Intellectual Property Violations and China Legal Remedies September 17 2020 Congressional Research Service https crsreports congress gov R46532 SUMMARY Intellectual Property Violations and China Legal Remedies Concerns that the government of the People’s Republic of China China fails to protect and enforce intellectual property IP rights and thus harms U S IP rights holders have been one of the key issues in U S -China relations for decades These concerns extend both to actions of China’s government itself and state-affiliated entities as well as to actions of Chinese persons and entities not affiliated with the Chinese government The primary issues raised by the U S government and U S businesses have evolved over time from an earlier focus on the adequacy of Chinese domestic IP protection and enforcement e g to counter piracy and counterfeiting to more recent concerns about cyber intrusions and strategic acquisitions R46532 September 17 2020 Kevin J Hickey Coordinator Legislative Attorney Nina M Hart Legislative Attorney Brandon J Murrill Legislative Attorney During the Trump Administration the U S Trade Representative USTR investigated China’s actions with respect to IP and concluded that a number of Chinese policies and practices violated Kevin T Richards Section 301 of the Trade Act of 1974 In response the United States initiated a World Trade Legislative Attorney Organization WTO dispute against China and imposed tariffs on billions of dollars of Chinese imports China responded by imposing tariffs on U S goods and challenging the U S tariffs at the WTO In January 2020 the United States and China reached a deal known as the “Phase One Agreement” that addressed some of the trade and IP issues between the parties However major issues—such as coerced technology transfer—were not resolved by the Phase One Agreement Although the parties anticipated further negotiations the onset of the Coronavirus Disease 2019 COVID-19 pandemic has increased tensions between the nations and stalled progress toward a Phase Two Agreement Violations of IP rights by Chinese persons and entities are not a monolithic phenomenon and general terms like “IP theft” often obscure important distinctions that affect the legal options available to address IP violations One such distinction is the type of IP at issue Different varieties of IP—such as patents copyrights trademarks or trade secrets—protect different types of intellectual creation involve different procedures for obtaining rights and grant the IP owner distinct rights that vary in scope and duration A second important distinction is the type of IP violation at issue—that is the particular policy practice or action that is alleged to undermine U S IP rights Possible violations include a failure to provide adequate legal protection for IP a failure to enforce existing IP laws trade secret misappropriation including via cyber intrusion discriminatory IP licensing laws coerced technology transfer as a condition of regulatory approval or market access or bad-faith assertion of IP rights The legal remedies available will depend on the type of violation the type of IP and where the violation occurred Existing U S legal remedies for IP violations can be grouped into two broad categories First there are remedies for systemic violations which are usually initiated by the executive branch to address widespread trade or IP violations by foreign actors The executive branch possesses a number of constitutional and statutory authorities to protect IP rights These include enforcement provisions in international agreements and authority to negotiate such agreements U S law also contains several statutory provisions that allow the executive branch to investigate IP violations that affect international trade and then impose different types of remedies including import and export controls suspension of trade benefits imposition of tariffs and regulation or prohibition of certain transactions Second there are legal remedies for individual violations—that is discrete IP violations by a particular person or entity Several legal doctrines limit domestic legal remedies for violations involving foreign actors or activity however First under the presumption against extraterritoriality U S law generally does not reach activity that occurred outside of the United States unless a statute clearly indicates otherwise Second under the requirement of personal jurisdiction U S courts may only adjudicate disputes involving a defendant who has a sufficient connection with the forum or who has submitted to the court’s power in some way Presuming that U S law applies and any jurisdictional barriers can be overcome possible remedies for individual violations include civil actions for infringement import controls by the International Trade Commission and U S Customs and Border Protection agency and criminal prosecutions for economic espionage computer hacking and in some circumstances IP infringement Moving forward Congress may consider whether these existing legal options are sufficient to deter or remedy continued practices or future IP violations by Chinese entities Congressional Research Service Intellectual Property Violations and China Legal Remedies Contents Intellectual Property Violations and China 5 Types of Intellectual Property 6 Basis and Rationales for IP Rights 6 Patents 7 Copyrights 8 Trademarks 9 Trade Secrets 11 Overlap and Interactions Among Different Forms of IP 12 Forms of “IP Theft” 15 Under-Protection 15 Infringement and Under-Enforcement 17 Trade Secret Misappropriation and Cyber Intrusions 19 Coercive Technology Transfer 20 Discriminatory Restrictions on Contractual IP Licensing 21 Bad-Faith Assertion Registration 22 State Sponsorship and IP Violations 23 Existing Legal Remedies 24 Systemic Violations Foreign Affairs and Trade Remedies 24 TRIPS and WTO Disputes 25 Diplomacy and International Agreements 27 Section 301 of the Trade Act of 1974 28 Export Controls 31 Section 232 of the Trade Expansion Act of 1962 32 Section 201 of the Trade Act of 1974 34 The International Emergency Economic Powers Act 35 Individual Violations Civil Criminal and Administrative Remedies 37 Remedial Issues Jurisdiction and Territoriality 37 Civil Actions 41 Import Controls 47 Criminal Prosecutions 50 Conclusion 54 Tables Table 1 Comparison of Each Form of Federal Intellectual Property Protection 14 Contacts Author Information 55 Congressional Research Service Intellectual Property Violations and China Legal Remedies ntellectual property IP plays a critical role in the global economy by encouraging innovation creativity and the development of new and useful technologies as well as facilitating international trade and investment 1 IP laws generally aim to encourage individuals and businesses to invest time effort and money into developing new technologies and creative works by providing legal protections for different forms of intellectual creation 2 As the U S economy has become increasingly knowledge-based and reliant on creativity and technological innovation as sources of competitive advantage IP-intensive industries have become a significant and critical part of the U S economy 3 I Concerns that the government of the People’s Republic of China China fails to protect and enforce IP rights and thus harms U S IP rights holders have been key issues in U S -China relations for decades 4 These concerns extend both to actions of China’s government itself and state-affiliated entities as well as to actions of Chinese persons and entities unaffiliated with the Chinese government The primary concerns raised by the U S government and American businesses have evolved over time In the 1990s before China’s 2001 accession to the World Trade Organization WTO China’s failure to provide basic levels of legal protection for some forms of IP was a central concern 5 During China’s WTO accession process its use of regulatory structures to coerce technology transfers from U S businesses to Chinese entities as a condition of doing business in China was another concern 6 In the early 2000s China’s failure to adequately enforce its IP laws received significant attention leading to a 2007 WTO dispute between the United States and China 7 Unauthorized cyber intrusions and trade secret misappropriation were—and remain—an area of concern 8 In recent years the United States has increasingly focused on coercive technology transfers strategic acquisitions and cyber intrusions On August 18 2017 the U S Trade Representative USTR initiated an investigation under Section 301 of the Trade Act of 1974 Section 301 into “whether acts policies and practices of the Government of China related to technology transfer 1 See generally DANIEL C K CHOW EDWARD LEE INTERNATIONAL INTELLECTUAL PROPERTY 1–17 3d ed 2018 See e g Kewanee Oil Co v Bicron Corp 416 U S 470 480 1974 “The patent laws promote technological progress by offering a right of exclusion for a limited period as an incentive to inventors to risk the often enormous costs in terms of time research and development ” Twentieth Century Music Corp v Aiken 422 U S 151 156 1975 “The immediate effect of our copyright law is to secure a fair return for an ‘author’s’ creative labor But the ultimate aim is by this incentive to stimulate artistic creativity for the general public good ” 3 See generally U S PATENT TRADEMARK OFF INTELLECTUAL PROPERTY AND THE U S ECONOMY 2016 UPDATE 2016 https www uspto gov sites default files documents IPandtheUSEconomySept2016 pdf CRS Report RL34292 Intellectual Property Rights and International Trade by Shayerah Ilias Akhtar Ian F Fergusson and Liana Wong at 6–9 4 See CRS Report RL33536 China-U S Trade Issues at 39–54 hereinafter CRS China-U S Trade Report Enhancing IP protection and enforcement internationally is a long-standing and significant component of U S international trade policy as a general matter See generally Ilias Akhtar et al supra note 3 5 See Donald P Harris The Honeymoon is Over The U S -China WTO Intellectual Property Complaint 32 FORDHAM INT’L L J 96 106–08 2008 reviewing pre-WTO history of U S -China IP disputes 6 See World Trade Organization Report of the Working Party on the Accession of China ¶¶ 48–49 WTO Doc WT MIN 01 3 Nov 10 2001 7 See Requests for Consultations by the United States China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights WTO Doc WT DS362 1 Apr 16 2007 8 See OFF OF THE U S TRADE REPRESENTATIVE FINDINGS OF THE INVESTIGATION INTO CHINA’S ACTS POLICIES AND PRACTICE RELATED TO TECHNOLOGY TRANSFER INTELLECTUAL PROPERTY AND INNOVATION UNDER SECTION 301 OF THE TRADE ACT OF 1974 2018 at 151–54 https ustr gov sites default files Section%20301%20FINAL PDF hereinafter SECTION 301 INVESTIGATION REPORT 2 Congressional Research Service 1 Intellectual Property Violations and China Legal Remedies intellectual property and innovation” were unreasonable or discriminatory and burdened or restricted U S commerce 9 On March 22 2018 the USTR concluded its investigation finding that four Chinese policies and practices violated Section 301 1 use of foreign ownership restrictions and administrative licensing requirements to pressure technology transfer from U S companies to Chinese entities 2 IP licensing restrictions that discriminate against foreign entities 3 systematic investment in or acquisition of U S companies to acquire targeted technologies and 4 unauthorized cyber intrusions into U S networks to obtain IP and other confidential business information 10 In light of the USTR’s conclusions the President issued a memorandum directing the USTR to consider three responses 1 increased tariffs on goods imported into the United States from China 2 initiation of a WTO dispute settlement process with respect to China’s discriminatory licensing practices and 3 executive branch actions to address concerns about Chinese inbound investment and acquisition 11 On March 26 2018 the United States initiated a WTO dispute alleging that China’s discriminatory licensing practices violate its WTO commitments 12 Beginning in July 2018 and continuing through 2019 the United States imposed tariff increases on Chinese products worth over $200 billion in several stages 13 China responded by issuing retaliatory tariffs on U S goods worth over $100 billion and filing a WTO dispute challenging the United States’ actions 14 Initiation of Section 301 Investigation Hearing and Request for Public Comments China’s Acts Policies and Practices Related to Technology Transfer Intellectual Property and Innovation 82 Fed Reg 40 213 Aug 24 2017 The investigation followed an August 14 2017 memorandum from the President directing the USTR to determine whether to investigate these practices Id at 40 213 10 SECTION 301 INVESTIGATION REPORT supra note 8 For a summary of the USTR’s conclusions see CRS Legal Sidebar LSB10109 Tricks of the Trade Section 301 Investigation of Chinese Intellectual Property Practices Concludes Part II by Brandon J Murrill 11 Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation of China’s Laws Policies Practices or Actions Related to Technology Transfer Intellectual Property and Innovation 2019 DAILY COMP PRES DOC 1 Mar 22 2018 https www whitehouse gov presidential-actions presidentialmemorandum-actions-united-states-related-section-301-investigation 12 See Request for Consultations by the United States China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 1 Mar 26 2018 see infra notes 231–237 and accompanying text summarizing the dispute and its current status To address concerns about inbound foreign investment Congress passed the Foreign Investment Risk Review Modernization Act of 2018 FIRRMA which the President signed into law on August 13 2018 See Pub L No 11232 tit XVII subtit A 132 Stat 1636 2174–2207 2018 FIRRMA is intended to modernize the processes and authority of the Committee on Foreign Investment in the United States CFIUS to review the national security effects of certain transactions Id at 2175–76 Statement on Congressional Action on Legislation to Reduce the National Security Risks Posed by Certain Types of Foreign Investment 2018 DAILY COMP PRES DOC 1 June 27 2018 https www whitehouse gov briefings-statements statement-president-regarding-investment-restrictions urging Congress to pass FIRRMA to address the foreign investment concerns raised in the Section 301 investigation 13 See CRS In Focus IF10708 Enforcing U S Trade Laws Section 301 and China hereinafter CRS Section 301 and China CRS Report R45529 Trump Administration Tariff Actions Sections 201 232 and 301 Frequently Asked Questions coordinated by Brock R Williams at 3 14 See Williams et al supra note 13 at 7 see also CRS Insight IN10971 Escalating U S Tariffs Affected Trade coordinated by Brock R Williams CRS Section 301 and China supra note 13 CRS In Focus IF10708 Enforcing U S Trade Laws Section 301 and China CRS In Focus IF11085 China’s Retaliatory Tariffs on U S Agricultural Products Request for Consultations by China United States—Tariff Measures on Certain Goods from China WTO Doc WT DS543 1 Apr 5 2018 On September 15 2020 a WTO panel issued a report finding that the United States violated several WTO obligations by imposing the Section 301 tariffs Panel Report United States—Tariff Measures on Certain Goods from China WTO Doc WT DS543 R Sept 15 2020 9 Congressional Research Service 2 Intellectual Property Violations and China Legal Remedies On January 15 2020 the United States and China signed a trade deal known as the “Phase One Agreement” intended to address issues relating to the Section 301 investigation and other trade concerns 15 The Phase One Agreement touches on several areas in China-U S trade relations including agriculture financial services macroeconomic policy currency exchange rates and trade purchases 16 With respect to IP China makes several commitments in the Phase One Agreement agreeing to      increase enforcement against trade secret misappropriation by expanding the scope of persons who may be sued for trade secret theft providing broader preliminary and criminal penalties and addressing unauthorized disclosures of trade secrets by Chinese regulatory authorities 17 strengthen patent protections for pharmaceuticals by creating a mechanism for the early resolution of pharmaceutical patent disputes and providing for patent term extensions and adjustments based on regulatory delays in the grant of patents or marketing approval for pharmaceutical products 18 improve procedures to counter copyright infringement online and counterfeiting on major e-commerce platforms 19 take effective enforcement actions against counterfeit medicines and other counterfeit goods with health and safety risks 20 and provide for procedures to improve border enforcement actions against counterfeit goods such as requirements that customs and judicial authorities generally destroy such goods 21 The Phase One Agreement did not resolve technology transfer issues—one of the central focuses of the Section 301 investigation—leaving the matter for future negotiations 22 The Phase One Agreement does contain general commitments by the parties not to “require or pressure” technology transfer but it avoids details on implementing that commitment 23 OFF OF THE U S TRADE REPRESENTATIVE U S DEP’T OF THE TREASURY ECONOMIC TRADE AGREEMENT BETWEEN THE UNITED STATES OF AMERICA AND THE PEOPLE’S REPUBLIC OF CHINA PHASE ONE Jan 15 2020 https ustr gov 15 sites default files files agreements phase%20one%20agreement Economic_And_Trade_Agreement_Between_The_Uni ted_States_And_China_Text pdf hereinafter Phase One Agreement For a summary of the Phase One Agreement see CRS Insight IN11208 U S Signs Phase One Trade Deal with China by Karen M Sutter For an analysis of the legal basis for the President to enter into this agreement without congressional involvement see CRS Legal Sidebar LSB10403 The Legal Basis for the U S -China “Phase One” Agreement and Implications for Implementation by Nina M Hart 16 See Phase One Agreement supra note 15 chs 3–6 17 Id arts 1 2–1 9 18 Id arts 1 10–1 23 19 Id arts 1 13–1 14 20 Id arts 1 18–1 19 21 Id arts 1 20–1 22 22 See David J Lynch Trump Signs off on Deal to Ease China Trade War WASH POST Dec 12 2019 https www washingtonpost com business 2019 12 12 trump-says-trade-deal-with-china-is-very-close-just-daysahead-tariff-deadline “ The so-called ‘phase one’ agreement would leave the thorniest issues in the U S -China trade dispute to future negotiations including China’s practice of forcing foreign companies to surrender technology secrets in return for access to the Chinese market ” 23 Phase One Agreement supra note 15 arts 2 1–2 4 Congressional Research Service 3 Intellectual Property Violations and China Legal Remedies Observers have noted that many of the Phase One Agreement’s IP provisions reflect changes or commitments that China had made before 24 or are phrased at high levels of generality without specific timelines for implementation 25 After the Phase One Agreement was reached however the United States and China agreed to attempt to deescalate their trade conflict In February 2020 both sides agreed to delay imposition of the next round of proposed tariff increases the United States agreed to reduce some tariffs it imposed in 2019 and China agreed to suspend some of its retaliatory tariffs 26 Since the onset of the Coronavirus Disease 2019 COVID-19 pandemic a number of events and issues have increased tensions between the nations This has led to a delay of the planned sixmonth review of the Phase One Agreement27 as well as an apparent halt to further negotiations of a Phase Two Agreement 28 Observers are uncertain whether the Phase One Agreement will prove lasting and whether a further agreement will emerge 29 In the meantime the United States continues to raise concerns about IP theft by Chinese entities including recent criminal allegations of Chinese state-sponsored hacking of COVID-19 vaccine research 30 This report seeks to place these developments into a broader legal context by reviewing the various legal options available to address IP violations by Chinese entities First it describes various forms that “IP theft” by Chinese entities may take depending on the form of IP at issue e g patents copyrights trademarks or trade secrets and the nature of the violation These See Sutter supra note 15 “China’s commitments on counterfeiting patent and trademark and pharmaceutical protections reflect domestic actions China already took and similar language from earlier commitments according to former U S government negotiators ” 25 See e g Phase One Agreement supra note 15 art 1 34 “Each party shall determine the appropriate method of implementing the provisions of this Agreement within its own system and practice ” Sutter supra note 15 “ The IP commitments appear to be more open-ended and are not linked to corresponding changes required in existing Chinese laws regulations rules practices and industrial policies ” Ningling Wang et al Phase 1 China Trade Deal Patent Provisions FINNEGAN Jan 27 2020 https www finnegan com en insights blogs prosecution-first phase-1-us-chinatrade-deal-patent-provisions html “The value of the Phase One Agreement’s patent provisions will not be known until more details are known in terms of how they will be implemented ” Bill Donahue US-China Trade Deal Aims to Bolster IP Protection LAW360 Jan 15 2020 “While substantively ambitious Wednesday’s agreement is loose on time frames for Chinese action The deal requires an ‘action plan’ within thirty working days but lacks any other hard deadlines ” 26 Williams Escalating U S Tariffs supra note 14 Sutter supra note 15 David Lawder et al What’s in the US-China Phase 1 Trade Deal REUTERS Jan 15 2020 https www reuters com article us-usa-trade-china-details-factbox whats-in-the-us-china-phase-1-trade-deal-idUSKBN1ZE2IF 27 Jenny Leonard U S China Postpone Weekend Talks on Trade Deal BLOOMBERG Aug 14 2020 https www bloomberg com news articles 2020-08-14 u-s-china-postpone-weekend-talks-on-tradedeal sref iK6sCltL 28 Grace Segers Trump Says He’s “Not Interested” in Talking to China About Trade CBS NEWS July 14 2020 https www cbsnews com news trump-china-trade-deal-phase-2-not-interested-talking 29 U S -China Trade Deal Is ‘Fine ’ Trump Advisor Kudlow Says BLOOMBERG Aug 12 2020 https www bloomberg com news articles 2020-08-12 u-s-china-trade-deal-is-fine-trump-adviser-kudlowsays sref iK6sCltL Claire Reade Commentary Trade May Still Be the Ballast in U S -China Relations—At Least for Now CSIS Aug 10 2020 https www csis org analysis trade-may-still-be-ballast-us-china-relations-least-now Scott Lincicome Trump’s China Trade Deal was Designed to Fail CATO INST June 26 2020 https www cato org publications commentary trumps-china-trade-deal-was-designed-fail Eamon Barrett ‘Unrealistically High ’ Experts Doubt China Can Fulfill Its Targets in ‘Phase One’ of the U S Trade Deal FORTUNE Jan 16 2020 https fortune com 2020 01 16 us-china-trade-deal-details-purchases 30 Ellen Nakashima Devlin Barrett U S Accuses China of Sponsoring Criminal Hackers Targeting Coronavirus Vaccine Research WASH POST July 21 2020 https www washingtonpost com national-security us-china-covid-19vaccine-research 2020 07 21 8b6ca0c0-cb58-11ea-91f1-28aca4d833a0_story html see infra notes 499–501 and accompanying text 24 Congressional Research Service 4 Intellectual Property Violations and China Legal Remedies distinctions are significant because the remedies available to the U S government and individual rights holders will depend on the nature and circumstances of the IP violations Second the report reviews the scope and requirements of the legal remedies available under U S and international laws These remedies fall into two broad categories 1 remedies for systemic IP violations which are initiated by the U S executive branch to target widespread IP violations by foreign actors by relying on trade or international