment i would ring some real alarm bells about ensuring that we preserve some important pillars that have led to this leadership until now and don't eviscerate them for specific concerns that can be addressed in a more surgical manner i from what i see i see two areas where um china has advantage uh over u.s at this moment in the tax space number one chinese china is really good in scale things up and mass production in the sense that um it can get things um cheaper faster and and and bigger in general so so that that's one area and second area is the social driven ai driven business model and surrounding technologies so two examples there um clay mentioned mate 1 earlier i don't know whether any of you are familiar with that it is a food a delivery app it's very popular in china i have used that versus um door dash and other things it it's it's miles miles difference in china you can order food from tens of thousands of restaurants 2 a.m in the morning it will deliver within 30 minutes and the charge of that delivery is like a dollar more and compare that with what i see in the us usually they take an hour and it charge extra 10 bucks for order of 20 dollars and they limit the choice of restaurants in that in in that network it's it's really um uh a proportion not not even worth mentioning so another example social media we know about tick tock or if we i watch a show on netflix i can see this uh if the social feature of the show in china there's something called tamu i know mark you can understand what i'm saying it meaningless user can do real-time comment on the show that's broadcasting and saying oh i love this smile this actress just did or i there's something that's so funny about this and there's so many of the user content can be can appear on uh when you're streaming immediately and that's such a popular thing in china i'm just saying that there are many area um that's the user interaction the user feedback is incorporated in the um in the platform it's so much faster and more instantaneous than what i see from the u.s counterparts um so from from that perspective um there are advantages what i see but i want to remind something else from the economic basic concept which is during international trade different country or different company having their comparative advantage the key word is comparative advantage not advantage per se is comparative so um different country or different company are good at something uh not so good at other things it's just normal uh competition uh with different perspective and i just want to make sure we don't lose sight and seeing somebody else is doing it is better in something and that's necessarily something alarming that to you brian thank you elizabeth mark any additional comments on that yeah um i'd like to kind of rip off of where cartie left off because there are a number of kind of uh sub points uh to her message um you have a huge amount of patenting a high amount of quantitative activity in china and and to read the press and the west uh we're going to be inundated or we already are inundated by china out innovating us because china has so many more patents or scientific publications or phds or scientific institutions or any number of other things and um uh and it is true china has all those things that doesn't mean it's a qualitative advantage and that also doesn't mean that it isn't valuable in the game of international ip litigation or in getting a judgment in china regarding the value of your portfolio or in making it very difficult for a foreign country to enter the chinese market when you have a huge basket of patents that you're threatening to assert uh and i think part of the problem with the west is we have what is now a very uh uh aggregated view uh a very non-granular view of uh what is happening in china i read an article the other day china threatens to dominate the world in a ipads well ai is a basket of technology and the article was all about facial recognition technology now china dominates in facial recognition technology in fact companies like facebook are pulling out of that technology because of privacy concerns but for china this is a security and police issue that's not necessarily the direction the united states is heading but you have to disaggregate it and say what is important to us and are we losing out in those areas it's also really important when you look at what china's doing to reflect on things like our five-year plan our ministry of science and technology our talent program we have none of those zero uh and china has those in abundance at a national and local level and that is really what is feeding into these developments and not only that i think equally important for purposes of this discussion is that they have officials who really understand these issues you know uh when i was in the government uh the second time around and i met with secretary pritzker and i had my five-minute elevator speech with her and i was thought very long and hard about what i was going to say to her as secretary of commerce about the chinese idea regime and i said imagine adam secretary that you called up mayor bloomberg who was then mayor at the time of new york and he said mr mayor i'm unhappy because new york only has 3.0 patents for 10 000 people and the national goal is 3.3 and secretary pritzker looked at me and said why the hell would i say that i said because if you don't understand that that that is happening on a daily basis and people are getting promoted on that basis and companies are moving through the bureaucratic system the high-level jobs the ceos and state-owned enterprises are getting recognized if you don't understand about how deeply that goes into china's system that ip is now fully incorporated into its economic system which has a tendency to create junk when the state gets involved then you you don't have a fair understanding of what's going on we're not going to be overwhelmed by uh chinese patents if we understand where the quality is where the gold is and where the lead is but if we don't understand that we're going to live in fear and have really hard time a very hard time engaging china and in a way that protects our interests thank you um let's move on to the next question and that is what are the differences between the us and china and their approach of both their respective private sectors and governments towards strengthening their competitiveness and innovation and as a follow-up to that you i think you've touched on this a little bit already and some of your comments to the first question is how economic nationalism either help or hinder advances in both countries i would gently uh defer on the point that you know uh comparative advantage yes of course that's a great thing but i think the underlying approach to innovation is so different that it's really not an apples to apples comparison so what is the key difference in the us and china approach look you know china has let's talk about standards a 2035 standards plan a comprehensive innovation policy comprehensive policy on intellectual property we have none of those things you know in our own executive order on competition let me just go back to that as an example there is this whole paragraph about recognizing the importance of leadership in critical technologies areas standards like 5g and exactly in that same document there is some reference to hey let's you know make sure that we regulate intellectual property especially in the case of standards but two don't add up so there is no coherence in terms of policy that we are promulgating to reach our overarching objectives i think that's sort of you know one-on-one difference in approach the other difference in approach is obviously you know market driven versus you know we like i think i've already shared in this discussion brian that you know we live in a market-based economy we're waiting and repair we're entirely dependent on returns on investment from the market not on anything else to be able to invest and innovate and that's how the innovation agenda is set it is set based on what the consumers want what's going to sell in the marketplace not on other you know bases that are more centralized in nature or driven by a sort of a overarching you know central planner agenda i think it's really important that we stay true to that so you know to the extent that we are now facing concerns in the any trust ip community about you know big tech platforms about um concentration of markets some of those concerns are absolutely valid but are the tools that we are approaching to address those concerns valid i don't know we gotta take a hard look at are we undermining our overarching goals i i just might add uh again to kurdy's comments that um you know if you look at ip as one important aspect of this discussion obviously we have yet to appoint the uspto director so we're a year into a four-year administration a quarter of the term of biden has gone by we've had uh policies of the wto coven 19 we've had this white house directly on competition we've something new going on standards and the one person who lives and breathes intellectual property uh uh who could add something not only to those domestic issues but also to the u.s china trade war has not yet been appointed hopefully she's going to have hearings tomorrow but um uh policy is already set without the benefit of information or expert information uh uh as we don't you know what do we have we're i said it jokingly where is that science and technology oh we have an office of science and technology policy in the white house very thinly staffed uh uh and we really don't have um uh the folks who are looking at civil technology if you go to dod you'll find there's a lot of people following security issues but the the civil technology and uh the very close gap uh that now exists between um civil and and security issues uh we're aware of it but we really don't have the people who understand how technology works and frankly the delay in appointing a pto director is a very good indicator of that another indicator by the way is at the same time as the u.s was weakening patent protection through supreme court decisions on areas like ai software paths genetic inventions the same time almost as if china was saying i see an opportunity china was strengthening those protections uh and it was possible and i believe it still is possible to secure patents in china on technology that you cannot secure in the united states uh uh and that's really i think not because the supreme court which made those decisions was um ill-intentioned but really they didn't understand what the technologies of the future are and no one was really in a position to well advise them on that uh so these are fundamental structural issues uh uh i know brian when you and i were uh serving the government actually a few years later i did a survey of trade officials in usg not just usdr but commerce and other agencies it's around 2008 how many of them spoke chinese and i think there were two and i was one of uh uh so again you know the the language expertise the area studies expertise the technical expertise whether it's economics or stem uh makes it very hard to craft the right kinds of policies and i think they've become especially critical china has