law and 2 remedies for individual IP violations which seek to redress discrete IP violations by particular entities by relying on domestic civil administrative and criminal processes Intellectual Property Violations and China Although news reports and U S entities often accuse China of “stealing IP ”31 this general usage conflates both different types of IP and different types of IP violations For example in several reports 32 the USTR has found that Chinese corporations individuals and its government collectively Chinese entities have among other things      used legal and regulatory requirements such as foreign ownership restrictions and administrative approval processes to require or pressure technology transfer from U S companies seeking to do business in China 33 imposed discriminatory technology licensing restrictions that impair U S companies’ ability to negotiate fair market-based terms when they seek to license IP or transfer technology to Chinese companies 34 conducted and supported unauthorized intrusions into U S computer networks to acquire valuable confidential business and technical information 35 as well as misappropriating such confidential information through other means 36 manufactured marketed and exported counterfeit trademarked goods 37 and permitted and facilitated online piracy of copyrighted music television movies and other creative works 38 31 See e g Erik Sherman One in Five U S Companies Say China Has Stolen Their Intellectual Property FORTUNE Mar 1 2019 https fortune com 2019 03 01 china-ip-theft Grant Clark What Is Intellectual Property and Does China Steal It WASH POST Jan 21 2019 https www washingtonpost com business what-isintellectual-propertyanddoes-china-steal-it 2019 01 21 180c3a9e-1d64-11e9-a759-2b8541bbbe20_story html Robert Boxwell How China’s Rampant Intellectual Property Theft Long Overlooked by U S Sparked Trade War SOUTH CHINA MORNING POST MAG Oct 28 2018 https www scmp com magazines post-magazine long-reads article 2170132 how-chinasrampant-intellectual-property-theft 32 See e g OFF OF THE U S TRADE REPRESENTATIVE 2019 SPECIAL 301 REPORT 2019 https ustr gov sites default files 2019_Special_301_Report pdf hereinafter 2019 SPECIAL 301 REPORT SECTION 301 INVESTIGATION REPORT supra note 8 OFF OF THE U S TRADE REPRESENTATIVE 2017 REPORT TO CONGRESS ON CHINA’S WTO COMPLIANCE 2018 https ustr gov sites default files files Press Reports China%202017%20WTO%20Report pdf hereinafter 2017 CHINA WTO COMPLIANCE REPORT 33 SECTION 301 INVESTIGATION REPORT supra note 8 at 19–43 2019 SPECIAL 301 REPORT supra note 32 at 17 46–47 34 SECTION 301 INVESTIGATION REPORT supra note 8 at 48–61 35 Id at 153–76 2019 SPECIAL 301 REPORT supra note 32 at 18 46 36 2019 SPECIAL 301 REPORT supra note 32 at 18 40 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 16–17 115 37 2019 SPECIAL 301 REPORT supra note 32 at 24–26 42–43 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 116–17 38 2019 SPECIAL 301 REPORT supra note 32 at 21–22 44 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 18 Congressional Research Service 5 Intellectual Property Violations and China Legal Remedies IP violations by Chinese entities are thus not a monolithic phenomenon and general terms like “IP theft” often obscure important legal distinctions Different actions by Chinese entities implicate distinct IP or trade laws which affects the various legal remedies that may be available To better understand these distinctions this section presents a taxonomy of IP violations along two dimensions 1 the particular type of IP at issue and 2 the type of violation—that is what is meant by “theft ” It also briefly notes a third distinction—the degree to which the IP violation is committed by the Chinese government or state-affiliated entities or with their support or instead by Chinese individuals or entities not affiliated with the Chinese government Types of Intellectual Property IP law comprises a set of legal rights to exclude others from making copying misappropriating selling disclosing or using certain intangible creations of the human mind 39 There is no universally accepted definition of what qualifies as “intellectual property ” Sometimes IP is used as an umbrella term to refer at least primarily to three distinct forms of legal protection patents copyrights and trademarks 40 Other times IP is used more broadly to include related areas of law including trade secrets rights of publicity misappropriation and moral rights as well as narrower legal regimes protecting plant varieties industrial design circuit design geographical indications and the like 41 Based on their primarily federal nature and commercial importance this report focuses on four types of IP patents copyrights trademarks and trade secrets Each of these forms of IP protects a different type of intellectual creation involves different procedures for obtaining rights and grants the IP owner distinct rights that vary in scope and duration After a brief discussion of the purposes and rationales for IP this section overviews these four major forms of IP protection Basis and Rationales for IP Rights Federal IP laws are legally grounded in one of two constitutional provisions First the U S Constitution’s IP Clause provides Congress with the power “ t o promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries ”42 The IP Clause provides the constitutional basis for U S patent and copyright law 43 Under the IP Clause patents and copyrights are intended to 115–16 39 See Intellectual Property BLACK’S LAW DICTIONARY 11th ed 2019 defining IP as a “category of intangible rights protecting commercially valuable products of the human intellect” 40 See e g id “ IP comprises primarily trademark copyright and patent rights but also includes trade-secret rights publicity rights moral rights and rights against unfair competition ” JAMES BOYLE JENNIFER JENKINS INTELLECTUAL PROPERTY LAW THE INFORMATION SOCIETY ix 4th ed 2018 defining IP as “the set of private legal rights that allows individuals and corporations to control intangible creations and marks” and stating that trademarks copyrights and patents are “the three main forms of US federal intellectual property” 41 See e g TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights Apr 15 1994 Marrakesh Agreement Establishing the World Trade Organization Annex 1C 1869 U N T S 299 301 1994 hereinafter TRIPS defining IP for purposes of the Agreement as comprising patents copyrights trademarks geographical indications industrial design protections trade secrets and integrated circuit design protection Rochelle C Dreyfuss Justine Pila Intellectual Property Law An Anatomical Overview in THE OXFORD HANDBOOK OF INTELLECTUAL PROPERTY LAW 5–6 Rochelle C Dreyfuss Justine Pila eds 2018 defining IP as “the area s of law concerned with the recognition and protection of exclusionary rights in” a number of categories of subject matter including authorial works inventions plant varieties signs of commercial origin designs and confidential information 42 U S CONST art I § 8 cl 8 43 See generally Copyrights and Patents Origins and Scope of the Power in CONSTITUTION OF THE UNITED STATES Congressional Research Service 6 Intellectual Property Violations and China Legal Remedies encourage innovation and the spread of knowledge by providing incentives to create new creative works and generate useful technological inventions 44 Other federal IP laws covering subjects such as trademarks and trade secrets are enacted under the Commerce Clause which grants Congress authority “ t o regulate Commerce with foreign Nations and among the several States and with the Indian Tribes ”45 These IP laws are less centrally concerned with promoting creative activity but are an aspect of Congress’s power to regulate economic activity and establish rules for fair competition For example trademarks protect consumers and lower search costs by preventing businesses from misrepresenting the source of goods or services 46 while trade secrets serve both to encourage innovation and to prevent unfair means of competition between businesses 47 Patents Any person who invents or discovers “any new and useful process machine manufacture or composition of matter or any new and useful improvement thereof” may apply for a patent under U S law 48 Patents may be granted for almost any type of technology made by humans save for laws of nature abstract ideas and natural phenomena 49 For example innovations in pharmaceutical drugs biotechnology chemistry computer hardware and software electrical engineering agriculture mechanical engineering and manufacturing processes may be patented 50 To obtain a patent the inventor must file a formal application with the U S Patent and Trademark Office PTO 51 The process for obtaining a patent called “patent prosecution ”52 is fairly demanding The patent application must contain a written specification that describes the claimed invention with enough detail that a person skilled in the relevant technical field can make and use the invention 53 During prosecution a PTO patent examiner reviews the application to determine whether the claimed invention is 1 directed at patent-eligible subject matter 2 useful 3 new ANALYSIS AND INTERPRETATION CONG RSCH SERV https constitution congress gov browse essay artI_S8_C8_1_1 last visited Aug 10 2020 44 See Sony Corp of Am v Universal City Studios Inc 464 U S 417 429 1984 “ Copyrights and patents are intended to motivate the creative activity of authors and inventors by the provision of a special reward and to allow the public access to the products of their genius after the limited period of exclusive control has expired ” 45 U S CONST art I § 8 cl 3 Protection for trademarks and trade secrets may also be available under state laws 46 Qualitex Co v Jacobson Prod Co 514 U S 159 163–64 1995 “ T rademark law by preventing others from copying a source-identifying mark reduces the customer’s costs of shopping and making purchasing decisions At the same time the law helps assure a producer that it and not an imitating competitor will reap the financial reputation-related rewards associated with a desirable product ” citations and internal quotations omitted 47 Kewanee Oil Co v Bicron Corp 416 U S 470 481 1974 “The maintenance of standards of commercial ethics and the encouragement of invention are the broadly stated policies behind trade secret law ” 48 35 U S C § 101 49 See Alice Corp Pty v CLS Bank Int’l 573 U S 208 216–17 2014 Diamond v Chakrabarty 447 U S 303 309– 10 1980 see generally CRS Report R45918 Patent-Eligible Subject Matter Reform in the 116th Congress by Kevin J Hickey at 10–20 reviewing current law of patent-eligible subject matter 50 See Patent Technology Centers Management U S PATENT TRADEMARK OFF https www uspto gov patent contact-patents patent-technology-centers-management last visited Aug 10 2020 listing technological divisions for PTO examiners 51 35 U S C § 111 52 See General Information Concerning Patents U S PATENT TRADEMARK OFF Oct 2015 https www uspto gov patents-getting-started general-information-concerning-patents 53 35 U S C § 112 a Ariad Pharms Inc v Eli Lilly Co 598 F 3d 1336 1343–45 Fed Cir 2010 en banc Congressional Research Service 7 Intellectual Property Violations and China Legal Remedies 4 nonobvious and 5 adequately disclosed and claimed in the patent application 54 If the examiner finds these requirements met the PTO will issue i e grant the patent 55 If the PTO grants the patent the patent holder has the exclusive right to make use sell offer to sell or import the invention in the United States until the patent expires 56 Patents typically expire twenty years after the initial patent application is filed 57 Any other person who makes uses sells or imports the invention without the patent holder’s permission is said to “infringe” the patent and is potentially legally liable 58 To enforce the patent the patent holder may sue alleged infringers in federal court to seek an injunction i e a judicial order to cease infringing activity damages and other remedies 59 Patents are presumed to be valid 60 but accused infringers may defend against lawsuits by asserting among other things 1 noninfringement i e their allegedly infringing actions were not covered by the patent or 2 invalidity i e the patent should not have issued because for example the claimed invention was not new 61 Copyrights Copyright grants creators of “original works of authorship” a set of exclusive rights in their creative works 62 Forms of expression that are copyrightable include literary works such as books and computer code musical works and sound recordings pictorial graphic and sculptural works audiovisual works such as movies and television and architectural works 63 The key requirements for a copyright are that the work is independently created at least minimally creative and fixed in some tangible form 64 Copyright does not extend to ideas processes systems discoveries or methods of operation 65 Copyright attaches once a work is created and fixed in a tangible medium of expression e g recorded in a computer file or on a piece of paper 66 In contrast to patents the author of a copyrightable creative work need not apply with the government to obtain a copyright 67 However for U S works copyright holders must register their copyrights with the U S Copyright Office before they can sue in federal court 68 The registration process requires 54 35 U S C §§ 101–103 112 Id § 131 56 Id § 271 a 57 Id § 154 a 2 58 Id 59 Id §§ 281 283–285 60 Id § 282 a Microsoft Corp v i4i Ltd P’ship 564 U S 91 95 2011 61 35 U S C § 282 b 62 17 U S C §§ 102 a 106 63 Id § 102 a 1 – 8 64 Id § 102 a Feist Publ’ns Inc v Rural Tel Serv Co 499 U S 340 345–47 1991 65 17 U S C § 102 b see also Baker v Selden 101 U S 99 102–04 1880 66 Id § 102 a 67 Id §§ 102 a 408 a 68 Id § 411 a Although a copyright holder may bring a claim in court even if the Copyright Office refuses to register the work see id the Copyright Office must either register the work or refuse registration before the copyright holder can file suit Fourth Estate Pub Benefit Corp v Wall-Street com LLC 139 S Ct 881 886 2019 55 Congressional Research Service 8 Intellectual Property Violations and China Legal Remedies submitting an application paying a fee and sending a copy or copies of the work to the Copyright Office 69 Copyright holders generally have the exclusive right to reproduce the work publicly perform and display it distribute it and prepare derivative works from it 70 Any person who takes one of those actions without the permission of the copyright owner is potentially legally liable for copyright infringement 71 For most works created today copyright does not expire until seventy years after the death of the work’s author 72 Once a copyright holder registers the copyright she may sue infringers in federal court to seek injunctions damages and other legal remedies 73 In addition to these civil remedies certain willful copyright infringements may be criminal offenses 74 The exclusive rights of a copyright holder are subject to many specific limitations and exceptions 75 The most important limitation is the doctrine of fair use which permits certain socially valuable uses that would otherwise be infringements e g using portions of a copyrighted work in a criticism parody or educational instruction 76 Courts consider a number of factors to evaluate whether a use is fair such as 1 the purpose and character of the use 2 the nature of the original work 3 the substantiality of what was copied 4 any market harm from the use and 5 whether the use is “transformative ” that is whether it adds new expression has a different purpose or alters the original work with new expression or meaning 77 Trademarks In general any “word name symbol or device” may be used as a trademark or service mark to identify a particular business’s goods or services 78 Familiar examples of trademarks include brand names and logos such as NIKE and its “swoosh” symbol The availability of trademark protection depends on the distinctiveness of the proposed mark 79 Generic terms i e a common descriptive name for a particular type of product80 and deceptive terms i e those that materially misrepresent the product81 may not be registered or protected as a trademark 82 Descriptive terms i e those that convey information about the qualities of the product83 surnames and geographically descriptive marks generally cannot be registered or 69 17 U S C §§ 407–410 U S COPYRIGHT OFFICE CIRCULAR 2 COPYRIGHT REGISTRATION 2019 https www copyright gov circs circ02 pdf 70 17 U S C § 106 1 – 6 71 Id §§ 106 501 a 72 Id § 302 a Copyright in works made for hire which often have corporate authors as well as anonymous or pseudonymous works last for 95 years after the work’s publication or 125 years after its creation whichever term is shorter Id § 302 c 73 Id §§ 501–505 74 Id § 506 a 18 U S C § 2319 75 See 17 U S C §§ 108–122 76 See id § 107 Campbell v Acuff-Rose Music Inc 510 U S 569 575–78 1994 77 17 U S C § 107 1 – 4 Campbell 510 U S at 579 78 5 U S C § 1127 defining “trademark” and “service mark” 79 Two Pesos Inc v Taco Cabana Inc 505 U S 763 768 1992 Abercrombie Fitch Co v Hunting World Inc 537 F 2d 4 9–11 2d Cir 1976 Friendly J 80 Park ’N Fly Inc v Dollar Park Fly Inc 469 U S 189 194 1985 81 In re Budge Mfg Co Inc 857 F 2d 773 775 Fed Cir 1988 82 15 U S C §§ 1052 a 1052 e 1064 3 Two Pesos 505 U S at 768–69 83 Park ’N Fly 469 U S at 194 Congressional Research Service 9 Intellectual Property Violations and China Legal Remedies protected as a trademark unless such terms acquire an association by consumers with a particular source of a product so-called “secondary meaning ”84 For example Coca-Cola a drink originally made with coca leaves and cola nuts might not have been initially protectable because its brand name was descriptive of the product Yet the mark subsequently became protectable when the public began to associate the mark with a particular producer 85 Arbitrary terms i e terms that in no way describe the goods or service86 and merely suggestive terms are “inherently distinctive” and may be registered and protected as marks without a showing of secondary meaning 87 Certain federal trademark rights are available based on actual use of or a bona fide intent to use a mark in commerce 88 Because federal law does not generally preempt state laws protecting trademarks 89 rights under applicable state trademark laws may be available as well based either on use of the mark or state registration 90 To obtain presumptive nationwide federal trademark rights a business must first register the mark with the PTO 91 Along with the distinctiveness requirements discussed above the PTO will only register marks that are not confusingly similar to marks that others have already registered 92 Each trademark registration is tied to the use of a mark with particular categories of goods or services e g clothing vehicles or telecommunications services 93 Thus different owners may use an identical or similar mark for different types of products e g Delta Airlines and Delta faucets so long as this parallel use would not confuse consumers 94 Owners of valid trademarks generally have the right to prevent other businesses or persons from using similar marks to identify their products if the use is likely to cause consumer confusion as to the product’s source 95 Trademark owners may sue in federal or state court to obtain 84 15 U S C § 1052 e 1 – 2 e 4 f Wal-Mart Stores Inc v Samara Brothers Inc 529 U S 205 210–11 2000 Two Pesos 505 U S at 769 85 See Coca-Cola Co v Koke Co of Am 254 U S 143 146–47 1920 86 See 2 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 11 11 What Are Arbitrary Word Marks 5th ed 2019 87 Wal-Mart Stores 529 U S at 210–11 Abercrombie Fitch Co v Hunting World Inc 537 F 2d 4 11 2d Cir 1976 88 See 15 U S C §§ 1125 a 1127 Two Pesos 505 U S at 768 89 See Sears Roebuck Co v Stiffel Co 376 U S 225 232 1964 Dorpan S L v Hotel Melia Inc 728 F 3d 55 62 1st Cir 2013 BOYLE JENKINS supra note 40 at 106 90 See generally 3 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION ch 22 State Protection and Registration of Marks 5th ed 2019 State Trademark Information Links U S PATENT TRADEMARK OFF https www uspto gov trademarks-getting-started process-overview state-trademark-information-links last visited Aug 18 2020 91 See 15 U S C §§ 1051 1057 b 92 Id § 1052 d Moreover certain types of marks may not be registered pursuant to specific statutory exceptions including 1 marks that falsely suggest a connection with persons or institutions 2 the names of living persons without their consent and 3 marks consisting of the U S state or municipal flags See id § 1052 a – c Federal law also purports to bar the registration of marks that contain “immoral deceptive or scandalous matter” or those that “may disparage” persons and institutions but the Supreme Court has invalidated these provisions on First Amendment grounds Iancu v Brunetti 139 S Ct 2294 2297 2019 Matal v Tam 137 S Ct 1744 1751 2017 93 15 U S C § 1051 a 2 see 37 C F R §§ 2 85 a 6 1 94 15 U S C § 1052 d BOYLE JENKINS supra note 40 at 104–05 Barton Beebe Jeanne C Fromer Are We Running Out of Trademarks An Empirical Study of Trademark Depletion and Congestion 131 HARV L REV 945 952 n 22 2018 95 15 U S C §§ 1114 1 1125 a KP Permanent Make-Up Inc v Lasting Impression I Inc 543 U S 111 117 2004 In determining whether consumers are likely to be confused by two similar marks courts consider a number of factors such as 1 strength of the mark 2 similarity of the marks 3 proximity of the products 4 evidence of actual confusion 5 the defendant’s intent in selecting the mark 6 the type of goods and sophistication of the Congressional Research Service 10 Intellectual Property Violations and China Legal Remedies injunctions damages and other legal remedies 96 In addition to civil remedies intentional trafficking in goods or services using a counterfeited mark is a federal criminal offense 97 If properly renewed and maintained trademark rights may last indefinitely 98 Trade Secrets Trade secret law protects competitively valuable confidential information Trade secrets include “all forms and types of financial business scientific technical economic or engineering information” where 1 the owner has taken reasonable measures to keep the information secret and 2 the information derives actual or potential independent economic value from not being generally known or readily ascertainable to another person usually a business competitor 99 Examples include secret recipes formulas financial information source code or manufacturing processes Matters of public knowledge or information generally known in an industry may not be a trade secret 100 Until recently trade secret protection was mainly a matter of state law 101 In 2016 Congress passed the Defend Trade Secrets Act DTSA which created a federal civil remedy for trade secret misappropriation 102 The DTSA built upon the Economic Espionage Act of 1996 which criminalized economic espionage and certain thefts of trade secrets 103 Under the DTSA the misappropriation of a trade secret is a federal civil violation that may be remedied through a lawsuit by the trade secret’s owner 104 Protection for trade secrets is also available under state laws which are generally similar to federal requirements 105 consumers and 7 similarity of advertising or marketing See e g AMF Inc v Sleekcraft Boats 599 F 2d 341 348– 49 9th Cir 1979 Polaroid Corp v Polarad Elecs Corp 287 F 2d 492 495 2d Cit 1961 see generally Barton Beebe An Empirical Study of the Multifactor Tests for Trademark Infringement 94 CAL L REV 1581 1587–90 1591 tbl 1 2006 summarizing the factors considered by different federal courts of appeals to determine the likelihood of consumer confusion in trademark cases 96 15 U S C §§ 1116–1117 28 U S C § 1338 a 97 See 18 U S C § 2320 