cultivated those talents they've been sending them to the best schools like in the us but um uh the u.s has not that's also been uh contributing to our weakness um i i want to um um welcome what kurti just said a little bit earlier that's what she said it was spot on so the difference in my mind between the u.s approach and chinese approach on how to um innovation it's very different approach the chinese approach government planned very focused and pre-selected national champion approach the at least from the government perspective and the u.s if i understand properly is market driven diversified and survival of the fittest type of approach and um so the key question is what is the most efficient way to generate um innovation to allocate limited resources i think that's the economic question and people have answered in the past meaning that in most situations the invisible band slash competition market force whatever you call it is more efficient than government planning to allocate resources to stimulate innovation and fully understand the concern that the government planned pre-select national champion a lot of resources piling on certain companies that may generate some short-term advantage it's possible but in the long run the market driven kurt he mentioned a little bit earlier get the proper right of rate of returns through market competition at least economic thing theory explained to us that's more sustainable sustainable and healthy in the long run and this point has been asked and to me empirical tests in china already that's why i mentioned earlier in china there are two group of companies out there state-owned enterprises versus private private companies and using those example and state-owned enterprises they're planned invested by government in contrast the private companies they're less so on in terms of government planning resource allocation all that stuff so if you look at right now in a tech space which companies are more successful and you heard about tick tock tenzin ali baba huawei those are private companies those are not state-owned enterprises and the economic theory told us the inefficiency caused by the planning and uh the thing that mark mentioned earlier those are very true and out there so the concern of whether the market signal the market competition would lead to best result at least in the long term from inside china already we see it's actually market competition wins out i just want to point that out thank you and i think all of you have really clarified and explained in great detail the key differences between the two approaches between china and the us in terms of market and incentivizing and spurring innovation um and technological advances it seems to me that there could be an argument made that although the u.s may have separate policies as mark pointed out you've got these different policies that have been laid out both domestically and internationally but yet they don't have the leadership to implement them or to develop them more fully it seems to me that the us currently doesn't really have a viable policy to maintain or strengthen its competitiveness in innovation and key tech sectors in your view what would be some concrete uh proposals or solutions that would that the u.s should consider to to strengthen his competitiveness and innovation vis-a-vis china well you know i'll take an initial crack at crack at this although i'm hardly the the leading scholar on u.s innovation policies but let me say the state should not be totally discounted even though we rely on the market and and uh you know darpa uh uh you know inventing the internet uh finding the right balance between the role of the government and industry is um is really critical i'd also like to add another point though on this balance between the state and the private sector and i agree with what elizabeth said about the efficiencies of the market but you know we're uh 20 plus years into china's market reforms and even now in legislation pending before the national people's congress the legislators say we need to accelerate the leading role of the market when china joined the wto the fundamental assumption was that china was going to become a market-oriented economy and in fact uh um and you'll remember this better than me i think brian but in fact and that was the reason we expected that we wouldn't have special treatment under our dumping and countervailing duty laws after a 15 year sunset period china won't need that because the steel industries the heavy state invested sectors will all be run by market forces uh of course no one i think really took seriously the possibility that intellectual property or innovation would also be run by non-market forces or that the patent system would be heavily dependent on subsidies which it has been uh uh uh and what that might mean uh uh uh to the chinese domestic market or how foreigners are treated that was really not under contemplation and this is uh kind of a fundamental contradiction to use a concept used by chairman mao uh between what the western expectation was of china's economy at what china has been and more recently has reinforced which is really an important leading role the state and of the party and in particularly in the past two to three years we've seen the party come out even more directly and openly to champion innovation policies to champion state intervention and the like and that is uh on the one hand at least that's a little bit more transparent but on the other hand it's troubling you're not going to have independent courts you're not going to be treated fairly as a foreigner at least there's that tremendous fear and although you know an alibaba or tencent may be privately oriented and uh uh have a certain advantage in the chinese market when it comes to a facebook or a netflix competing in china uh they're gonna be at a major disadvantage against a private champion such as an alibaba attention at least that will be perceived and that will certainly be the case in market access and intellectual property and other areas uh so it's not uh once the state is that deeply involved the way it affects the market is multi-fault uh uh and sometimes unseen uh uh uh and that makes it very very difficult i think for companies to fairly monetize their ip rights in china or to have a sense that they'll be treated fairly they may have a greater fear than is the reality but i can't even tell you that for certain because it's not a transparent system and when you have a non-transparent system where a very large cohort for example cases are not published then you naturally suspect that it's those unpublished cases those decisions behind closed doors that are the ones that really matter not the ones that are made available to the public do you have some thoughts on some perhaps some concrete solutions or at least proposals that the us government should consider you know uh from uh from from the perspective of um technology ipn standards i think that it would we've got to have a comprehensive innovation policy and we've got to have a comprehensive policy on standards when it comes to ip antitrust these are legal tools and they should be incorporated i mean they should be used to advance the agenda of innovation policy of technology policy not the other way around they are the tools that need to be used towards reaching the goals and not determine where we need to reach so you know let me let me just make this a little bit more concrete for example if we have a comprehensive innovation policy that says we must lead in you know 5g ai semiconductor supply chain these are the five steps we need to take part of which could be let's talk about standards you know if we need to lead in 5g standards we must ensure number one a strong intellectual property pillar because if you know u.s companies don't have a way to invest in these technologies they will not go to these standards bodies and they will not lead in them period second we must advance a rules-based ecosystem so that we play on a level playing field with china with others in a global standard setting agents in in global standard setting institutions uh we must make sure that the you know governance principles are strong that everybody is playing by the rules of openness transparency fairness consensus building majority clarify what those rules are so that nobody can game the system we must ensure that standards should be global and there is multilateral cooperation to ensure that they are global so that state-driven innovation agendas cannot you know rule the day then you talk about okay where does it fit in where does any trust fit in but right now i think we don't have a comprehensive innovation policy we don't have a comprehensive standards policy we have things like you know uh an executive order on some something that's relates to any trust and we talk about innovation policy in that context it's the other way around thanks security um elizabeth what do you in your thoughts um on what are the key factors for u.s competitiveness and innovation vis-a-vis china what would be some of the key factors for the u.s to consider or you know again from the chinese perspective um i think this the the strongest factor that would make america great not again american great to begin with is is this um it's mature and efficient market that's open and fair and efficient in both physical capital and human capital and um my i came from china my american dream is that i can come to us compete on merit and it doesn't matter where i come from who i know and who i associate with and to me my favorite tv show is the shark tank and where it's such a beautiful illustration what a efficient and the mature market look like and there if something is disrupting that market it's both in terms of human capital as well as physical capital if something is disrupting that i think that's such a such a big loss um to the us and my personal view china doesn't have that if u.s can keep doing that keep maintaining that efficient and uh market force whatever area it put into it going to be great that's just my personal view um i want to pick up something that both kirti and mark have referred to and that is that you know earlier this year president biden issued an executive order to promote or to allegedly promote competition in a wide range of sectors including tech but i think there's been some concern among certain technology companies about how effective or how much of a hindrance this might be um what impact will this executive over have on us leadership in innovation as competitiveness in key tech sectors kierti sure i i can start i think uh you know frankly the purpose of the executive order seems to have been concerns vis-a-vis big tech platforms um the you know fangs or the gaffer companies as we call them uh apart from you know this coming out of context without having an innovation policy that this is somehow supporting or not um i think that you know that there are some significant causes of concern we should flag um and they relate to this sort of st it's woven in uh at several points in the executive order that we should be limiting intellectual property rights access to them their enforcement or enhancing the regulation of ip in areas like standards or drugs or agriculture um in