a A “counterfeit mark” is a “spurious” mark that must be 1 identical to or substantially indistinguishable from a registered mark 2 used in connection with the same good or services as the registered mark and 3 likely to cause confusion to cause mistake or to deceive Id § 2320 h i – iv 98 15 U S C § 1058 a – b 99 18 U S C § 1839 3 Factors that courts may consider in determining whether information is a trade secret include 1 the extent to which the information is known outside of the business 2 the extent to which the information is known by employees and others involved in the business 3 the extent of measures taken by the owner to guard the secrecy of the information 4 the value of the information to the owner and the owner’s competitors 5 the amount of effort or money expended by the owner in developing the information and 6 the ease or difficulty with which the information could be properly acquired or duplicated by others See RESTATEMENT 1ST OF TORTS § 757 cmt b AM LAW INST 1939 100 18 U S C § 1839 3 B Kewanee Oil Co v Bicron Corp 416 U S 470 475 1974 “The subject of a trade secret must not be of public knowledge or of a general knowledge in the trade or business ” 101 See BOYLE JENKINS supra note 40 at 769 102 Pub L No 114-153 § 2 130 Stat 376 376–82 2016 codified at 18 U S C §§ 1836 b – d 1839 103 Pub L No 104-294 tit I 110 Stat 3488 3488–91 1996 codified as amended at 18 U S C §§ 1831–1839 104 18 U S C § 1832 b 1 105 Almost all the states have adopted the Uniform Trade Secrets Act in some form See UNIF TRADE SECRETS ACT Unif Law Comm’n 1985 hereinafter UTSA 1 MILGRIM ON TRADE SECRETS § 1 01 2 c i 2019 noting that fortyeight states have adopted UTSA with local variations as of 2018 The federal definitions of “trade secret ” “misappropriation ” and “improper means” generally follow the UTSA 1 MILGRIM ON TRADE SECRETS § 1 01 5 2019 Congressional Research Service 11 Intellectual Property Violations and China Legal Remedies Owners of commercially valuable information need not formally apply with federal or state governments to obtain legal protection for an asserted trade secret However the owner must take “reasonable measures” to keep the information secret 106 For example an owner may restrict access to the information within the business require confidentiality agreements of employees or any others who receive the information or place the information on secure computer systems 107 Whether the measures taken are reasonable depends on the factual circumstances and the nature of the information 108 The owner of a valid trade secret may not legally prevent all acquisitions uses and disclosures of the information Rather federal and state law provide a remedy only when a trade secret is “misappropriated ”109 There are two main forms of misappropriation First misappropriation occurs when an unauthorized person acquires a trade secret through “improper means ” such as theft bribery electronic espionage or a breach of a duty to maintain secrecy e g violation of a nondisclosure agreement 110 Acquiring a trade secret through lawful means such as reverse engineering or independently discovering the trade secret is not a misappropriation 111 Second a person may not use or disclose a trade secret if that person knows or has reason to know that 1 knowledge of the trade secret derives from a person who used improper means to acquire the trade secret 2 the trade secret was acquired under circumstances creating a duty to maintain secrecy or 3 knowledge of the trade secret derives from a person owing a duty to maintain secrecy 112 Owners of trade secrets may sue in state or federal court to enjoin actual or threatened misappropriations and obtain monetary damages for losses caused by misappropriations 113 Civil seizures of property necessary to prevent the dissemination of a trade secret may be available in extraordinary circumstances 114 The EEA also criminalizes two forms of trade secret misappropriation 1 economic espionage which includes the unauthorized appropriation or transmission of a trade secret with the intent to benefit a foreign government 115 and 2 theft of a trade secret which includes the unauthorized appropriation or transmission of a trade secret when the offender knows that the act will injure the owner of a trade secret for the economic benefit of another person 116 Overlap and Interactions Among Different Forms of IP Table 1 summarizes the differences between patents copyrights trademarks and trade secrets Although this section has presented each form of IP separately because they are legally distinct there is a degree of overlap in the subject matter that each form of IP protects This can lead to situations in which an owner must choose between different forms of IP protection For example 106 18 U S C § 1839 3 A See generally 1 MILGRIM ON TRADE SECRETS § 1 01 c iii D 2019 108 Id 109 18 U S C § 1836 b 1 UTSA §§ 2 a 3 a 110 18 U S C § 1839 5 A 6 A In addition a person who used improper means to acquire a trade secret may not disclose or use the trade secret without authorization Id § 1839 5 B i 111 Id § 1839 6 B 112 Id § 1839 B ii I – III 113 Id § 1836 b 3 A – B 114 Id § 1836 b 2 115 Id § 1831 a 116 Id § 1832 a 107 Congressional Research Service 12 Intellectual Property Violations and China Legal Remedies the owner of a novel discovery may strategically decide whether to protect that information as a trade secret or instead seek a patent 117 While trade secret protection covers a broader range of information and potentially lasts longer than a patent it provides narrower rights because it lacks any protection against independent discovery or reverse engineering by third parties 118 By applying for a patent however the owner gives up any claim to trade secret protection because issued patents and patent applications are publicly available 119 In other situations an individual may be able to protect the same information or product by relying on multiple forms of IP protection For example computer code is eligible for copyright protection as a literary work yet the owner may also choose to keep the code as a trade secret Moreover different aspects of a product may be protected by different types of IP rights such as a patented pharmaceutical product with a trademarked brand name There is no general one-to-one correspondence between IP protection and a particular consumer product For example the various technologies within a typical smartphone e g computer hardware and software design and networking are protected by many thousands of different patents 120 along with the copyrighted computer code of the operating system and various applications Valuable pharmaceutical products are often protected by dozens of different patents relating to the active ingredient formulations administration methods of treatment or methods of manufacturing the drug 121 117 See Kewanee Oil Co v Bicron Corp 416 U S 470 485–92 1974 Compare 35 U S C § 271 a patentee has the exclusive right to make use and sell the patented invention with 18 U S C § 1839 6 permitting reverse engineering and independent derivation of trade secrets 119 35 U S C §§ 10 122 b 153 37 C F R §§ 1 11 a 1 211 120 Steve Lohr Apple-Samsung Patent Battle Shifts to Trial N Y TIMES July 29 2012 https www nytimes com 2012 07 30 technology apple-samsung-trial-highlights-patent-wars html 121 See CRS Report R45666 Drug Pricing and Intellectual Property Law A Legal Overview for the 116th Congress coordinated by Kevin J Hickey at 12–14 118 Congressional Research Service 13 Intellectual Property Violations and China Legal Remedies Table 1 Comparison of Each Form of Federal Intellectual Property Protection Patent Copyright Trademark Trade Secret Constitutional Basis IP Clause U S CONST art I § 8 cl 8 IP Clause U S CONST art I § 8 cl 8 Commerce Clause U S CONST art I § 8 cl 3 Commerce Clause U S CONST art I § 8 cl 3 Statutory Basis 1952 Patent Act as amended 35 U S C §§ 1–390 1976 Copyright Act as amended 17 U S C §§ 101–1332 1946 Lanham Act as amended 15 U S C §§ 1051– 1141n DTSA and Economic Espionage Act of 1996 18 U S C §§ 1831–1839 Initial Rights Holder Inventor Author Business or person using mark to identify goods or services Owner of commercially valuable confidential information Subject Matter New and useful processes machines manufactures or compositions of matter Original works of authorship Any word name symbol or device used to identify goods or services Financial business scientific technical economic or engineering information Subject Matter Examples Pharmaceuticals engineering manufacturing processes Books musical works movies fine art architecture software Brand names logos distinctive trade dress Formulas source code prototypes customer lists financial information Requirements for Protection Novelty nonobviousness utility first to file Independent creation minimal creativity fixation Use in commerce registration for presumptive nationwide rights Information derives economic value from not being generally known Excluded From Protection Laws of nature natural phenomena and abstract ideas Any idea procedure process system method of operation concept principle or discovery Generic terms deceptive terms descriptive terms that lack secondary meaning Information generally known independently discovered reverse engineered or lawfully acquired Process to Secure Rights PTO patent application process patent prosecution Create and fix the work registration is required to sue PTO trademark registration process Take reasonable measures to keep information secret Exclusive Rights Granted To make use offer to sell sell and import the patented invention To reproduce distribute or publicly perform display the work and make derivative works Prevent confusingly similar uses of the mark Prevent others from misappropriating trade secret e g acquisition through improper means Duration 20 years from date of application Life of author plus 70 years Potentially indefinite Potentially indefinite Infringement Test Practice the claimed invention Substantially similar to original Likely to confuse consumers Misappropriation Main Defenses Invalidity noninfringement inequitable conduct Fair use lack of substantial similarity Fair use nominative use lack of confusion Information was not a trade secret or was not misappropriated Source Congressional Research Service Congressional Research Service 14 Intellectual Property Violations and China Legal Remedies Forms of “IP Theft” “IP theft” and “stealing IP” are colloquial terms not legal concepts Strictly speaking most forms of IP with the important exception of trade secrets cannot be “stolen ” A patent for example is a publicly available legal document granting the patent holder certain exclusive rights another person might infringe the patent e g by making and selling the patented invention without permission but infringers do not “steal” the patent Nor does IP law necessarily preclude persons other than the IP owner from using or acquiring protected information without permission third parties may lawfully reverse engineer a trade secret for example or make a fair use of a copyrighted work 122 Rather the colloquial usage of “IP theft” usually seeks to capture concerns about varied laws policies and practices of—in the context of this report—the Chinese government and other Chinese entities related to IP and technology transfer which harm U S IP rights holders 123 This section describes several forms that these IP-related violations may take Under-Protection One way in which a foreign nation might undermine IP rights is through a lack of substantive legal protections for IP available under that country’s domestic law Under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights TRIPS all members of the WTO including the United States and China agree to certain minimum standards for IP protection and enforcement 124 First members agree to provide under their domestic laws a basic level of substantive protection for copyrights trademarks patents trade secrets and other forms of IP 125 Second members agree to ensure that certain minimum civil criminal and administrative procedures to enforce IP rights are available to permit effective action against infringements 126 Members further agree to provide “national treatment ” a nondiscrimination principle under which each WTO member must treat nationals of other members no less favorably than they treat their own citizens with respect to IP rights 127 TRIPS’s substantive provisions set forth required minimum levels of IP protection For example with respect to trademarks members agree that “any sign capable of distinguishing the goods or services” of a business shall be eligible for trademark registration subject to limited exceptions 128 Owners of valid registered trademarks must have the right to exclude others from “using in the course of trade identical or similar signs for goods or services where such use would result in a likelihood of confusion ”129 Initial trademark registrations must last for at least 122 See 17 U S C § 107 18 U S C § 1839 6 B See e g SECTION 301 INVESTIGATION REPORT supra note 8 at 4 124 See TRIPS supra note 41 see generally Ilias Akhtar et al supra note 3 at 15–17 125 TRIPS supra note 41 pt II Geographical indications industrial design and integrated circuit design are the other forms of IP that must be protected by WTO members under TRIPS Id TRIPS explicitly incorporates by reference many of the provisions of earlier and still in force IP treaties such as the Paris Convention for the Protection of Industrial Property Mar 20 1883 revised at Stockholm July 14 1967 21 U S T 1583 828 U N T S 305 and the Berne Convention for the Protection of Literary and Artistic Works Sept 9 1886 revised at Paris July 24 1971 1161 U N T S 3 See e g TRIPS supra note 41 arts 1–3 9 15–16 39 126 TRIPS supra note 41 pt III 127 Id arts 1 3 A similar but distinct nondiscrimination principle required by TRIPS is known as “most-favored nation treatment ” which generally requires that if a member extends to the nationals of one country any advantage relating to the availability acquisition scope maintenance and enforcement of IP it must also extend that same privilege to the nationals of all other members Id art 4 128 Id art 15 129 Id arts 16–17 123 Congressional Research Service 15 Intellectual Property Violations and China Legal Remedies seven years and must be renewable indefinitely 130 If a WTO member were to for example provide a shorter initial term or a nonrenewable term of trademark registration that nation would fail to meet the minimum substantive standards set forth in TRIPS Concerns about China failing to meet its WTO obligations with respect to IP are long-standing TRIPS which first went into effect in 1996 became applicable to China after its accession to the WTO in 2001 131 In 2007 the United States initiated a dispute against China before the WTO alleging inadequacies in China’s substantive IP laws and its enforcement of those laws 132 After the United States prevailed on several of its claims 133 China agreed to implement the WTO’s ruling in the dispute by March 2010 134 U S stakeholders continue to lodge complaints about whether China’s domestic laws meet TRIPS’s substantive requirements 135 while acknowledging progress by China in recent years 136 Since 2005 137 the USTR has placed China on the Priority Watch List indicating “that particular problems exist in that country with respect to IP protection enforcement or market access for persons relying on IP ”138 Specifically the USTR found that China has an “urgent need for fundamental structural changes to strengthen IP protection and enforcement including as to trade secret theft online piracy and counterfeiting the high volume manufacture and export of counterfeit goods and impediments to pharmaceutical innovation ”139 The USTR has also designated many online or physical markets based in China as “notorious markets”140 that are “prominent and illustrative examples of online and physical marketplaces that reportedly engage in and facilitate substantial piracy and counterfeiting ”141 In its most recent Special 301 Report 142 the USTR concluded that although China reorganized its IP protection and enforcement authorities and made progress in some areas ultimately its actions “fell short of needed fundamental changes to the IP landscape in China ”143 130 Id art 18 See 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 2 107 132 Request for Consultations by the United States China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights WTO Doc WT DS362 1 Apr 16 2007 133 Panel Report China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights WTO Doc WT DS362 R adopted Jan 26 2009 134 Communication from China and the United States concerning Article 21 3 b of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes DSU China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights WTO Doc WT DS362 13 July 3 2009 see generally CRS China-U S Trade Report supra note 4 at 53 Devon Spencer Not in It for the Long Run China’s Solution for Compliance with TRIPS Requires More Than a Nine-Month Campaign 19 U MIAMI INT’L COMP L REV 197 211–18 2012 135 See generally 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 107–13 136 See e g CRS China-U S Trade Report supra note 4 at 40–41 citing surveys of IP holders finding that although many find the IP enforcement environment in China to be ineffective or inadequate over 90% believed the IP environment in China had improved between 2009 and 2016 137 International Intellectual Property Alliance History of USTR’s Special 301 Decisions Since 1989 Feb 7 2019 https iipa org files uploads 2019 02 2019SPEC301HISTORICALCHART pdf 138 2019 SPECIAL 301 REPORT supra note 32 at 8 139 Id at 6 140 OFF OF THE U S TRADE REPRESENTATIVE 2018 OUT-OF-CYCLE REVIEW OF NOTORIOUS MARKETS 16–17 22–23 2019 https ustr gov sites default files 2018_Notorious_Markets_List pdf 141 Id at 2 142 See discussion infra in “Section 301 of the Trade Act of 1974” discussing Special 301 authority 143 2019 SPECIAL 301 REPORT supra note 32 at 41 131 Congressional Research Service 16 Intellectual Property Violations and China Legal Remedies For example as to the substantive level of IP protection afforded by Chinese law the USTR has asserted that     China fails to provide adequate patent protection for pharmaceutical products by imposing unduly restrictive and “opaque” patent examination procedures 144 China fails to impose adequate criminal liability for copyright infringement through high monetary thresholds and profit motive requirements 145 China’s trade secret law may exclude some types of proprietary information and is limited to actions of commercial entities rather than any legal person 146 and China has failed to make clear that sports and other live broadcasts are eligible for copyright protection in China 147 Such substantive legal shortcomings could conceivably be the basis of a WTO complaint based on TRIPS noncompliance 148 or other remedies discussed below Notably the Phase One Agreement addresses some of these issues 149 Infringement and Under-Enforcement Together with its provisions for minimum levels of substantive IP protection TRIPS also sets forth minimum standards for IP enforcement by WTO members 150 Presuming that a nation’s IP laws meet TRIPS’s minimum substantive standards IP rights may still be undermined if a nation does not adequately enforce those IP laws For example a nation may lack adequate institutions or procedures such as an effective and fair court system that are necessary to vindicate IP rights TRIPS requires that WTO members have enforcement procedures that “permit effective action” against infringements of IP rights 151 For example members must make “fair and equitable” civil judicial procedures available to IP rights holders 152 These judicial authorities must have authority to grant effective and adequate relief including injunctions and damages 153 For counterfeit trademarked goods and pirated copyrighted goods members must establish border control procedures through which rights holders may apply to customs authorities to block the importation of infringing goods 154 For cases of willful trademark infringement or copyright piracy “on a commercial scale ” members must establish criminal procedures and penalties 155 144 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 110–11 2019 SPECIAL 301 REPORT supra note 32 at 44– 45 145 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 108 146 Id at 109 2019 SPECIAL 301 REPORT supra note 32 at 41–42 147 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 108 2019 SPECIAL 301 REPORT supra note 32 at 45 148 See discussion infra in “TRIPS and WTO Disputes ” 149 See supra notes 15–29 and accompanying text 150 TRIPS supra note 41 pt III 151 Id art 41 1 152 Id arts 41–42 153 Id arts 44–45 154 Id arts 51–60 155 Id art 61 Congressional Research Service 17 Intellectual Property Violations and China Legal Remedies As with the substantive aspects of TRIPS U S rights holders have long maintained that Chinese authorities fail to enforce existing IP laws adequately or that China lacks effective procedures and institutions for rights holders to enforce their IP rights 156 Two areas of continuing concern about China’s IP enforcement environment are 1 the manufacture sale and export of counterfeit trademarked goods counterfeiting and 2 unauthorized copying performance and distribution of copyrighted works particularly online piracy As to trademark counterfeiting a 2019 study of customs seizures by the Organization for Economic Co-operation and Development OECD and the EU Intellectual Property Office EUIPO found that China was the world’s leading source of counterfeit goods 157 Together with Hong Kong through which exported Chinese merchandise often transships China was the source of over 63% of counterfeited and pirated exports representing $322 billion in value 158 The United States was the largest victim of these infringements with nearly 25% of seized counterfeits affecting IP rights registered in the United States 159 Looking just at seizures by U S authorities China together with Hong Kong was the origin of 87% of the goods seized by U S Customs and Border Protection for IP violations in FY2018 representing $1 2 billion in retail value 160 Trademark counterfeiting by Chinese entities encompasses a vast array of goods including apparel and footwear toys sporting goods and other consumer products 161 On top of the harms that counterfeiting has on trademark holders counterfeit goods may also create health and safety concerns as in the case of counterfeit pharmaceuticals food and beverages semiconductors and automotive parts 162 Piracy of copyrighted works is a second area of long-standing concern for U S rights holders The internet is an efficient vehicle enabling the unauthorized distribution of copyrighted movies music software and television programs in China as well as other nations 163 The USTR reports that copyright piracy is “widespread” in China particularly online 164 For example the Business Software Alliance’s most recent study found that 66% of all software in China is unlicensed that is used without permission from the copyright holder representing $6 8 billion in commercial 156 See generally CRS China-U S Trade Report supra note 4 at 39–43 OECD EUIPO TRENDS IN TRADE IN COUNTERFEIT AND PIRATED GOODS 12 27–28 2019 OECD defines “counterfeit and pirated goods” broadly see id at 14 so its estimates include goods that violate patents design rights and copyrights as well as trademarks The study’s list of the most affected industries footwear clothing leather watches cosmetics id at 31 suggests that trademark infringements are a substantial component of these estimates 158 Id at 46 159 Id at 32–33 160 U S CUSTOMS BORDER PROT INTELLECTUAL PROPERTY RIGHTS FISCAL YEAR 2018 SEIZURE STATISTICS 16 24 2019 https www