different parts of the executive order and that's somehow meant to promote competition and i think that's a significant cause of concern because uh you know the ip community of small inventors entrepreneurs venture capitalists universities they have spoken up again and again and again in support of intellectual property rights because that is the only way they have to protect their ideas traditionally it's the fangs or the gaffa companies the big tech platforms that you know the executive order has a beef with they're the ones who benefit from weakening intellectual property rights that the executive order is trying to do so it's a little confusing why you know this policy directive that is trying to rein in the power of the big is actually giving them a gift the big have other ways to protect their ideas and that's why they don't like ip they don't like the idea of having you know this process of shampooing process of creative destruction where good ideas can come from anywhere and it can threaten the status quo they have means of vertical integration they have means of you know prioritizing their ideas and a first mover advantage they have you know monetization of their ideas for adjacent markets cognominate effects all kinds of means to be able to protect their ideas that the small don't and that's why the smaller you know the nvca has written papers most recently about their concerns with these kinds of proposals the national venture capitalist association the the mentor community has written their you know papers in uh with concerns about these kinds of proposals so you know the it's the small guys it's the innovators that are really concerned about weakening of intellectual property rights because that is leading us to exactly the system where only the big will have the privilege to innovate and in that system by the way we're only the big the vertically integrated have the privilege to innovate the state-driven economies have a natural advantage i i find myself uh speaking on kirti's coattails but uh uh that's okay i i the um [Music] i i i i curry makes some very important points and and i think uh uh it's actually an area that's often neglected in the united states about how our innovation system ecosystem has uh uh kind of neglected the smaller startups uh on the smaller vc firms and the like even though in the back of most people's minds as a thomas edison or hewlett and packard or bill gates that somehow began the garage and made their way to uh becoming multi-billionaires i uh but the reality is we have a system that is highly corporatized uh and where a lot of the big companies view ip is a bit of a nuisance they don't need it that much to maintain maintain their dominance uh uh and in that sense um it it it it's it's a it's a kind of a weakness on the u.s side i i think also the the the biden announcement just to dwell on one small area that was also contradictory was this area of non-compete agreements they they wanted the ftc to investigate uh the anti-competitive effect of non-compete agreements the idea being that uh you know full labor mobility will make a more competitive economy which is exactly the law in california where non-compete agreements are generally illegal uh the problem with that is if you have an employee uh who goes and leaves their employer let's say a california company today taking trade secrets and goes to china for example uh uh and the non-compete is ineffective you have no way other than bringing a great secret case to pursue that individual and those types of cases have happened in california in the semiconductor sector in particular uh uh so it's again a bit of a of a blindness or deafness regarding the international uh implications of uh weakening the ip system of weakening uh our system with regard to non-competes of ramping up against some of our competitive companies using antitrust where occasionally it might be inappropriate but uh uh that um we're not looking at the international consequences uh i also you don't mind i wanted to debbie seligson raise some questions online and if i can i just want to somewhat related to this uh she asked uh uh she thought that i was being perhaps too black and white and describing the us's market-oriented and china as being state-oriented uh after all uh uh all i p rights actually most ip rights not all ip rights are granted by the state but in some cases they're protected by the state but not all ip rights are granted by the state but uh nonetheless copyright subsists without formalities straight secrets are not granted by the state uh but even accepting that premise um uh they're i think our objective indicia of the hand of the state and china that don't exist in the u.s and don't exist even in economies like in europe which do have a more active state role for example until recently most of the ip enforcement in china quantitatively was undertaken by the state uh that is by state administrative agencies uh and to this day the level of criminal enforcement in china as i mentioned earlier is about 60 times the size of of uh the us uh uh also subsidization of patents and trademark filings or participation standards is a status role goals regarding ownership of patents and trademarks for 10 000 people at 10 000 enterprises is a status goal we don't have those things nor nor in fact did china traditionally have strong civil remedies with adequate compensation when qualcomm was the subject of a state-sponsored anti-trust investigation where damages i believe were about 875 million dollars there was roughly 60 000 times average civil damages and a patent lawsuit in china so there you have it when the state is pursuing you 875 million dollars when you bring a private patent lawsuit twenty thousand dollars that's how the state plays out its empty hand where it's enforcing what it wants it piles on the penalties but in order to have a robust civil compensation system where you can protect your rights uh where you can monetize the rights because they're well protected or you have functioning markets that's where china has had to struggle because the state is so actively involved so i do think this is an area where there are shades of gray uh uh uh uh and ip is still basically a property right yes it is true that property rights are dependent upon the state but there are systems that are more private property oriented and many that are less and certainly north korea which by the way has a patent law uh and protects patents and its constitution is probably much less protective of ip as a private property right than china and and the days to quibble over you know property rights and ip and its importance and its merits are over we're talking about a technological arms race we're talking about tools in the toolkit that we need to use one way or another to win the race period that's what this is about so you know we need to have okay what's our innovation agenda lead in these technologies what do we need we need ipv we need this we need that we need these tools okay let's get those tools we can't have technocrats run the show say oh yeah we need to you know put any trust here and devalue ip there and to help with the innovation policy and the broader goals i i just have very small point which is completely different from uh the the the ip perspective and more on the innovation part my reading is probably my very narrow reading of the the executive order is that it appears to me it focus a lot more on distribution rather than uh efficiency issue so um that there are talking about um how anti-trust or competition is to solve the um reallocation of things which in my mind is called distribution and um traditionally competition uh is to promote innovation which is to make the pie bigger rather than focus on how do we slice and dice who get the bigger piece of a given pie so that that's just that's on my house it's right on you know you can talk about rent distribution people about it all day but at the same time you're losing losing the pie to competition no very interesting discussion on that different perspectives much appreciated i know we're running out of time and i know that we've got some several great questions from the audience so let me raise one more question um if i may all of you have stressed the extreme importance of strong intellectual property rights protection and it's key you know role that it plays in terms of spurring and protecting innovation and competitiveness especially the tech sectors you know we hear about we mark you know very clearly outlined the problems and the challenges that companies face in china the current ipr regime there has there been any progress i know it's been mark you know this firsthand more than anybody here you know that this has been a long-standing concern in focus of the u.s yeah has there been any improvement or you know for example there was a phase one trade agreement last year that had certain commitments um is there any improvement in is there sometimes sorry is there what are the key concerns that u.s companies should still be aware of in going into china working in china well i think without a doubt the system has improved so uh i i i i suppose that's the good news the bad news is that the uh the areas of concern are where there's more uh uh uh uh existential uh uh threats like uh the us technological competitiveness we were we were never going to be uh uh uh uh strategically undermined uh by uh counterfeit uh uh you know louis vuitton banks you know or or or or some of the other consumer goods or luxury goods but when it comes to technology and economic espionage anti-trust if it's misapplied and all that it has a much more existential impact upon the us but you know in terms of the functioning of the ip system china has you know specialized ip courts a new national appellate ip court the pat i have to say i teach chinese ib at berkeley and i'm dreading teaching in january because every major ip law has been revised in the last two years the patent law the trademark law the copyright law the trade secret law the anti-trust law is being revised there's a new plant variety law as well as regulations and judicial guidance and cases it is absolutely astronomical and this was done without the pressure of joining the wto this was done largely in response to china's own uh domestic its consideration of its own domestic needs now the phase one agreement brought a lot of positive changes uh increased damages possibilities for punitive damages an increase in criminal enforcement uh some special campaigns and i'm mentioning all those at the outset because those were the easy ones even though people in the us may view it otherwise those are the ones where the state is actively involved this is kind of cohen's hypothesis i'm drilling it in but the reality is china is always interested in improving the state's role and managing ib and that's what we got out of china the phase one agreement in large part do we still have complete transparency of court decisions absolutely not do we know how every case is being decided do we get copies of preliminary injunctions when they're ready rendered absolutely not uh uh uh so some of the other things that go into a functioning civil system and china is a very big civil system over 400 000 cases a year which