cbp gov sites default files assets documents 2019-Aug IPR_Annual-Report-FY-2018 pdf hereinafter FISCAL YEAR 2018 SEIZURE STATISTICS These statistics aggregate seizures for both trademark and copyright infringement see id at 6 13 but the top categories of products seized apparel footwear watches handbags id at 17 suggest that trademark infringements are a substantial component of these estimates 161 2019 SPECIAL 301 REPORT supra note 32 at 24 162 Id at 24–25 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 116–17 163 2019 SPECIAL 301 REPORT supra note 32 at 22 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 18 164 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 116 157 Congressional Research Service 18 Intellectual Property Violations and China Legal Remedies value 165 China is also a leading source and exporter of websites and software that facilitate copyright piracy 166 Trade Secret Misappropriation and Cyber Intrusions Improper acquisition and disclosure of trade secrets represents another way that Chinese entities and its government may harm U S IP rights holders Because trade secret law generally requires a misappropriation to be actionable—such as acquisition of a trade secret through theft bribery breaches of contractual duties or electronic espionage167—this type of IP violation fits more naturally within a “theft” paradigm than other IP infringements Trade secret misappropriation by Chinese entities takes many forms Perhaps the most direct means of improperly acquiring a trade secret is through unauthorized intrusion by Chinese entities into U S firms’ computer networks to obtain confidential business information 168 The USTR has found that China’s government conducts or supports many of these cyber intrusions 169 Several industries targeted by China—such as information technology aerospace and energy— match those identified as key areas in China’s state-led industrial policies 170 According to the USTR “ a s the global economy has increased its dependence on information systems cyber theft became one of China’s preferred methods of collecting commercial information because of its logistical advantages and plausible deniability ”171 Trade secret misappropriations by Chinese entities extend beyond hacking and cyber intrusions however In other situations current or former employees of a business such as locally hired engineers of U S entities doing business in China may disclose trade secrets to Chinese authorities or competitors without authorization 172 Chinese entities also allegedly use means such as physical intrusions bribery fraud breach of confidentiality agreements or misrepresentation to acquire trade secrets 173 For example U S authorities have raised concerns about unauthorized disclosures to Chinese entities of confidential biomedical research proposals submitted to the National Institutes of Health allegedly in violation of peer review confidentiality agreements 174 Although trade secret misappropriation is itself a civil and potentially criminal violation under U S law 175 other civil and criminal laws may be implicated as well depending on the means used to acquire the trade secret For example as discussed below unauthorized cyber intrusions may 165 SOFTWARE ALL SOFTWARE MANAGEMENT SECURITY IMPERATIVE BUSINESS OPPORTUNITY BSA GLOBAL SOFTWARE SURVEY 7 10 12 2018 https gss bsa org wp-content uploads 2018 06 2018_BSA_GSS_Report_A4_ en pdf 166 2019 SPECIAL 301 REPORT supra note 32 at 44 167 18 U S C §§ 1836 b 1839 5 – 6 168 SECTION 301 INVESTIGATION REPORT supra note 8 at 153–76 169 Id at 153 170 See id at 11–13 156 171 Id at 154 172 See 2019 SPECIAL 301 REPORT supra note 32 at 18 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 115 173 See Keith Bradsher How China Obtains American Trade Secrets N Y TIMES Jan 15 2020 https www nytimes com 2020 01 15 business china-technology-transfer html CRS China-U S Trade Report supra note 4 at 42–43 18 U S C § 1839 5 – 6 174 See CRS Insight IN11207 Foreign Interference in NIH Research Policy Implications by Kavya Sekar Gina Kolata Vast Dragnet Targets Theft of Biomedical Secrets for China N Y TIMES Nov 4 2019 https www nytimes com 2019 11 04 health china-nih-scientists html 175 See 18 U S C §§ 1831–1832 1836 Congressional Research Service 19 Intellectual Property Violations and China Legal Remedies be a crime under the Computer Fraud and Abuse Act or other anti-hacking laws 176 Similarly obtaining trade secrets through unauthorized physical intrusions or bribery may violate various state or federal laws e g burglary or fraud depending on the circumstances As discussed below however the ability of U S authorities to exercise jurisdiction over the person and violation represents a significant limitation on remedies for these crimes 177 Traditional trade secret misappropriation does not reach all of the various means that Chinese entities use to obtain technology and other know-how from U S firms Coercive technology transfer and regulatory extraction discussed below 178 may or may not be a trade secret violation depending on the circumstances Strategic acquisition of U S firms by Chinese corporations to acquire technology is another means of acquisition that does not generally represent a trade secret violation but still may raise national security or other legal concerns 179 Coercive Technology Transfer Acquisition of trade secrets and technology by Chinese entities may take somewhat subtler forms than outright misappropriations like cyber intrusions or physical theft In its 2018 investigation report conducted under Section 301 180 the USTR describes China’s industrial policies and practices concerning IP and other technological know-how as an “unfair technology transfer regime ”181 The USTR characterizes this “regime” of coerced technology transfer applicable to U S and other foreign entities seeking to do business in China as taking two main forms First China uses formal and informal foreign ownership restrictions to pressure transfer of technology to Chinese entities effectively as a condition of foreign companies doing business in China 182 Second China uses regulatory licensing requirements to force technology transfer in exchange for various administrative approvals needed to conduct business in China 183 The first form of coercive technology transfer concerns Chinese foreign investment restrictions such as requirements that foreign businesses seeking to enter the Chinese market form a joint venture JV with Chinese entities or state-owned enterprises Under Chinese law foreign companies in certain industries may not enter the Chinese market unless they partner with a Chinese company 184 The Chinese JV partner or Chinese governmental entities may informally or formally require or pressure technology transfer from the foreign entity to the Chinese partner as a condition of concluding the partnership deal and obtaining access to the Chinese market 185 Moreover in some cases the Chinese JV partner or its employees may have ties to the Chinese See discussion infra in “Computer Fraud and Abuse Act ” See discussion infra in “Remedial Issues Jurisdiction and Territoriality ” 178 See discussion infra in “Coercive Technology Transfer ” 179 See CRS China-U S Trade Report supra note 4 at 28–29 180 See discussion infra in “Section 301 of the Trade Act of 1974 ” 181 SECTION 301 INVESTIGATION REPORT supra note 8 at 19 The Report uses the term “technology” broadly to encompass not just information protected by patents copyrights trademarks and trade secrets but also “know-how” such as “production process management techniques expertise and the knowledge of personnel” even if not legally protected as IP Id at 6 182 Id at 19 183 Id 184 Id at 23–24 Depending on the industry the Chinese party may be required to be the controlling shareholder Id at 24–29 185 Id at 21–24 176 177 Congressional Research Service 20 Intellectual Property Violations and China Legal Remedies partner’s existing operations which may compete with the JV operation 186 In such a situation the JV’s technology or trade secrets may be misappropriated or leaked to the firm’s Chinese competitors 187 The second form of coerced technology transfer relates to administrative licensing and regulatory approvals required by China for companies to establish or expand operations in many industries such as food drugs mining or telecommunications 188 In the abstract there is nothing inherently improper about the government regulating industries for health safety or environmental reasons However the USTR has alleged that China leverages necessary regulatory approvals as a tool to force technology transfer 189 For example a company may disclose proprietary formulas and designs to regulatory authorities to receive marketing approval only to find that this sensitive information is passed along to Chinese competitors 190 In other cases the “expert panel” to which companies submit sensitive technical information for regulatory approval consists not only of governmental officials but also of representatives from Chinese industry or academia with a competitive interest in the technology 191 Discriminatory Restrictions on Contractual IP Licensing Owners of most forms of IP can assign or license their rights to another person just as tangible property may be sold or leased to another party 192 For example ownership of a copyright may be transferred from one person to another by signed written contract 193 usually in exchange for compensation The IP owner may also retain ownership and grant a license to another person that is either exclusive or nonexclusive permission to use the IP 194 Thus for example a patent owner may grant permission to another person to use and sell the patented invention through a contract in exchange for money or other compensation e g royalties or a musician may sell or license the rights in his work to a record company or a music publisher 195 Sale or licensure can be an important way for IP owners to make money from their creations especially for smaller entities that may not have the resources to commercialize their IP themselves If IP owners cannot freely license their works at market rates this may diminish the IP’s value In its Section 301 investigation report the USTR found that Chinese laws policies and practices preclude foreign entities from fairly negotiating market-based terms when licensing technology to Chinese entities 196 Under Chinese law foreign entities negotiating technology transfers or 186 Id at 28 Id 188 Id at 36–39 189 Id 190 Id at 42–43 191 Id 192 See e g 17 U S C § 201 d copyrights 35 U S C § 261 patents Ruckelshaus v Monsanto Co 467 U S 986 1002 1984 trade secrets Trademarks may be assigned or licensed as well but subject to limitations such as prohibitions on “naked licensing” and “assignments in gross ” See generally 3 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION ch 18 Assignment and Licensing of Trademarks 5th ed 2019 193 17 U S C § 204 a 193 17 U S C § 204 a 194 See License BLACK’S LAW DICTIONARY 11th ed 2019 defining a license as “permission to commit some act that would otherwise be unlawful” 195 See e g MedImmune Inc v Genentech Inc 549 U S 118 121–22 2007 patent license agreement Cohen v Paramount Pictures Corp 845 F 2d 851 852 9th Cir 1988 copyright license agreement 196 SECTION 301 INVESTIGATION REPORT supra note 8 at 48–61 187 Congressional Research Service 21 Intellectual Property Violations and China Legal Remedies licenses are subject to different contractual restrictions than comparable provisions applicable to Chinese entities 197 For example Chinese regulations mandate that in a technology license a foreign licensor cannot stop the licensee from making improvements to the technology and the Chinese licensee must own any such improvements made to the licensed technology 198 Thus the licensor cannot preclude the licensee from altering the licensed technology and then seeking a patent on that improvement 199 In the context of JVs with Chinese entities Chinese regulations mandate that the contract be limited to a ten-year duration but the Chinese entity must nonetheless be granted the rights to use the technology in perpetuity 200 The USTR alleges that these legally mandated licensing terms in effect put U S companies at a disadvantage relative to Chinese entities decrease the value that U S companies can obtain from licenses and limit foreign IP rights holders’ ability to control future uses of licensed technologies 201 As discussed in further detail below 202 on March 26 2018 the United States filed a complaint with the WTO over these discriminatory licensing practices alleging that China 1 imposes mandatory adverse contract terms that discriminate against and are less favorable to imported foreign technology and 2 denies foreign patent holders the ability to enforce their patent rights against a Chinese JV partner even after a technology transfer contract ends 203 The proceedings have been suspended since June 2019 at the request of the United States although with brief periods of activity to ensure the WTO panel’s authority does not lapse 204 Bad-Faith Assertion Registration Another form of harm to U S IP rights holders concerns the bad-faith over-enforcement of IP rights In some ways this issue is the inverse of concerns about under-enforcement of IP rights instead of ignoring widespread infringement the issue here relates to exploitation of the IP system using specious claims that harm the legitimate interests of IP rights holders and users For example bad-faith trademark registrations in China are an area of “growing concern ”205 Many U S brand owners have complained that third parties are registering large numbers of marks in China that are identical or similar to existing well-known U S brands 206 This practice may harm the U S trademark holder in two ways First if the registrant uses the mark to establish a business in China passing off its goods as those of the U S brand this may confuse Chinese consumers and harm U S rights holders in ways analogous to ordinary trademark infringement 207 Second some bad-faith registrants have sought to “ransom” the mark to the U S rights holder forcing U S trademark holders to purchase their “own” rights back to avoid damage to their 197 Id at 49–51 Id at 49 199 Id 200 Id at 50 201 Id at 51–54 202 See infra notes 231–237 and accompanying text 203 Request for Consultations by the United States China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 1 Mar 26 2018 204 See Communication from the Panel China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 14 June 18 2020 Communication from the Panel China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 10 June 14 2019 205 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 110 206 2019 SPECIAL 301 REPORT supra note 32 at 42 207 Id 198 Congressional Research Service 22 Intellectual Property Violations and China Legal Remedies brand 208 U S stakeholders do not view the existing trademark opposition process in China as adequate to address concerns about bad-faith registration 209 Bad-faith assertion issues may also occur within the U S IP system Chinese applications for trademarks in the United States have surged recently rising from 0 07% to 10 5% of all trademark registration applications between 1985 and 2017 210 A recent empirical study found that nearly 67% of trademark applications originating from China in 2017 in the apparel category showed signs of being fraudulent because the registrants did not appear to intend to use the mark in commerce 211 Even so fraudulent trademarks harm U S rights holders through trademark depletion i e a decrease in the supply of available effective trademarks and “clutter” in the Principal Register the primary U S trademark registry 212 While the motivation for these fraudulent trademark applications is unclear some speculate it results from the cash incentives offered by Chinese provincial governments for the registration of trademarks 213 and it may be intended to harm U S competitiveness 214 State Sponsorship and IP Violations IP violations also differ in terms of the actor who committed the alleged violation In the context of this report a potentially relevant distinction is whether the IP violation was committed or supported by the Chinese government or government-affiliated entities or instead by private Chinese individuals or entities not affiliated with or supported by the Chinese government The discussion above has generally used the term Chinese entities to include both governmental and nongovernmental actors in part because the complex relationship between the private sector in 208 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 110 2019 SPECIAL 301 REPORT supra note 32 at 48 210 See Fraudulent Trademarks How They Undermine the Trademark System and Harm American Consumers and Businesses Hearing Before the S Subcomm on Intellectual Property of the S Comm on the Judiciary 116th Cong 17–18 statement of Profs Barton Beebe and Jeanne Fromer showing increase from 42 trademark applications originating from China in 1985 to 51 312 applications in 2017 https www judiciary senate gov imo media doc Beebe%20Testimony pdf hereinafter Beebe Fromer Statement 211 Id at 18–20 Such fraudulent trademark applications relied on “specimens of use” that for example consisted of multiple nearly identical images of the same consumer product digitally altered with a different brand name on the tag or relied on a product image associated with another company Id at 19 laying out indicia of fraudulent specimens of use see also Jacob Gershman Flood of Trademark Applications From China Alarms U S Officials WALL ST J May 5 2018 https www wsj com articles flood-of-trademark-applications-fromchinaalarms-u-s-officials-1525521600 212 See Beebe Fromer Statement supra note 210 at 32–33 213 Gershman supra note 211 Trade Relations Bringing in the Big Guns WORLD INTELL PROP REV Apr 11 2019 https www worldipreview com contributed-article trade-relations-sending-in-the-big-guns “As part of a national effort to drive growth and IP ownership China’s provincial governments began paying citizens for each trademark registered in the US in some cases paying $790 for each US trademark application according to reports ” 214 See Fraudulent Trademarks How They Undermine the Trademark System and Harm American Consumers and Businesses Hearing Before the S Subcomm on Intellectual Property of the S Comm on the Judiciary 116th Cong 8 responses to questions for the record by Megan K Bannigan https www judiciary senate gov imo media doc Bannigan%20Response%20QFRs pdf “I cannot say concretely why China is doing this and can only assume it is to negatively impact the American economy and competitiveness while bolstering the Chinese economy and competitiveness ” Bruce Berman 12-Fold Increase in China’s U S Trademark Apps Many Are Said to Be Fraudulent and Improperly Filed IP CLOSEUP Sept 4 2018 https ipcloseup com 2018 09 04 12-fold-increase-inchinas-u-s-trademark-apps-many-are-said-to-be-fraudulent-and-improperly-filed overviewing debate over whether “China may be attempting to ‘disrupt’ the U S trademark system by flooding it with huge numbers of applications” 209 Congressional Research Service 23 Intellectual Property Violations and China Legal Remedies China and the government can make these distinctions more difficult to draw than in other countries 215 For some types of IP violations—such as a failure to provide adequate IP protection216 or discriminatory IP licensing regulations217—the actor at issue is necessarily a governmental entity as the complaint concerns the legal provisions of Chinese domestic law In most cases however the varieties of IP violations discussed above may be committed either by entities affiliated with the Chinese government or by private entities acting without state sponsorship For example U S authorities have alleged that certain cyber intrusions are committed with the support of the Chinese government but this is not necessarily true in every case 218 With respect to IP infringements such as piracy or counterfeiting the infringers may be primarily nongovernmental entities although U S rights holders complain of a lack of effective enforcement by Chinese authorities 219 In other cases it may be unclear whether a particular IP violation is supported by the Chinese government Existing Legal Remedies The legal remedies available for IP violations by Chinese entities depend on many factors including the nature of the violation the type of IP at issue where the violation occurred the availability of personal jurisdiction over the accused and whether the violation is part of a larger pattern of IP violations 220 This section reviews some of the principal legal remedies available under current law First it reviews remedies to address systemic violations which are usually initiated by the executive branch to address widespread IP violations by foreign actors These remedies generally rely on the President’s authority over foreign affairs or Congress’s statutory delegation of its authority over trade to the executive branch Second this section reviews the civil criminal and administrative remedies available for individual IP violations—that is discrete IP violations affecting a particular rights holder—such as infringement suits or import controls This section does not address the policy considerations relevant to pursuing these various remedies 221 Systemic Violations Foreign Affairs and Trade Remedies This section examines actions that the executive branch could initiate against China’s alleged violations of U S IP rights under international trade agreements through the use of its constitutional authority over foreign affairs and under domestic international trade statutes SECTION 301 INVESTIGATION REPORT supra note 8 at 25 noting that the “complex relationship between China’s private sector and the government” is a “particular challenge” 216 See discussion supra in “Under-Protection ” 217 See discussion supra in “Discriminatory Restrictions on Contractual IP Licensing ” 218 See SECTION 301 INVESTIGATION REPORT supra note 8 at 153 2017 CHINA WTO COMPLIANCE REPORT supra note 32 at 115 219 See discussion supra in “Infringement and Under-Enforcement ” 220 Although this report focuses on China these legal remedies are not restricted to addressing IP violations by Chinese entities but are available to address IP violations more generally 221 For more on these policy aspects see Ilias Akhtar et al supra note 3 215 Congressional Research Service 24 Intellectual Property Violations and China Legal Remedies Although this section also examines remedies under some national security-related authorities 222 it does not address potential remedies under U S sanctions laws 223 TRIPS and WTO Disputes The United States could consider challenging China’s IP practices by bringing cases against China before a WTO dispute settlement panel To initiate a WTO dispute a complaining member requests consultations with the respondent member in an effort to settle the dispute 224 If these consultations fail the member initiating a dispute may request the establishment of a dispute settlement panel composed of trade experts to determine whether a country has violated WTO rules 225 Prior to December 2019 if a WTO panel rendered an adverse decision against China it would be expected to bring its practices in line with its WTO obligations generally within a reasonable period of time or face the possibility of paying compensation to the complaining member or being subject to countermeasures allowed under the rules 226 Such countermeasures could include the United States imposing higher duties on imports of selected products from China 227 As of December 11 2019 the WTO’s Appellate Body—the entity that considers appeals from dispute settlement panel decisions—lost its quorum of three members necessary to decide such appeals 228 Accordingly if a WTO member appeals a panel report the Dispute Settlement Body DSB i e the committee composed of all WTO members that oversees the dispute settlement mechanism can no longer adopt panel reports in line with the WTO’s Understanding on Rules and Procedures Governing the Settlement of Disputes DSU 229 Unless WTO members agree to See e g NAT’L COUNTERINTELLIGENCE SEC CTR NATIONAL COUNTERINTELLIGENCE STRATEGY OF THE UNITED STATES OF AMERICA 2020–2022 at 1 8 2020 https www dni gov files NCSC documents features 20200205National_CI_Strategy_2020_2022 pdf hereinafter COUNTERINTELLIGENCE STRATEGY REPORT listing as one of three primary goals the promotion of “American prosperity by protecting our economy from foreign adversaries who seek to steal our technology and intellectual property” and noting that “ t he theft of our most sensitive technologies research and intellectual property harms U S economic technological and military advantage in the world” 223 This section also does not examine whether the use of such authorities against China would violate U S obligations under international agreements 224 WTO Understanding on Rules and Procedures Governing the Settlement of Disputes arts 3–6 hereinafter DSU The texts of the DSU and other WTO agreements discussed in this report are available at https www wto org english docs_e legal_e final_e htm 225 Id 226 DSU supra note 224 arts 21–22 Prior to the Appellate Body’s loss of a quorum in December 2019 WTO members whose measures were deemed inconsistent with its WTO obligations and unjustified under one of the GATT exceptions were expected to implement the panel or Appellate Body’s report Id art 21 3 That is the defending member had to withdraw modify or replace its inconsistent measures See id If a disagreement arose as to whether the defending member had in fact implemented the report a WTO panel could be convened to hear the dispute over compliance Id art 21 5 The WTO Appellate Body also heard appeals of these compliance panel reports Id art 17 1 227 See id art 22 3 Prior to the Appellate Body’s loss of a quorum when a defending Member failed to implement a panel or Appellate Body report within the established compliance period the prevailing member could request that the defending member negotiate a compensation agreement Id art 22 2 If such negotiations were not requested or if an agreement was not reached the prevailing member could also request authorization to impose certain trade sanctions against the noncomplying member Id art 22 2–22 3 Specifically the WTO could authorize the prevailing member to suspend tariff concessions or other trade obligations that it otherwise owed the noncomplying member under a WTO agreement Id 228 Alan H Price Real WTO Reform Now Possible with Demise of Appellate Body BLOOMBERG LAW Dec 20 2019 For more on this issue see CRS Legal Sidebar LSB10385 The WTO’s Appellate Body Loses Its Quorum Is This the Beginning of the End for the “Rules-Based Trading System” by Brandon J Murrill 229 DSU supra note 224 art 16 222 Congressional Research Service 25 Intellectual Property Violations and China Legal Remedies consider panel reports as final the DSB can no longer oversee the losing member’s implementation of a panel report or authorize the prevailing member to engage in trade retaliation if the losing member ignores the dispute panel’s recommendations 230 Thus even if the United States obtained a favorable ruling against China from a dispute panel there are doubts as to whether the ruling would be enforceable under WTO procedures As an example in March 2018 the United States initiated the WTO dispute process against China based on its laws and implementing measures for importing and exporting technology and for foreign JVs 231 Specifically the United States alleged that these Chinese laws and regulations were inconsistent with TRIPS’s national treatment principle 232 because they treated foreign IP rights holders less favorably than Chinese IP rights holders 233 The United States also alleged that Chinese regulations permitting a Chinese JV partner to continue using licensed technology even after a contract’s expiration violate TRIPS article 28 1 because they deny the foreign patentee the “exclusive” right to her invention 234 In other words these Chinese laws and regulations allegedly favor Chinese IP holders while preventing U S IP rights holders from enforcing their valid IP rights On June 14 2019 at the request of the United States the WTO panel handling the dispute suspended the proceedings 235 The suspension remains in effect at the request of the United States and with China’s consent although the panel resumed work for several brief periods between June 14 2019 and June 8 2020 The most recent request for a suspension was filed in June 2020 236 Under the DSU a panel retains its authority so long as it has not been suspended for more than twelve months 237 The United States and China appear to interpret this rule as permitting suspensions to extend beyond a year overall if the panel has resumed work even briefly during that period WTO rules under the TRIPS Agreement are arguably inadequate for addressing China’s IP violations because WTO members retain some flexibility with regard to implementation and enforcement In addition there can be difficulties in collecting sufficient evidence to support a WTO dispute The executive branch’s decision to impose tariffs under domestic law to address some of China’s IP practices identified in the USTR’s Section 301 Report may reflect this concern 238 230 Some U S trading partners have agreed to an interim appeal system that does not—at least yet—include the United States See In Davos DG Azevêdo Hears Support—and Urgency—for WTO Reform WTO ORG Jan 24 2020 https www wto org english news_e news20_e minis_24jan20_e htm 231 Request for Consultations by the United States China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 1 Mar 26 2018 232 TRIPS supra note 41 art 3 see supra note 127 and accompanying text 233 Request for Consultations by the United States China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 1 Mar 26 2018 at 2 234 Id 235 Communication from the Panel China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 10 June 14 2019 236 Communication from the Panel China—Certain Measures Concerning the Protection of Intellectual Property Rights WTO Doc WT DS542 14 June 18 2020 237 DSU supra note 224 art 12 12 238 Memorandum of March 22 2018 Actions by the United States Related to the Section 301 Investigation of China’s Laws Policies Practices or Actions Related to Technology Transfer Intellectual Property and Innovation 83 Fed Reg 13 099 Mar 27 2018 see also e g Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301 China’s Acts Policies and Practices Related to Technology Transfer Intellectual Property and Innovation 83 Fed Reg 28 710 28 711 June 20 2018 Congressional Research Service 26 Intellectual Property Violations and China Legal Remedies Diplomacy and International Agreements239 The President possesses constitutional authority over diplomacy and foreign affairs 240 This includes constitutional power to negotiate international agreements241 and non-legally binding international pacts 242 The executive branch may use this authority to negotiate more extensive protections for U S IP than is currently offered by TRIPS Such protections may be contained within a comprehensive bilateral free-trade agreement or as part of a multilateral agreement among several countries 243 To the extent that international engagement with China may result in international pacts that are not legally binding the President historically has claimed the power to conclude such pacts without congressional authorization 244 If a negotiation produces a binding international agreement however Congress’s role varies depending on the final agreement’s form i e whether it is an Article II treaty that requires the Senate’s advice and consent a congressional-executive agreement that requires congressional approval or a sole executive agreement for which the President claims constitutional authority to conclude without Congress 245 The executive branch has used this constitutional authority in conjunction with statutory authority under Section 301 246 to negotiate certain “structural reforms” to China’s IP practices to protect U S IP rights holders as part of the Phase One Agreement 247 As explained by the USTR the Phase One Agreement was designed in part to address the issues identified during the Section 301 investigation and thus relied partly on statutory authority to enter into binding agreements with a country “that commits it to eliminate or phase out the act policy or practice in question ”248 Issues not addressed by the Section 301 investigation e g market access for agriculture and purchase requirements may have relied instead on the President’s authority over foreign affairs Unlike a number of other Section 301 agreements the Phase One Agreement does not include a binding obligation on the parties to remove tariffs or other countermeasures 239 Steve Mulligan CRS Legislative Attorney contributed to this section While recognizing that the Constitution divides the foreign affairs power between Congress and the Executive Zivotofsky v Kerry 576 U S 1 16 2015 “In foreign affairs as in the domestic realm the Constitution ‘enjoins upon its branches separateness but interdependence autonomy but reciprocity ’” quoting Youngstown Sheet Tube Co v Sawyer 343 U S 579 635 1952 Jackson J concurring the Supreme Court has stated that the President possesses the “vast share” of foreign relations authority Am Ins Ass’n v Garamendi 539 U S 396 414 2003 quoting Youngstown Sheet Tube Co 343 U S at 610–11 Frankfurter J concurring 241 See Zivotofsky 576 U S at 13 “The President has the sole power to negotiate treaties ” CONG RSCH SERV TREATIES AND OTHER INTERNATIONAL AGREEMENTS THE ROLE OF THE UNITED STATES SENATE S REP NO 106-97 at 96–97 2001 discussing negotiations of treaties and other international agreements 242 See CRS Report RL32528 International Law and Agreements Their Effect upon U S Law by Stephen P Mulligan at 12–15 discussing authority to negotiate and complete nonlegal pacts The President also possesses specific statutory authority over certain trade agreements discussed in more detail below See discussion infra in “Section 301 of the Trade Act of 1974 ” 243 Currently the WTO and the World Intellectual Property Organization WIPO represent the primary fora for global cooperation on protecting IP WIPO is a “self-funding agency of the United Nations with 192 member states ” See TRIPS supra note 41 Inside WIPO WORLD INTELL PROP ORG https wipo int about-wipo en last visited Aug 18 2020 244 See Mulligan supra note 242 at 12–15 245 For a discussion of the forms of international agreements and the role of Congress see id at 2–15 246 See discussion infra in “Section 301 of the Trade Act of 1974 ” 247 Hearing on U S -China Trade Before the H Comm on Ways and Means 116th Cong 22 2019 statement of Robert E Lighthizer U S Trade Rep “The President is using his power under Section 301 which has been delegated And it is an executive agreement which the Constitution gives the President the right to enter into ” 248 19 U S C § 2411 c 240 Congressional Research Service 27 Intellectual Property Violations and China Legal Remedies imposed during the trade dispute Moreover the Phase One Agreement is somewhat unusual in that it addresses a dispute outside the context of the WTO by contrast other recent uses of this Section 301 negotiating authority have sought to resolve long-standing WTO disputes 249 As discussed above the increased tensions between the United States and China have led to more uncertainty as to whether the Phase One Agreement will be fully implemented or terminated and whether the contemplated Phase Two Agreement may ever be negotiated Section 301 of the Trade Act of 1974 To address China’s IP practices the executive might also consider using authority under domestic trade statutes As noted one broad authority that might be used is known as “Section 301 ” The statutory framework governing “Section 301” investigations is based in Sections 301 through 310 of the Trade Act of 1974 as amended 250 This framework is one of the principal means by which the United States enforces U S rights under trade agreements and addresses “unfair” trade barriers to U S exports 251 Investigations can be initiated as a result of a petition filed by an interested party with the USTR or by the agency itself 252 If the USTR initiates an investigation under Section 301 then Section 303 requires that on the date of initiation the USTR must “request consultations with the foreign country concerned” to reach a settlement within a set time frame 253 Section 303 also requires the USTR to determine whether the Section 301 investigation “involves a trade agreement” and if so must then follow the formal dispute settlement process under that agreement should consultations with the other country fail 254 If the USTR makes an affirmative determination of “unfair” barriers to U S trade it generally must implement the action it determines to take subject to any specific direction of the President no later than thirty days after the date of the affirmative determination 255 249 See Hart supra note 15 19 U S C §§ 2411–2420 This memorandum does not discuss all of the procedures the USTR must follow under Section 301 See generally CRS Legal Sidebar LSB10108 Tricks of the Trade Section 301 Investigation of Chinese Intellectual Property Practices Concludes Part I by Brandon J Murrill discussing the executive branch’s use of Section 301 against China and the procedures that the USTR follows when conducting a Section 301 investigation 251 For a discussion of the policy considerations in Section 301 investigations and the history of their use with regard to China specifically see CRS Section 301 and China supra note 13 For a discussion of the policy considerations related to the Trump Administration’s tariff actions under Section 301 see Williams et al supra note 13 For an overview of Section 301 and policy considerations see CRS In Focus IF11346 Section 301 of the Trade Act of 1974 by Andres B Schwarzenberg 252 19 U S C § 2412 253 Id § 2413 254 Id 255 Id § 2415 a Under certain circumstances the agency may temporarily delay action See id Section 301 provides that the action taken “to eliminate an act policy or practice shall be devised so as to affect goods or services of the foreign country in an amount that is equivalent in value to the burden or restriction being imposed by that country on United States commerce ” Id § 2411 a 3 Section 301 defines two types of executive action—mandatory or discretionary—that can result from Section 301 investigations Under Section 301 a —the “mandatory action” provision—the USTR must take action as specified by the statute subject to certain exceptions if he determines that • “the rights of the United States under any trade agreement are being denied ” or • “an act policy or practice of a foreign country violates or is inconsistent with the provisions of or otherwise denies benefits to the United States under any trade agreement ” or • “an act policy or practice of a foreign country is unjustifiable” defined to mean conduct that “is in violation of or inconsistent with the international legal rights of the United States” “and burdens or restricts United 250 Congressional Research Service 28 Intellectual Property Violations and China Legal Remedies The statute authorizes the USTR to among other things 256  suspend withdraw or prevent the application of certain benefits of trade concessions in a trade agreement with the country under investigation 257  impose duties or other import restrictions on goods or fees or restrictions on services 258 States commerce ” Id § 2411 a d 4 A The provision further states that in order to enforce U S rights under a trade agreement or obtain the elimination of certain unfair practices “ a ctions may be taken that are within the power of the President with respect to trade in any goods or services or with respect to any other area of pertinent relations with the foreign country ” Id § 2411 a 1 B ii emphasis added Thus the mandatory action provision generally applies in the context of a trade agreement provision or when a foreign country’s conduct violates or is inconsistent with international legal rights which likely are the product of such a trade agreement By contrast under Section 301 b —the “discretionary action” provision—the USTR may take certain actions enumerated in the statute if he determines that “an act policy or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce and action by the United States is appropriate ” Id § 2411 b The statute specifies that conduct “is unreasonable if the act policy or practice while not necessarily in violation of or inconsistent with the international legal rights of the United States is otherwise unfair and inequitable ” Id § 2411 d 3 A Thus the discretionary action provision can operate outside of the context of a trade agreement or established “international legal rights ” Conduct is discriminatory under the statute when “any act policy and practice denies national or most-favored-nation treatment to United States goods services or investment ” Id § 2411 d 5 “Most-favored-nation treatment” is a commitment on the part of trading partners to treat another country’s goods no less favorably than the goods of other trade agreement countries 256 Section 301 a 1 B states that the USTR shall take authorized actions subject to the specific direction if any of the President regarding any such action and shall take all other appropriate and feasible action within the power of the President that the President may direct the USTR to take under this subsection to enforce such rights or to obtain the elimination of such act policy or practice Actions may be taken that are within the power of the President with respect to trade in any goods or services or with respect to any other area of pertinent relations with the foreign country Id § 2411 a 1 B 257 This report does not examine the President’s authority to withdraw from free trade agreements altogether For more on this issue see CRS Report R45557 The President’s Authority to Withdraw the United States from the North American Free Trade Agreement NAFTA Without Further Congressional Action by Brandon J Murrill 258 There are other international trade-related statutory authorities not discussed in this section that appear to provide the President with broad authority to regulate international commerce For example Section 338 of the Tariff Act of 1930 authorizes the President to among other things impose duties on imports from a foreign country that 1 Imposes directly or indirectly upon the disposition in or transportation in transit through or reexportation from such country of any article wholly or in part the growth or product of the United States any unreasonable charge exaction regulation or limitation which is not equally enforced upon the like articles of every foreign country or 2 Discriminates in fact against the commerce of the United States directly or indirectly by law or administrative regulation or practice by or in respect to any customs tonnage or port duty fee charge exaction classification regulation condition restriction or prohibition in such manner as to place the commerce of the United States at a disadvantage compared with the commerce of any foreign country 19 U S C § 1338 As another example Section 103 a of the 2015 Bipartisan Congressional Trade Priorities and Accountability Act Pub L No 114-26 authorizes the President to enter into limited trade agreements with foreign countries before July 1 2021 in order to promote U S trade by obtaining the reciprocal reduction or removal of tariff barriers “or other import restrictions ” provided the President follows certain procedural requirements and adheres to certain limitations on the exercise of this authority Id § 4202 a The executive branch might also consider using authorities specifically related to tariffs and quantitative restrictions on agricultural imports See e g id §§ 3601 tariff-rate quotas 3602 special agricultural safeguards Congressional Research Service 29 Intellectual Property Violations and China Legal Remedies   revoke suspend or limit in accordance with trade preference laws certain trade preferences that provide duty-free treatment to goods regardless of whether it affects goods or services in an amount equivalent to the burden imposed by that country on U S commerce and enter into binding agreements that commit the offending country to eliminate or phase out the act policy or practice in question eliminate the burden or restriction on U S commerce from such conduct or compensate the United States with trade benefits 259 After the statute was enacted in 1974 the United States conducted numerous Section 301 investigations to enforce its trade rights with some of the most significant cases brought against China in the early 1990s 260 Following the establishment in 1995 of the WTO’s dispute settlement procedures under the DSU however the United States began to rely primarily on the WTO dispute settlement process to enforce its trade rights 261 With the exception of the Trump Administration’s unilateral tariffs imposed on Chinese imports which a WTO panel ruled to violate U S WTO commitments 262 the Section 301 investigations initiated after 1995 either resulted in a WTO dispute settlement case were used to enforce the outcomes of a previously decided WTO dispute or were not further pursued by the USTR 263 The Trump Administration has already imposed Section 301 tariffs on billions of dollars in Chinese imports to address China’s alleged IP violations 264 However Section 301 might provide a variety of additional options for the United States to act directly or indirectly against China if the USTR determines that China’s practices meet the statutory criteria for taking such action Section 301 provides that the USTR may take action against “any goods or economic sector A on a nondiscriminatory basis or solely against the foreign country in violation and B without regard to whether or not such goods or economic sector were involved in the act policy or practice that is the subject of such action ”265 Accordingly Section 301 might seemingly be used to restrict imports of China products or services into the United States or to restrict imports of goods and services of other countries or companies to pressure them not to do business with China 266 An additional provision known as “Special 301 ” requires the USTR to issue an annual report identifying foreign countries that are “priority foreign countries” because they deny effective protection of U S IP rights267 or they deny fair and equitable market access to U S persons who 259 Id § 2411 c See CRS Section 301 and China supra note 13 261 Bruce Hirsch Taking Matters into Your Own Hands–Section 301 of the Trade Act of 1974 HINRICH FOUND Aug 3 2017 https tradevistas org taking-matters-hands-section-301-trade-act-1974 262 See id Panel Report United States—Tariff Measures on Certain Goods from China WTO Doc WT DS543 R Sept 15 2020 263 Williams et al supra note 13 at 9 264 For more on these tariffs see CRS In Focus IF11346 Section 301 of the Trade Act of 1974 by Andres B Schwarzenberg 265 19 U S C § 2411 c 266 Section 301 includes within its definition of “services” the “transfers of information ” raising the possibility that USTR might restrict data flows to Chinese companies that enable them to provide goods or services See id § 2411 d 1 267 Regardless of whether it is in compliance with TRIPS a “foreign country denies adequate and effective protection of intellectual property rights if the foreign country denies adequate and