i guess is probably roughly 40 times the size of the united states we don't have a really good window into it and i think some of the things that have been neglected what i used to call orphaned back in 2004 uh uh uh uh are coming to haunt us we didn't talk about patents with china bilaterally to any great degree until the past five or ten years we hardly talked about trade secrets with china we certainly rarely talked about industrial policy uh uh or commercializing or licensing technology and having a good market for that those were not top grow issues we were concerned about trademark counterfeiting and uh knockoffs of hollywood movies important issues particularly down in los angeles i'm not going to disparage the movie or recording industries but uh the high-tech sector whether it is uh high-tech and 5g and iot or the technology sectors whether it's material science or biotech we're not really front and center in that equation and that's the area that's really really important and demands a much higher level of sophistication uh you know our our farm pan applicants being treated fairly in china there's some data that suggests that where a patent is incorporated into a standard the likelihood that that patent will be granted in china is lower than uh if a chinese applicant apply for that patent or compared to other technologies uh that is really significant information in terms of the kinds of industrial sectors that kerdi works on uh uh uh similarly there's data that says the same thing about biotechnology that foreign biotech farmer patents are being discriminated against in favor of chinese applicants do we know what happens in the courts no no we are 20 years into china's wto accession and for us to still be wondering when are we going to get all the court cases how are we going to determine whether we're being treated fairly is not uh the sign of great success in our trade negotiations we should know more and those issues were not part of the phase one agreement elizabeth i know you focus on ip issues in your work with compass lexicon um any any thoughts or observations about you know how it's improved or what u.s companies should still be wary of right i was remembering back what mark mentioned earlier that the statistics show that um the the the win rate for the patent litigation in china for nine us nine chinese companies is higher on that comment and that actually that statistics i heard from mark four years ago and um i i still remember he said u.s companies go to china and do your litigation and search your right there um and at least from the very little data that i observed which is um similar to what we currently mentioned a little bit earlier this standard essential patterns um litigation in china i do see at least now compared to four years ago more non-chinese companies are getting involved in the litigation in china so that's this little data point um to to for what i observe uh the second observation i see is that i mentioned earlier that um i p protection issue is a china issue or is it um are you the creator versus are you the user of the intellectual property right and um my hypothesis is that if you you are the owner or creator of the intellectual property uh you have more incentive to protect it versus um if you're just purely the user so what i observe is that um chinese companies those are creating or owning intellectual property rights especially patent rights they i see what i see is they start to use patent litigation to protect their petting rights so that general direction if chinese companies owning more patents only more intellectual property right then they should respect or protect iqr more and i do see that moving toward that direction too okay thank you elizabeth kirti we only have a couple minutes but if you wanted to add anything i apologize for that but i'll just add a minute then because i think mark covered a whole bunch of sort of the reality on the ground right like we're still quibbling about where's the data to show whether we're being treated fairly so there's like there's really lack of information but i would say that you know one of the most recent topics of conversation has been the use of an assumed injunctions and an iodization junctions in china to keep jurisprudence in china to keep the global rate setting in the context of standard essential patents and trend rates in china so look there's a game to be played here and it's play it's being played well uh by by china on all fronts while we are here at kindergarten level talking about hey how do we you know uh use any trust to regulate our patents in the space of any trust in the space of standards and how do we use other means to limit the patent eligibility subject matter and things like that so we're not recognizing what's on the horizon thank you curie i uh our time is up um i'd like to thank our our panelists um obviously with a tremendous wealth of expertise we appreciate you sharing your your observations and your insights and providing them for us with a very robust interesting and informative discussion i apologize to the audience that there were some very good questions but we didn't unfortunately have time to do that but i think we all benefited from hearing what our three panels had to say and share in their discussions i'd like to thank clay and the usc u.s china institute for their collaboration and putting this program together and with that uh thank you everyone appreciate your time thank you for joining us

Channel: USC U.S.-China Institute

Views: 4,799

Keywords: usc, us, china

Id: f57K1P5RjWI

Length: 70min 57sec (4257 seconds)

Published: Fri Dec 03 2021