effective means under the laws of the foreign country for persons who are not citizens or nationals of such foreign country to secure exercise and enforce rights 260 Congressional Research Service 30 Intellectual Property Violations and China Legal Remedies rely upon IP protection 268 If these countries are not entering into good faith negotiations or otherwise making significant progress in negotiations to protect IP effectively then the USTR must develop an action plan with respect to a country that has remained on the list for at least one year 269 The President may take “appropriate action” with respect to a foreign country that fails to meet action plan benchmarks 270 Export Controls271 The U S government may also regulate the transfer of U S -based IP to Chinese entities through the use of the export control regime 272 The Export Controls Act of 2018 ECA 273 provides the President with certain powers to control the export of among other things certain U S dual-use goods and technology 274 Specifically it requires the executive branch to develop a list of controlled items and a list of foreign entities and end-users that cannot receive certain U S exports without a license because they are deemed “threat s to the national security and foreign policy of the United States ”275 The U S Department of Commerce’s Bureau of Industry and Security BIS maintains a list known as the “Entity List ” of individuals and entities that are subject to license requirements for the export of specific items 276 The concept of “export” is broad and includes the transfer of technology or data to a foreign national within a U S territory 277 Thus the U S government could seek to prevent theft of U S IP rights by regulating transfers of technology or data embodying U S IP rights to Chinese individuals or entities even if such transfers occur within the boundaries of the United States The U S government could also use export controls to pressure China to cease violating U S IP rights by denying critical components to Chinese companies The United States has added many Chinese companies and their non-U S affiliates to the Entity List since 2019 For example in final rules issued in May and August 2019 BIS added Huawei Technologies Co Ltd Huawei and 114 non-U S affiliates of Huawei to the Entity List 278 Because some Chinese companies relating to patents process patents registered trademarks copyrights trade secrets and mask works ” Id § 2242 d 2 268 Regardless of whether it is in compliance with TRIPS “ a foreign country denies fair and equitable market access if the foreign country effectively denies access to a market for a product protected by a copyright or related right patent trademark mask work trade secret or plant breeder’s right through the use of laws procedures practices or regulations” that violate international law or agreements to which the United States and the foreign country are party or “constitute discriminatory nontariff trade barriers ” Id § 2242 d 3 The Special 301 Report also identifies countries on additional administratively created categories such as the “Priority Watch List” countries—a category that includes China See 2019 SPECIAL 301 REPORT supra note 32 at 6 269 19 U S C § 2242 g 270 Id 271 Steve Mulligan CRS Legislative Attorney contributed to this section of the report 272 See David S Bloch Intellectual Property Implications of Export Control Laws BLOOMBERG LAW 2011 https www winston com images content 7 6 767 pdf “Through the export control regime the Government regulates what U S -based IP can be conveyed to foreign parties and how ” 273 50 U S C §§ 4801–4826 274 Id § 4812 For detailed background on the Export Controls Act and its authority see CRS Report R41916 The U S Export Control System and the Export Control Reform Initiative by Ian F Fergusson and Paul K Kerr 275 50 U S C § 4813 a 1 – 2 276 See 15 C F R app supp no 4 to pt 744 277 15 C F R § 734 13 278 Addition of Entities to the Entity List 84 Fed Reg 22 961 May 21 2019 codified at 15 U S C pt 744 Addition of Entities to the Entity List and Revision of Entities on the Entity List 84 Fed Reg 43 493 Aug 21 2019 codified at 15 U S C pt 744 However BIS has maintained certain limited exemptions for some exports to these entities See Congressional Research Service 31 Intellectual Property Violations and China Legal Remedies e g telecommunications companies depend on certain U S products such as microchips for their supply chain denial of exports of U S products can severely affect their business 279 Section 232 of the Trade Expansion Act of 1962 Section 232 of the Trade Expansion Act of 1962 authorizes the President to “adjust the imports” of “articles” and their derivatives to address threats to national security 280 The statute’s use of the term “articles” suggests that it is aimed at addressing imports of products e g machinery or DVDs containing counterfeit software or patent-infringing hardware 281 Although Section 232 addresses imports of articles that threaten national security the U S government has noted the close relationship between foreign theft of U S IP rights and national security 282 For example the 2020 National Counterintelligence Strategy notes that “ t he theft of our most sensitive technologies research and intellectual property harms U S economic technological and military advantage in the world ”283 Because Section 232 defines the concept of “national security” broadly to include economic effects the executive could likely use this authority to restrict or prohibit imports of IP-infringing goods from China or to pressure other countries to cease doing business with China 284 The President’s authority under Section 232 is triggered if the Department of Commerce conducts an investigation and concludes that the articles are “being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security ”285 The “adjustment” of imports might take the form of tariffs quotas tariff-rate quotas import licenses embargos or other restrictions for a duration that the President determines is appropriate286—or the negotiation of trade agreements that limit or restrict the import into or export from the United States of the article at issue 287 e g Press Release U S Dep’t of Commerce U S Department of Commerce Extends Huawei Temporary General License Nov 18 2019 https www commerce gov news press-releases 2019 11 us-department-commerce-extendshuawei-temporary-general-license 279 In November 2018 Huawei released a list of core suppliers and thirty-three of ninety-two suppliers were U S companies Yuan Yang Lucy Hornby China Raises Alarm over Its Dependency on Foreign Chips FIN TIMES July 18 2018 https www ft com content 410306d8-8ae0-11e8-bf9e-8771d5404543 “China relies on imported semiconductors to build the hardware—including phones telecoms gear and computers—that account for almost onethird of its exports ” 280 19 U S C § 1862 For a comprehensive overview of Section 232 see CRS Report R45249 Section 232 Investigations Overview and Issues for Congress coordinated by Rachel F Fefer 281 Article MERRIAM-WEBSTER http www merriam-webster com dictionary article defining “article” as “a member of a class of things especially an item of goods” last visited Aug 18 2020 282 See e g COUNTERINTELLIGENCE STRATEGY REPORT supra note 222 at 1 8 listing as one of three primary goals the promotion of “American prosperity by protecting our economy from foreign adversaries who seek to steal our technology and intellectual property” and noting that “ t he theft of our most sensitive technologies research and intellectual property harms U S economic technological and military advantage in the world” 283 Id at 8 284 19 U S C § 1862 d 285 Id § 1862 c 1 286 Fed Energy Admin v Algonquin SNG Inc 426 U S 548 561 1976 287 19 U S C § 1862 c 3 A Congressional Research Service 32 Intellectual Property Violations and China Legal Remedies The statute provides that the Department of Commerce and the President shall consider a wide variety of factors when determining whether imports threaten national security and how to adjust them if necessary 288 It characterizes national security concerns broadly stating the following In the administration of this section the Secretary of Commerce and the President shall further recognize the close relation of the economic welfare of the Nation to our national security and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries and any substantial unemployment decrease in revenues of government loss of skills or investment or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered without excluding other factors in determining whether such weakening of our internal economy may impair the national security 289 Prior to the Trump Administration’s use of Section 232 there was relatively little case law interpreting the scope of the President’s authority under Section 232 although a 1976 Supreme Court case upheld Section 232 as a constitutional delegation of authority to the President 290 The U S Court of Appeals for the Federal Circuit Federal Circuit has relied upon and reaffirmed this precedent in recent litigation291 challenging President Trump’s 2018 proclamations imposing tariffs on certain steel and aluminum 292 Further case law from the U S Court of International Trade CIT suggests some limits to the scope of the President’s authority under Section 232 For instance in Transpacific Steel LLC v United States a U S company that imports steel products from various countries including Turkey sought a refund of the allegedly excess Section 232 duties it paid on imports of Turkish steel 293 The CIT held that the President’s power to impose tariffs under Section 232 b while broad is not unlimited 294 Specifically the court decided that the President must closely adhere to the statute’s procedural requirements when exercising such authority 295 The court also 288 These factors include domestic production needed for projected national defense requirements the capacity of domestic industries to meet such requirements existing and anticipated availabilities of the human resources products raw materials and other supplies and services essential to the national defense the requirements of growth of such industries and such supplies and services including the investment exploration and development necessary to assure such growth and the importation of goods in terms of their quantities availabilities character and use as those affect such industries and the capacity of the United States to meet national security requirements Id § 1862 d 289 Id 290 Algonquin SNG 426 U S at 561 291 Am Inst for Int’l Steel Inc v United States 806 F App’x 982 Fed Cir 2020 cert denied No 19-1177 2020 WL 3405872 mem U S June 22 2020 292 Proclamation 9704 of March 8 2018 Adjusting Imports of Aluminum Into the United States 83 Fed Reg 11 619 Mar 15 2018 Proclamation 9705 of March 8 2018 Adjusting Imports of Steel Into the United States 83 Fed Reg 11 625 Mar 15 2018 The Department of Commerce has also developed a process whereby individuals or organizations can file requests for exclusions from the tariffs The exclusion process might also be used as a form of leverage over companies or countries For more on the Section 232 process the historical use of this authority and the exclusion process see CRS Report R45249 Section 232 Investigations Overview and Issues for Congress coordinated by Rachel F Fefer 293 Transpacific Steel LLC v United States No 19-00009 2020 WL 3979838 at 1 Ct Int’l Trade July 14 2020 see also Transpacific Steel LLC v United States 415 F Supp 3d 1267 Ct of Int’l Trade 2019 prior decision denying the United States’ motion to dismiss the complaint because the court found the constitutional and statutory allegations were plausible 294 Transpacific Steel 2020 WL 3979838 at 1 295 Id at 3–4 Congressional Research Service 33 Intellectual Property Violations and China Legal Remedies determined that the executive violated constitutional guarantees of equal protection protected by the Fifth Amendment’s Due Process Clause when imposing without a rational basis the additional steel tariffs only on imports from Turkey 296 This decision indicates that courts may scrutinize whether the executive branch has followed the proper procedures including meeting statutory deadlines when exercising Section 232 authority Provided proper statutory procedures are followed and the imposition of tariffs comports with constitutional requirements Section 232 might be used to restrict additional imports of Chinese products among others that infringe U S IP rights and thereby threaten national security e g products with IP-infringing hardware that might be used to carry out cyberattacks in the United States A finding under Section 232 that certain imports threaten national security does not itself necessarily implicate a specific country such as China as the responsible actor rather the focus of Section 232 investigations is whether domestic vulnerabilities indicate that the volume or type of imports pose risks to national security Section 201 of the Trade Act of 1974 Sections 201 through 204 of the Trade Act of 1974 Section 201 authorize the President to impose temporary tariffs import restrictions and other similar measures known as “safeguards” following an investigation by the independent U S International Trade Commission ITC if it reaches an affirmative determination of injury or the threat thereof to a domestic industry 297 The President must impose such measures to protect a domestic industry from significant increases in imports of products comparable to those produced by the domestic industry 298 For these safeguard measures the President decides on the amount and to an extent the form of relief no finding of an unfair trade practice is required 299 Using this authority the executive could consider imposing safeguard duties provided the statutory procedures and prerequisites for action are satisfied i e there is a surge of IP-infringing Chinese products such as counterfeit software or patent-infringing hardware that injure or threaten to injure a particular U S industry In general a decision to impose safeguard duties would not necessarily indicate that China itself is involved in creating the surge or aware of the IP-infringing nature of the products for several reasons 1 the investigations are global in nature and 2 import surges can be caused by factors other than state-sponsored practices that affect trade patterns Nonetheless if there was a surge of IP-infringing imports into the United States an investigation may encompass products whose IP-infringing elements are known to the Chinese government 296 Id at 6–8 19 U S C §§ 2251–2254 For background and policy considerations see CRS In Focus IF10786 Safeguards Section 201 of the Trade Act of 1974 by Vivian C Jones 298 19 U S C §§ 2251–2254 Generally measures may be imposed on products from all countries except in certain cases in which an international agreement provides otherwise or products from those countries responsible for a surge in imports Id The President may impose provisional relief in certain circumstances with respect to certain products including perishable agricultural products See generally id § 2252 d Under Section 406 of the Trade Act of 1974 which bears some similarities to Section 201 the ITC is responsible for investigating “with respect to imports of an article which is the product of a Communist country whether market disruption exists with respect to an article produced by a domestic industry” and the President can act to provide relief Id § 2436 299 Id § 2253 297 Congressional Research Service 34 Intellectual Property Violations and China Legal Remedies The International Emergency Economic Powers Act300 The International Emergency Economic Powers Act IEEPA 301 grants the President power to regulate a broad range of economic transactions when the President declares that a national emergency exists pursuant to the provisions of the National Emergencies Act 302 The President might rely on IEEPA to block exports to or imports from entities believed to engage in IP violations if he declared that IP theft created a national emergency e g because of its threat to U S economic and national security interests 303 Upon a national emergency declaration the President may subject to certain exceptions described below investigate regulate or prohibit foreign exchange transactions transfers of credit involving foreign nationals or foreign countries and the importation or exportation of currency and securities involving persons or property subject to U S jurisdiction 304 IEEPA also allows the President to take certain specified action relating to property in which a foreign country or person has an interest including blocking property or specific interests in property prohibiting U S persons from entering into transactions involving frozen assets or blocked property and regulating transactions involving frozen assets and blocked property 305 Nonetheless IEEPA is not boundless The President cannot use IEEPA to regulate transactions involving certain communications that do not involve a transfer of anything of value informational materials or transactions incident to travel 306 IEEPA also is limited jurisdictionally to transactions involving U S persons or property subject to the jurisdiction of the United States 307 It does not permit the President to “confiscate” i e take title to property unless that property is owned by a person nation or entity that has planned authorized aided or engaged in hostilities or attacks against the United States 308 And while IEEPA permits economic sanctions it does not require the President to impose or maintain them nor does it place any congressional review process on the executive’s decision to lift IEEPA-based sanctions 309 The President used this authority on August 6 2020 to issue executive orders to prohibit certain transactions involving the mobile applications TikTok and WeChat These executive orders build on a prior executive order addressing vulnerabilities in information and communications technology and services In May 2019 the President issued an executive order declaring a national emergency due to “vulnerabilities in information and communications technology and services which store and communicate vast amounts of sensitive information ” including personal information “to commit malicious cyber-enabled actions including economic and industrial espionage against the United States ”310 The President also determined that “unrestricted acquisition or use” of such technology and services that was “designed developed manufactured or supplied by persons owned by controlled by or subject to the jurisdiction or 300 Steve Mulligan CRS Legislative Attorney contributed to this section of the report See 50 U S C § 1702 For additional analysis of IEEPA see CRS Report R45618 The International Emergency Economic Powers Act Origins Evolution and Use coordinated by Christopher A Casey 302 Pub L No 94-412 90 Stat 1255 1976 codified as amended at 50 U S C §§ 1601–1651 303 50 U S C § 1702 a 1 B 304 Id § 1702 a 1 A 305 Id § 1702 a 1 B 306 See id § 1702 b 307 See id § 1702 a 1 308 See id § 1702 c 309 See id § 1701 a 1 providing that the President “may” prescribe sanctions in response to a national emergency 310 Exec Order No 13 873 84 Fed Reg 22 689 May 15 2019 301 Congressional Research Service 35 Intellectual Property Violations and China Legal Remedies direction of foreign adversaries” could allow such adversaries to “create and exploit vulnerabilities ” thereby also qualifying as “an unusual and extraordinary threat to the national security foreign policy and economy of the United States” under IEEPA 311 “Foreign adversary” is defined as “any foreign government or foreign non-government person engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or security and safety of United States persons ”312 Based on these previous determinations the President’s August 6 2020 executive orders found that “additional steps must be taken to deal with the national emergency” due to the alleged threats posed by TikTok and WeChat 313 In particular the President found that China “continues to threaten the national security foreign policy and economy of the United States” and that TikTok and WeChat present risks based on how much information they collect from users 314 This information “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information ” which could allow China to track federal employees build files of personal information for blackmail and carry out “corporate espionage ”315 To implement the orders the Secretary of Commerce must develop a list of prohibited transactions between individuals subject to the jurisdiction of the United States and ByteDance Ltd and Tencent Holdings the parent companies of TikTok and WeChat respectively and their subsidiaries 316 The Secretary must identify these prohibited types of transactions within forty-five days after August 6 2020 317 As of the time of writing these transactions have not been identified although experts speculate that these could include removing the apps from online stores run by U S companies or prohibiting financial institutions from supporting transactions conducted on the apps or via their parent companies 318 As these executive orders suggest at least part of the concern about TikTok and WeChat involves economic espionage potentially including IP China appears to view these orders as related to the broader U S -China trade disputes and negotiations even reportedly seeking to discuss them during the currently postponed review of the Phase One Agreement 319 In addition to these executive orders invoking IEEPA on August 14 2020 President Trump issued an executive order ordering ByteDance to divest from Musical ly a company that ByteDance acquired in 2017 within ninety days finding that the acquisition threatened national security insofar as Musical ly’s acts occurred in interstate commerce in the United States 320 This order relied on statutory authority that the President may use to prohibit or limit foreign investment in the United States 311 Id Id 313 Exec Order No 13 942 85 Fed Reg 48 637 48 637 Aug 6 2020 Exec Order No 13 943 85 Fed Reg 48 641 48 641 Aug 6 2020 314 The executive orders appear to find that China qualifies as a “foreign adversary” under the May 2019 executive order although this is not made explicit 315 Exec Order No 13 942 85 Fed Reg at 48 637 Exec Order No 13 943 85 Fed Reg at 48 641 316 Exec Order No 13 942 85 Fed Reg at 48 638 Exec Order No 13 943 85 Fed Reg at 48 641–42 317 Exec Order No 13 942 85 Fed Reg at 48 638 Exec Order No 13 943 85 Fed Reg at 48 642 318 Alex Lawson Confusion Prevails over Extent of Trump’s TikTok ‘Ban ’ LAW360 Aug 10 2020 https www law360 com articles 1299421 Martin Chorzempa Trump’s Ban on WeChat and TikTok Lacks Clarity and Will Not Solve Our Data Security Problems PETERSON INST FOR INT’L ECON Aug 7 2020 https www piie com blogs realtime-economic-issues-watch trumps-ban-wechat-and-tiktok-lacks-clarity-and-will-not-solve 319 China to Bring up WeChat TikTok in Next U S Trade Talks BLOOMBERG Aug 12 2020 https www bloomberg com news articles 2020-08-12 china-to-bring-up-wechat-tiktok-in-upcoming-u-s-trade-talks 320 Exec Order of Aug 14 2020 85 Fed Reg 51 297 Aug 19 2020 312 Congressional Research Service 36 Intellectual Property Violations and China Legal Remedies that threatens national security 321 and determined the order was necessary because other laws including IEEPA could not adequately address the national security risks 322 This final order does not address WeChat and insofar as U S entities may continue transactions with TikTok until the Secretary of Commerce identifies which transactions are prohibited the President’s August 6 2020 executive orders remain in effect 323 Both TikTok and WeChat have filed lawsuits against the Administration seeking to enjoin the effects of the executive orders on constitutional grounds 324 Individual Violations Civil Criminal and Administrative Remedies The preceding section focused on legal remedies initiated by the President based on executive authority over foreign affairs or delegations of congressional power over trade to the executive branch primarily to address systemic IP violations by foreign actors By contrast this section focuses on legal remedies available to IP rights holders under U S law to address individual IP violations including civil criminal and administrative processes Remedial Issues Jurisdiction and Territoriality A threshold question in all litigation including litigation aimed at remediating IP theft is whether a court has the power to adjudicate the underlying allegations In particular the court must have power over both the conduct and parties involved In a case involving alleged IP theft each of these requirements can present challenges for a U S IP owner For example it may be difficult for an owner of U S IP to pursue a domestic remedy for IP theft when the offending conduct is performed by a foreign entity or occurs abroad although it may be possible to pursue remedies in the foreign jurisdiction itself Two such challenges faced by IP owners that limit the opportunity for U S -based remediation of IP theft—territoriality and personal jurisdiction—are described below 325 Activity Outside the United States and the Principle of Territoriality Congress has the power “to enforce its laws beyond the territorial boundaries of the United States ”326 Nevertheless “ i t is a longstanding principle of American law ‘that legislation of Congress unless a contrary intent appears is meant to apply only within the territorial 321 50 U S C § 4565 Exec Order of Aug 14 2020 85 Fed Reg at 51 297 323 Some commentators have suggested that perhaps the most immediate effect of President Trump’s August 14 2020 executive order may be to increase pressure on ByteDance to find a U S -based or non-Chinese buyer See e g Evan Semones Trump Hits TikTok’s Owner Again by Ordering Sale of U S Operations POLITICO Aug 14 2020 https www politico com news 2020 08 14 trump-tiktok-us-operations-sale-395720 324 Ryan v Trump et al Case No 20-cv-05948 N D Cal TikTok Inc et al v U S Dep’t of Commerce et al Case No 20-cv-07672 C D Cal In Re U S WeChat Users Alliance et al Case No 20-cv-05910 N D Cal 325 In addition foreign states such as China may be entitled to sovereign immunity from civil suits subject to certain exceptions 28 U S C §§ 1604–1607 Verlinden B V v Cent Bank of Nigeria 461 U S 480 488–89 1983 For purposes of sovereign immunity a “foreign state” includes “a political subdivision of a foreign state or an agency or instrumentality of a foreign state ” 28 U S C § 1603 a – b Suits against officials of a foreign state are not barred by sovereign immunity under statute but may be barred under common law or if the foreign state is the real party in interest Samantar v Yousuf 560 U S 305 324–25 2010 326 EEOC v Arabian Am Oil Co 499 U S 244 248 1991 “Both parties concede as they must that Congress has the authority to enforce its laws beyond the territorial boundaries of the United States ” 322 Congressional Research Service 37 Intellectual Property Violations and China Legal Remedies jurisdiction of the United States ’”327 According to the Supreme Court this principle “serves to protect against unintended clashes between our laws and those of other nations which could result in international discord ”328 Consistent with this principle U S IP laws generally reach only conduct that occurs within the United States For example “the Copyright Act is considered to have no extraterritorial reach ”329 Similarly “purely extraterritorial conduct cannot constitute direct infringement of a U S patent ”330 Thus if the underlying acts of infringement occurred purely outside of the United States it may be difficult to remedy those acts in a U S court There are exceptions to the generally territorial reach of U S IP law however For example a trademark owner may sue for extraterritorial infringement where 1 the violations “create some effect on American foreign commerce” 2 the effect is “sufficiently great to present a cognizable injury to the plaintiffs” and 3 the link to American foreign commerce is “sufficiently strong in relation to those of other nations to justify an assertion of foreign authority ”331 Where copyright infringement occurs domestically and enables foreign infringement the copyright owner may be able to recover damages and the infringer’s extraterritorial profits 332 Similarly various types of indirect patent infringement involve extraterritorial acts For example “where a foreign party with the requisite knowledge and intent employs extraterritorial means to actively induce acts of direct patent infringement that occur within the United States such conduct is not categorically exempt from redress” as an act of indirect patent infringement 333 Moreover a person may infringe a patent by without authority 1 supplying or causing to be supplied in or from the United States “all or a substantial portion” of the uncombined components of a patented invention “in such a manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States” 334 2 supplying in or from the United States any component of a patented invention “especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use ” with knowledge that the component “is so made or adapted ” and intending that the component will be combined outside of the United States in a manner that would infringe if it occurred 327 Id quoting Foley Bros Inc v Filardo 336 U S 281 285 1949 Id 329 Tire Eng’g Distrib LLC v Shandong Linglong Rubber Co 682 F 3d 292 306 4th Cir 2012 see also e g Allarcom Pay Television Ltd v Gen Instrument Corp 69 F 3d 381 387 9th Cir 1995 “ F ederal copyright law does not apply to extraterritorial acts of infringement ” accord Geophysical Serv Inc v TG S-NOPEC Geophysical Co 850 F 3d 785 799–800 5th Cir 2017 “Where a copyright plaintiff claims contributory infringement predicated on direct infringement that occurred entirely extraterritorially the plaintiff has stated no claim ” 330 Merial Ltd v Cipla Ltd 681 F 3d 1283 1302 Fed Cir 2012 citing 35 U S C § 271 a see also 35 U S C § 271 a “ W hoever without authority makes uses offers to sell or sells any patented invention within the United States or imports into the United States any patented invention during the term of the patent therefore infringes the patent ” emphasis added 331 Trader Joe’s Co v Hallatt 835 F 3d 960 969 9th Cir 2016 quoting Love v Associated Newspapers Ltd 611 F 3d 601 613 9th Cir 2010 Trademark owners may establish an impact on U S commerce by alleging for example “that infringing goods though sold initially in a foreign country flowed into American domestic markets ” Id 332 See e g L A News Serv v Reuters Television Int’l USA Ltd 340 F 3d 926 927–32 9th Cir 2003 333 Merial 681 F 3d at 1302–03 Indirect infringement is described in more detail below See discussion infra in “Patent Copyright or Trademark Infringement ” 334 35 U S C § 271 f 1 328 Congressional Research Service 38 Intellectual Property Violations and China Legal Remedies within the United States 335 or 3 importing offering to sell selling or using a product within the United States that is made by a process patented in the United States 336 Personal Jurisdiction To adjudicate a dispute a court must also have power over the particular parties involved a requirement referred to as “personal jurisdiction ”337 Under current U S law the primary focus when determining whether a court has personal jurisdiction over a party is the party’s relationship to the forum where the lawsuit is taking place 338 Because the plaintiff consents to jurisdiction in a forum by filing a lawsuit there 339 the analysis most often centers on whether a particular court has personal jurisdiction over the defendant A court has personal jurisdiction over a defendant if 1 the defendant has sufficient “minimum contacts” with the forum where the court is located 340 and 2 the exercise of jurisdiction over the defendant would “comport with ‘fair play and substantial justice ’”341 If the cause of action is under state law then the defendant’s minimum contacts must be with the forum state 342 if the cause of action is under federal law and there is no state where the defendant is subject to personal jurisdiction then the contacts may be with the United States as a whole 343 There are two types of personal jurisdiction general jurisdiction and specific jurisdiction 344 Under general jurisdiction a defendant’s contacts with a forum are so pervasive that the defendant is essentially at home there 345 For an individual it is the forum where they live for a corporation it is any place where “the corporation is fairly regarded as at home ”346 “A court with general jurisdiction may hear any claim against that defendant even if all the incidents underlying the claim occurred in a different” forum 347 Specific jurisdiction however relies on the conduct that underlies the lawsuit 348 For a court to exercise specific jurisdiction the lawsuit must arise from the defendant’s contacts with the forum 349 Although it is necessary that the defendant’s “suit-related conduct create a 335 Id § 271 f 2 Id § 271 g 337 See e g Robert M Bloom Janine A Hanrahan Back to the Future The Revival of Pennoyer In Personal Jurisdiction Doctrine and the Demise of International Shoe 56 SAN DIEGO L REV 581 582 2019 338 Bristol-Myers Squibb Co v Superior Court of Cal 137 S Ct 1773 1779 2017 339 United States v Swiss Am Bank Ltd 191 F 3d 30 35–36 1999 “Because a plaintiff ordinarily consents to a court’s jurisdiction by filing suit disputes over personal jurisdiction typically feature the forum court’s relationship to one or more defendants ” see also Phillips Petroleum Co v Shutts 472 U S 797 811–12 1985 “Any plaintiff may consent to jurisdiction ” 340 Int’l Shoe Co v Washington 326 U S 310 316 1945 341 Burger King Corp v Rudzewicz 471 U S 462 476 1985 quoting Int’l Shoe 326 U S at 320 342 See e g Int’l Shoe 326 U S at 316 343 See e g Argentina v Weltover Inc 504 U S 607 619–20 1992 Plixer Int’l Inc v Scrutinizer GmbH 905 F 3d 1 6–7 1st Cir 2018 Synthes U S A v G M Dos Reis Jr Ind Com de Equip Medico 563 F 3d 1285 1293–94 Fed Cir 2009 A Benjamin Spencer The Territorial Reach of the Federal Courts 71 FLA L REV 979 994–97 2019 collecting cases see also FED R CIV P 4 k 2 344 Bristol-Myers Squibb Co v Superior Court 137 S Ct 1773 1779–80 2017 345 Id at 1780 346 Goodyear Dunlop Tires Operations S A v Brown 564 U S 915 924 2011 347 Bristol-Myers Squibb 137 S Ct at 1780 emphasis in original 348 Id 349 Id 336 Congressional Research Service 39 Intellectual Property Violations and China Legal Remedies substantial connection with the forum ” a connection alone is insufficient 350 The connection “must arise out of contacts that the ‘defendant himself’ creates with the forum ” rather than contacts that the plaintiff has with the forum 351 Moreover the contacts must be with the forum itself rather than “persons who reside” in that forum 352 That the plaintiffs suffered an injury as a result of the defendant’s conduct while in the forum is insufficient “The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant’s conduct connects him to the forum in a meaningful way ”353 In other words extraterritorial acts may not necessarily give rise to specific jurisdiction in the United States even if those actions injure an IP owner in the United States The case of Parker v Winwood is illustrative 354 There the plaintiffs sued for copyright infringement in the U S District Court for the Middle District of Tennessee alleging that the defendants had stolen the bass line from one of the plaintiffs’ songs by using it in a song that the defendants released throughout the United States and United Kingdom 355 One of the defendants moved to dismiss the suit on the basis of lack of personal jurisdiction arguing that he was a British citizen who “had never lived or worked in the United States that he had never been to Tennessee and that he had never done business had a mailing address or had a bank account in Tennessee either ”356 The plaintiffs responded that the court nevertheless had personal jurisdiction because that defendant had “purposely infringed the plaintiffs’ copyright and therefore willfully harmed Tennessee residents ” and that the defendant had contracted with a record company “to distribute his infringing song which made its way to Tennessee ”357 The district court granted the motion to dismiss as to that defendant holding that there was no personal jurisdiction over him in Tennessee and the U S Court of Appeals for the Sixth Circuit affirmed 358 On the plaintiffs’ first argument i e that the defendant had willfully harmed Tennessee residents the court reasoned that the mere fact that the plaintiffs were harmed in Tennessee was insufficient as the alleged infringement occurred in England thus the infringement did not connect the defendant to Tennessee only to Tennessee residents 359 On the second argument i e that the song was distributed throughout the United States including in Tennessee the court concluded that nationwide distribution was insufficient where there was no evidence that the defendant had “specifically directed” the allegedly infringing song’s distribution into Tennessee 360 Accordingly the court determined that the district court did not have personal jurisdiction over that defendant 361 350 Walden v Fiore 571 U S 277 284 2014 Id quoting Burger King Corp v Rudzewicz 471 U S 462 475 1985 352 Id at 285 353 Id at 290 354 938 F 3d 833 6th Cir 2019 355 Id at 835–36 356 Id at 836 357 Id 358 Id at 835 359 Id at 839–40 360 Id at 841 361 Id Another court has similarly held that distribution of an e-newsletter to at least seventy companies throughout the United States did not allow an exercise of personal jurisdiction over a defendant accused of copyright infringement Axiom Foods Inc v Acerchem Int’l Inc 874 F 3d 1064 1071–72 9th Cir 2017 351 Congressional Research Service 40 Intellectual Property Violations and China Legal Remedies Consistent with the principle that the conduct must be specifically directed at a forum even selling an infringing product within a state or within the United States may not suffice to give rise to personal jurisdiction The Supreme Court has not clearly articulated the circumstances under which introducing products into the “stream of commerce” gives rise to personal jurisdiction it has at least twice addressed that question but with no majority opinion 362 In the most recent plurality opinion Justice Kennedy opined that “ t he principal inquiry” in stream-of-commerce cases should be “whether the defendant’s activities manifest an intention to submit to the power of a sovereign ”363 Justice Kennedy’s opinion rejected the notion that “considerations of fairness and foreseeability” should play any role in the analysis as those considerations were “inconsistent with the premises of lawful judicial power ”364 In Justice Kennedy’s view “it is the defendant’s actions not his expectations that empower a State’s courts to subject him to judgment ”365 Justice Breyer took a broader view opining that if a defendant “purposefully” benefited from conducting activity in the forum or sold products “with the expectation that they will be purchased” in the forum that would suffice to confer personal jurisdiction—but that neither requirement was met in that particular case 366 Thus the Supreme Court held that New Jersey did not have jurisdiction over a British manufacturer of scrap-metal machines where the manufacturer sold its machines to a distributor who then sold the machines in New Jersey the manufacturer targeted the United States but not specifically New Jersey for sales 367 Civil Actions If the court has jurisdiction over an entity one of the primary methods of IP enforcement is for the IP owner to bring a civil action in a U S district court or a state court for certain trademark or trade secret claims Patent Copyright or Trademark Infringement Actions involving patents copyrights or trademarks generally involve allegations that an entity has infringed the IP at issue Because the actions are generally similar although different in some particulars actions alleging infringement of these three types of IP will be addressed together The evidence required to prove infringement depends on the type of IP that a rights holder alleges has been infringed Direct infringement occurs when the defendant personally takes the actions that infringe a patent copyright or trademark For patents this occurs when a person makes uses offers to sell sells 362 J McIntyre Mach Ltd v Nicastro 564 U S 873 2011 Asahi Metal Indus Co Ltd v Superior Court of Cal 480 U S 102 1987 363 J McIntye Mach 564 U S at 882 Kennedy J plurality 364 Id at 882–83 365 Id at 883 366 Id at 889 Breyer J concurring in the judgment quoting World-Wide Volkswagen Corp v Woodson 444 U S 286 297–98 1980 367 Id at 887–88 As an example of the type of conduct that would suffice to confer personal jurisdiction in the patent context the Federal Circuit has held that sending of a cease-and-desist letter to a company in California along with licensing of a U S patent in the United States sufficed to meet the requirements for personal jurisdiction Genetic Veterinary Scis Inc v LABOKLIN GmbH Co KG 933 F 3d 1302 1310–11 Fed Cir 2019 But see Maxchief Inv Ltd v Wok Pan Ind Inc 909 F 3d 1134 1138–39 Fed Cir 2018 concluding that simply sending infringement notice letters to company’s lawyer in Tennessee was insufficient to confer personal jurisdiction in Tennessee Congressional Research Service 41 Intellectual Property Violations and China Legal Remedies or imports the patented invention without authorization 368 For copyrights direct infringement occurs when an entity violates any of the statutory rights enumerated by Congress 369 for example if the entity makes an unauthorized reproduction of a copyrighted work makes a derivative work or distributes copies of the work for sale to the public 370 For trademarks direct infringement occurs when an entity uses or makes a counterfeit copy or imitation of the mark in commerce in a manner that is likely to cause confusion mistake or deception 371 Indirect infringement a second form of infringement occurs when an entity does not itself directly infringe the IP but instead encourages or contributes to another’s infringing acts For patents an entity is liable for indirect infringement when it “actively induces infringement of a patent” by knowingly aiding and abetting another’s direct infringement 372 An entity induces infringement when it knows of the relevant patent and that the acts it induced constitute patent infringement 373 An entity is also liable for indirect patent infringement if it contributes to patent infringement by selling or importing a material component of a patented article or method knowing that the article was especially made or adapted for infringement and does not have substantial noninfringing use 374 An entity may indirectly infringe a copyright as well One form of indirect copyright infringement is vicarious infringement where the entity “has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities ”375 Another form of indirect copyright infringement is contributory infringement where an entity with knowledge of infringing activity “induces causes or materially contributes to the infringing conduct of another ”376 The Supreme Court has held that a defendant induces copyright infringement when it “distributes a device with the object of promoting its use to infringe copyright as shown by clear expression or other affirmative steps taken to foster infringement ”377 The court clarified that “mere knowledge of infringing potential or of actual infringing uses would not be enough to subject a distributor to liability ”378 Instead inducement liability is premised “on purposeful culpable expression and conduct ”379 368 35 U S C § 271 a 17 U S C § 501 a “Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122 or of the author as provided in section 106A a or who imports copies or phonorecords into the United States in violation of section 602 is an infringer of the copyright or right of the author ” 370 Id § 106 371 15 U S C §§ 1114 1 1125 a 372 35 U S C § 271 b DSU Med Corp v JMS Co 471 F 3d 1293 1305 Fed Cir 2006 en banc see also Glob Tech Appliances Inc v SEB S A 563 U S 754 765–65 2011 373 Commil USA LLC v Cisco Sys Inc 135 S Ct 1920 1926 2015 This can occur for example when a company sells a product that infringes a patented method when used thereby causing the company’s customers to infringe directly but does not use the product and the patented method itself See e g In re Bill of Lading Transmission Processing Sys Patent Litig 681 F 3d 1323 1341–42 Fed Cir 2012 374 35 U S C § 271 c 375 See e g Sony Corp of Am v Univ City Studios Inc 464 U S 417 434–42 1984 Fonovisa Inc v Cherry Auction Inc 76 F 3d 259 261–64 9th Cir 1996 376 Fonovisa 76 F 3d at 264 quoting Gershwin Pub’g Corp v Columbia Artists Mgmt Inc 443 F 2d 1159 1162 2d Cir 1971 377 Metro-Goldwyn-Mayer Studios Inc v Grokster Ltd 545 U S 913 936–37 2005 378 Id at 937 379 Id 369 Congressional Research Service 42 Intellectual Property Violations and China Legal Remedies An entity may also indirectly infringe a trademark Vicarious trademark infringement requires a showing that “the defendant and the infringer have an actual or apparent partnership have authority to bind one another in transactions or exercise joint ownership or control over the infringing product ”380 A defendant is liable for contributory trademark infringement if it “intentionally induces another to infringe a trademark or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement ”381 Chinese companies have been found liable for infringing IP in the United States For example in 2018 a Texas jury found that the Chinese technology company Huawei had willfully infringed five patents owned by PanOptics Patent Management LLC relating to wireless and video-coding technology and awarded $10 6 million in damages 382 The judge later increased the award to $13 2 million based on the jury’s finding that the infringement was willful 383 In 2019 the court ordered Huawei to pay PanOptics’s attorney’s fees due to Huawei’s litigation conduct 384 Similarly in 2010 a Virginia jury found that a family of Chinese corporations had committed copyright infringement by conspiring to steal a U S corporation’s tire blueprints reprinting the blueprints without authorization and using the blueprints to manufacture tires nearly identical to the U S corporation’s products 385 The jury awarded $26 million in damages which was affirmed on appeal 386 Notably one of the defendants’ primary arguments on appeal which the court rejected was that they did not have sufficient contacts with Virginia for the court to exercise personal jurisdiction 387 Trade Secret Misappropriation Whereas the owner of a patent copyright or trademark may sue an entity for infringement i e unauthorized use of IP the owner of a trade secret may sue for misappropriation 388 A defendant misappropriates a trade secret by acquiring a trade secret by improper means or disclosing a trade secret that was acquired by improper means 389 Chinese companies have been found liable for misappropriation of U S trade secrets For example in 2018 a California jury found that the Chinese company Elec-Tech International had stolen trade secrets from lighting company Lumileds LLC 390 The jury found that while a former employee was still employed at Lumileds Elec-Tech’s chairman had paid him to steal trade 380 See e g Grubbs v Sheakley Grp Inc 807 F 3d 785 793 6th Cir 2015 Inwood Labs Inc v Ives Labs Inc 456 U S 844 854 1982 382 Jack Queen Huawei Owes Fees for ‘Rank Gamesmanship’ in Patent Loss LAW360 Nov 15 2019 https www law360 com articles 1220427 383 Id 384 Id 385 Tire Eng’g Distrib LLC v Shandong Linglong Rubber Co 682 F 3d 292 298 308 4th Cir 2012 This was part of a larger alleged scheme to steal the blueprints “produce infringing tires and sell them to entities that had formerly purchased products from” the U S corporation Id 386 Id at 298 387 Id at 300–06 388 See generally 18 U S C § 1836 In addition to civil suits there may also be criminal penalties See discussion infra in “Economic Espionage and Criminal Trade Secret Misappropriation ” 389 18 U S C § 1839 5 defining “misappropriation” id § 1839 6 defining “improper means” 390 RJ Vogt LED Co Wins $66M In Trade Secrets Row With Chinese Rival LAW360 Aug 13 2018 https www law360 com articles 1072949 led-co-wins-66m-in-trade-secrets-row-with-chinese-rival 381 Congressional Research Service 43 Intellectual Property Violations and China Legal Remedies secrets 391 The employee “copied thousands of files containing trade secrets and other information onto a portable storage device and then moved to China” where Elec-Tech began using the stolen trade secrets in its products 392 The jury awarded Lumileds $66 million in compensation 393 Preliminary Remedies In general remedies are awarded only after a tribunal adjudicates the merits of the case In certain circumstances however an IP owner may be able to receive some relief even before the merits are fully adjudicated An IP owner who succeeds on the merits may obtain an injunction—a court order preventing further infringement by the defendant—under certain circumstances At the beginning of the case an IP holder may also request that the court enter a preliminary injunction barring the defendant from infringement while the case is ongoing 394 To obtain a preliminary injunction an IP owner must establish 1 that he is “likely to succeed on the merits” 2 that he is “likely to suffer irreparable harm in the absence of preliminary relief” 3 “that the balance of the equities tips in his favor” and 4 “that an injunction is in the public interest ”395 If the IP owner succeeds on the merits the preliminary injunction is generally converted into a permanent injunction barring further infringement after the trial 396 It is possible that the IP owner will not succeed on the merits To guard against any harm to the defendant resulting from a preliminary injunction the court will require the IP owner to give “security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined ”397 Generally a court issues a preliminary injunction after a hearing in which the IP owner and the defendant present arguments and the court evaluates evidence 398 Sometimes however infringement will be so damaging that an IP owner will suffer irreparable harm before it could reasonably receive a preliminary injunction In those circumstances the IP owner may request a temporary restraining order TRO To receive a TRO the IP owner must establish “that immediate and irreparable injury loss or damage will result” if the TRO is not granted 399 If the IP at issue is a trade secret the court may without providing notice to the defendant and “only in extraordinary circumstances ” order “the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action ”400 Before ordering seizure however the court must find 391 Id Id 393 Id 394 See e g Commodores Entm’t Corp v McClary 879 F 3d 1114 1125 11th Cir 2018 395 adidas Am Inc v Skechers USA Inc 890 F 3d 747 753 9th Cir 2018 quoting Winter v Nat Res Def Council Inc 555 U S 7 20 2008 trademark see also Disney Enters Inc v VidAngel Inc 869 F 3d 848 856 9th Cir 2017 copyright Mylan Institutional LLC v Aurobindo Pharma Ltd 857 F 3d 858 865 Fed Cir 2017 patent 396 See e g Commodores 879 F 3d at 1121 1127 397 FED R CIV P 65 c 398 See e g Tinnus Enters LLC v Telebrands Corp 846 F 3d 1190 1197 Fed Cir 2017 see also FED R CIV P 65 a 1 “The court may issue a preliminary injunction only on notice to the adverse party ” 399 FED R CIV P 65 b 1 A 400 18 U S C § 1836 b 2 A i 392 Congressional Research Service 44 Intellectual Property Violations and China Legal Remedies 1 other forms of relief “would be inadequate” because the holder of the property would evade or not obey the order 401 2 “an immediate and irreparable injury will occur” absent the seizure 402 3 the harm to the IP owner outweighs the harm to the holder of the property and substantially outweighs the harm to any third parties 403 4 the IP owner is likely to succeed in showing that the information at issue is a trade secret that the person against whom seizure would be ordered misappropriated or conspired to misappropriate by improper means 404 5 the person against whom seizure would be ordered has actual possession of the trade secret and any property seized 405 6 the IP owner “describes with reasonable particularity the matter to be seized and to the extent reasonable under the circumstances identifies the location where the matter is to be seized” 406 7 the person against whom seizure would be ordered or those assisting that person “would destroy move hide or otherwise make such matter inaccessible to the court ” if the IP owner “were to proceed on notice to such person” 407 and 8 the IP owner “has not publicized the requested seizure ”408 If an IP owner cannot meet the requirements for a preliminary remedy then he or she must wait for adjudication of the case on the merits before receiving a remedy Post-Adjudication Remedies If a court finds that an entity has infringed IP two remedies are generally available money damages and permanent injunctions Generally damages awards require an infringer to pay money to the rights owner to compensate for infringement If a patent is infringed for example then “the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer together with interest and costs as fixed by the court ”409 If a patent owner can prove that it lost profits due to the infringement it can recover those lost profits instead 410 If the infringement was willful the court may triple the damages award 411 For copyright infringement the owner may recover either its “actual damages and any additional profits of the infringer” or “statutory damages ”412 Under the first option the “actual damages” are any damages actually suffered by the copyright owner and the “profits” are “any profits of 401 Id § 1836 b 2 A ii I Id § 1836 b 2 A ii II 403 Id § 1836 b 2 A ii III 404 Id § 1836 b 2 A ii IV 405 Id § 1836 b 2 A ii V 406 Id § 1836 b 2 A ii VI 407 Id § 1836 b 2 A ii VII 408 Id § 1836 b 2 A ii VIII 409 35 U S C § 284 410 See e g Mentor Graphics Corp v EVE-USA Inc 851 F 3d 1275 1283–90 Fed Cir 2017 411 35 U S C § 284 412 17 U S C § 504 a 402 Congressional Research Service 45 Intellectual Property Violations and China Legal Remedies the infringer that are attributable to the infringement and not taken into account in computing the actual damages ”413 Under the statutory damages provision the copyright owner is entitled to between $750 and $30 000 per infringed work “as the court considers just ”414 For trademark infringement the owner may recover the defendant’s profits any damages suffered by the trademark owner and the costs of the suit 415 If the suit involves the intentional use of a counterfeit mark then the trademark owner is entitled to triple the greater of defendant’s profits and the trademark owner’s damages 416 In a case involving a counterfeit mark the trademark owner may instead elect statutory damages from $1 000 to $200 000 per counterfeit mark per type of goods or services sold 417 If the court finds that use of the counterfeit mark was willful it may award up to $2 000 000 per counterfeit mark per type of goods or services sold 418 If a trade secret owner proves misappropriation the court may award 1 damages for any actual loss suffered by the trade secret owner by the misappropriation as well as any unjust enrichment received by the defendant 419 or 2 a reasonable royalty for the defendant’s unauthorized disclosure or use 420 If the trade secret was misappropriated “willfully and maliciously ” the court may award “exemplary damages” of up to two times the amount of the other damages 421 A successful IP owner may also obtain an injunction for example barring sales of products found to infringe 422 or in the case of trade secrets “any actual or threatened misappropriation ”423 To be eligible for an injunction a rights owner must establish that 1 the injury from infringement was irreparable 2 remedies such as money damages are inadequate to compensate for the injury 3 a balancing of the hardships between the rights owner and the infringer counsels toward granting an injunction and 4 the public interest would not be disserved by an injunction 424 For copyrights the court may also impound all copies infringing a copyright and all articles used to make such copies during the pendency of a suit it may also order those infringing copies and articles destroyed at the conclusion of the suit 425 For trademarks the court may order the seizure and or destruction of infringing and counterfeit articles in some circumstances 426 413 Id § 504 b Id § 504 c 1 The amount of statutory damages can be reduced to “not less than $200” if the infringer proves that it “was not aware and had no reason to believe that his or her acts constituted an infringement ” Id § 504 c 2 The statutory damages may be reduced in certain other circumstances as well Id Statutory damages may be increased to $150 000 if the copyright owner proves that the infringement was willful Id § 504 c 1 415 15 U S C § 1117 a The Supreme Court recently held that willful trademark infringement is not a prerequisite to an award of an infringer’s profits Romag Fasteners Inc v Fossil Inc 140 S Ct 1492 1497 2020 416 15 U S C § 1117 b 417 Id § 1117 c 1 418 Id § 1117 c 2 419 Id § 1836 b 3 B i 420 Id § 1836 b 3 B ii 421 Id § 1836 b 3 C 422 35 U S C § 283 17 U S C § 502 15 U S C § 1116 423 15 U S C § 1836 b 3 A In extraordinary circumstances the court may order the seizure of property necessary to prevent the disclosure of a trade secret See id § 1836 b 2 supra notes 400–408 and accompanying text 424 eBay Inc v MercExchange L L C 547 U S 388 391 2006 patent TD Bank N A v Hill 928 F 3d 259 278 3d Cir 2019 copyright La Quinta Worldwide LLC v Q R T M S A de C V 762 F 3d 867 879–80 9th Cir 2014 trademark 425 17 U S C § 503 426 15 U S C §§ 1116 d 1118 414 Congressional Research Service 46 Intellectual Property Violations and China Legal Remedies Import Controls In addition to private actions the U S government in coordination with U S IP rights holders has several methods for preventing infringing products from entering the United States The International Trade Commission and Section 337 Investigations The ITC administers a number of statutes concerning international trade including investigations relating to tariffs treaties imports and competition of foreign industries with U S industries 427 The ITC also administers Section 337 of the Tariff Act of 1930 Section 337 which allows it to “investigate and issue decisions on unfair methods of competition and unfair acts in the importation and or sale of imported articles ”428 Section 337 establishes that the importation into or sale within the United States of articles that infringe a valid U S patent copyright or trademark are unlawful actions the ITC may address 429 Although Section 337 investigations are not limited to behavior arising from IP in recent years many such investigations “have focused on either patent unregistered trademark or trade secret claims ”430 Section 337 investigations are somewhat similar to civil infringement actions in district court with some important differences Unlike infringement actions in district court where the court primarily adjudicates disputes between the parties in Section 337 investigations the ITC itself investigates whether there were unfair methods of competition or unfair acts in importation 431 Thus an investigative attorney from the ITC’s Office of Unfair Import Investigations participates as a party in the process to represent the public interest along with the complainant and respondent 432 Section 337 proceedings also differ from district court litigation in that the ITC’s jurisdiction arises from the imported products targeted by the complaint rather than any party associated with the products 433 Thus there may be fewer of the jurisdictional concerns described above 434 Section 337 investigations are based on a complaint filed by a private party 435 First the ITC performs a pre-institution investigation to determine whether the complaint provides an adequate basis for a full investigation 436 If the ITC determines that the complaint establishes such a basis 427 See 35 U S C § 1332 William P Atkins Justin A Pan An Updated Primer on Procedures and Rules in 337 Investigations at the U S International Trade Commission 18 U BALT INTELL PROP L J 105 2010 429 19 U S C § 1337 a 1 B – E 430 Atkins Pan supra note 428 at 107 “The majority of Section 337 investigations have focused on either patent unregistered trademark or trade secret claims in part because these types of rights are not subject to recordation with the U S Customs Service ” Most recent cases have involved allegations of patent infringement but the ITC has also adjudicated cases involving alleged trademark infringement or dilution trade dress misappropriation and infringement false designation of origin copyright infringement or misappropriation of trade secrets among others Id at 108–09 collecting cases 431 19 U S C § 1337 b 19 C F R §§ 210 9–210 10 432 Atkins Pan supra note 428 at 116 see also 19 C F R § 210 3 433 Atkins Pan supra note 428 at 119 see also 19 U S C § 1337 a targeting conduct “in the importation of articles” 434 See discussion supra in “Remedial Issues Jurisdiction and Territoriality ” 435 Atkins Pan supra note 428 at 112 19 C F R § 210 8 Other interested parties may join the action as cocomplainants See Stephen E Kabakoff Andrew G Strickland Leveraging Standing and Domestic Industry Activities of Third Parties in Patent-Based ITC Investigations 26 INTELL PROP TECH L J 25 27 2014 436 Atkins Pan supra note 428 at 112 19 C F R § 210 9 428 Congressional Research Service 47 Intellectual Property Violations and China Legal Remedies then the full investigation begins 437 An administrative law judge ALJ oversees the full investigation which is similar to district court litigation in that it includes discovery motions practice and an ultimate hearing on whether there has been a violation 438 Following this process the ALJ is to issue an initial determination whether a violation of Section 337 has been shown that determination may be reviewed by the ITC commissioners and the commissioners’ determination may be appealed to the Federal Circuit 439 To be entitled to relief the party who files the Section 337 complaint “must show that a U S industry that is dedicated to exploitation of the asserted IP rights either exists or is in the process of being established ”440 To establish the existence of a domestic industry a complaint must meet both the “technical” and the “economic” elements 441 The technical element requires that the complainant be performing activities based in the United States that exploit the particular IP rights asserted by the complainant 442 The economic element requires either significant investment in plant and equipment significant employment of labor or capital or substantial investment in exploitation of the particular right such as engineering research and development or licensing 443 If a Section 337 violation is established there are a number of possible remedies including 1 a general exclusion order which forbids importation of products regardless of the source 2 a limited exclusion order which forbids importation of those products by specific companies designated in the complaint 3 cease-and-desist orders that enjoin activities by U S entities 4 temporary exclusion or cease-and-desist orders during the pendency of the investigation and 5 consent orders where the parties agree to an outcome similar to a settlement in litigation 444 The President may disapprove any exclusion or cease-and-desist order within sixty days of issuance if he does not then the order goes into effect 445 Notably monetary damages are not available through the ITC proceedings 446 The ITC has issued orders excluding Chinese products that infringe U S IP For example in 2007 the ITC granted Zippo Manufacturing Company an order excluding lighters manufactured by several Chinese companies that infringed Zippo’s trademarked design 447 Similarly in 2012 the ITC issued general exclusion orders blocking the importation of products that infringed certain Louis Vuitton trademarks 448 In 2019 the ITC issued a general exclusion order barring certain 437 Atkins Pan supra note 428 at 113 19 U S C § 1337 b Atkins Pan supra note 428 at 113–15 439 Id 440 Id at 120 citing 19 U S C § 1337 a 2 441 Id at 121 see e g InterDigital Commc’ns LLC v ITC 707 F 3d 1295 1298 Fed Cir 2013 442 Atkins Pan supra note 428 at 121 443 Id at 122 citing 19 U S C § 1337 a 3 444 Id at 129–33 445 Id at 135 citing 19 U S C § 1337 j Such disapprovals are reportedly rare Id 446 Id at 129 447 Certain Lighters Inv No 337-TA-575 2007 WL 9683834 July 18 2007 General Exclusion Order Certain Lighters Inv No 337-TA-575 2007 WL 963194 Feb 21 2007 Initial Determination Zippo Wins Order to Block Import of Knock-Off Lighters THE STAR July 19 2007 https www thestar com business 2007 07 19 zippo_wins_order_to_block_import_of_knockoff_lighters html 448 Certain Handbags Luggage Accessories Packaging Inv No 337-TA-754 2012 WL 13046731 May 30 2012 Final Determination Exclusion Order Certain Handbags Luggage Accessories Packaging Inv No 337-TA754 2012 WL 864789 Mar 5 2012 Initial Determination Carl C Charneski Tiffany W Shimada Does Louis Vuitton’s Recent Victory at the US International Trade Commission Mark That Tribunal as a Viable Alternative to 438 Congressional Research Service 48 Intellectual Property Violations and China Legal Remedies Chinese companies from importing particular products that can be used to mount phones on vehicles on the basis that those products infringed various U S patents 449 U S Customs and Border Protection Seizures In addition to its other enforcement duties U S Customs and Border Protection CBP helps to protect the rights of U S IP owners by seizing counterfeited or pirated goods at the border 450 Under 19 U S C § 1595a c 2 C “merchandise which is introduced or attempted to be introduced into the United States may be seized and forfeited if it is merchandise or packaging in which copyright trademark or trade name violations are involved ”451 In FY2018 CBP seized 33 810 infringing items 452 If the seized goods had been genuine the total estimated manufacturer’s suggested retail price MSRP of the goods was nearly $1 4 billion 453 The vast majority of seized goods originated from either mainland China or Hong Kong 46% and 41% respectively for a total of 87% 454 Goods seized from China and Hong Kong also accounted for 85% of the total MSRP of seized products 54% and 31% respectively in FY2018 455 This was an increase from the 78% combined total percentage of MSRP in 2017 the percentage from mainland China alone increased from 46% in FY2017 to 54% in FY2018 456 Holders of trademarks and copyrights can assist CBP by recording a registered trademark or copyright with CBP along with a supporting image 457 Providing this information helps CBP personnel determine whether a particular good may be infringing IP 458 Rights owners can also file e-Allegations notifying CBP of potentially infringing shipments or conduct 459 Some rights owners create product identification guides that they provide to CBP or devise product training sessions for CBP personnel to assist with infringement determinations 460 District Court WORLD TRADEMARK REV Dec 2012 Jan 2013 https www worldtrademarkreview com enforcement-and-litigation does-louis-vuittons-recent-victory-us-international-trade-commission 449 Certain Mounting Apparatuses for Holding Portable Elec Devices Components Thereof Inv No 337-TA-1086 2019 WL 2897808 June 24 2019 General Exclusion Order Dani Kass ITC Blocks Counterfeit Phone Mounting Device Imports LAW360 June 20 2019 https www law360 com articles 1171169 itc-blocks-counterfeit-phonemounting-device-imports 450 U S CUSTOMS BORDER PROT INTELLECTUAL PROPERTY RIGHTS ENFORCEMENT 4 Jan 2017 https www cbp gov sites default files assets documents 2017-Jan ipr_guide pdf 451 19 U S C § 1595a c 2 C see also U S CUSTOMS BORDER PROT CUSTOMS DIRECTIVE NO 2310-010A DETENTION AND SEIZURE AUTHORITY FOR COPYRIGHT AND TRADEMARK VIOLATIONS 3 Dec 2002 https www cbp gov sites default files documents 2310-010a_3 pdf citing 19 U S C § 1595a c 2 C as authority for seizure Legislation has also been proposed that would allow CBP to seize goods that infringe a design patent See Counterfeit Goods Seizure Act of 2019 S 2987 116th Cong 2019 452 FISCAL YEAR 2018 SEIZURE STATISTICS supra note 160 at 6 453 Id 454 Id at 16 455 Id at 24 456 Id at 24–25 457 INTELLECTUAL PROPERTY RIGHTS ENFORCEMENT supra note 450 at 6 see also Intellectual Property Rights eRecordation U S CUSTOMS BORDER PROT https iprr cbp gov last visited Aug 18 2020 458 INTELLECTUAL PROPERTY RIGHTS ENFORCEMENT supra note 450 at 6 459 Id at 7 see also e-Allegations U S CUSTOMS BORDER PROT https eallegations cbp gov Home Index2 last visited Aug 18 2020 460 INTELLECTUAL PROPERTY RIGHTS ENFORCEMENT supra note 450 at 8–9 Congressional Research Service 49 Intellectual Property Violations and China Legal Remedies CBP also enforces ITC exclusion orders including those issued as a result of Section 337 investigations 461 In FY2018 CBP seized 172 shipments and excluded 31 shipments 462 The estimated MSRP of the seized goods was $968 803 463 Criminal Prosecutions In addition to civil actions in some circumstances IP violations implicate U S criminal laws 464 The following is not necessarily an exhaustive list of possibly applicable criminal statutes instead it is a representative list of the statutes and penalties that may be applicable depending on the circumstances of a particular theft Criminal Copyright and Trademark Infringement A copyright infringement may be criminally prosecuted if it is willful and committed 1 “for the purposes of commercial advantage or private financial gain” 465 2 “by the reproduction or distribution” of one or more copies of one or more copyrighted works with a total retail value of more than $1 000 during a 180-day period 466 or 3 by distributing a copyrighted work “being prepared for commercial distribution ” which the distributor knew or should have known was intended for commercial distribution “by making it available on a computer network accessible to members of the public ”467 Depending on the particular circumstances of the case individuals and organizations who violate these provisions are subject to a fine up to $250 000 for individuals and $500 000 for organizations imprisonment of up to ten years forfeiture of any property used to commit or facilitate the offense and restitution to the victim 468 In addition to infringement itself in certain circumstances it may be a criminal offense to traffic in counterfeit labeling relating to a copyrighted work Specifically a person may be criminally prosecuted if they knowingly traffic in a counterfeit or illicit label affixed to enclosing or accompanying a copyrighted work or traffic in counterfeit documentation or packaging 469 Violators are subject to a fine of up to $250 000 for individuals and $500 000 for organizations and or imprisonment of up to five years 470 Some copyright holders attempt to protect recordings of their works for example DVDs by using technology such as digital rights management DRM Circumventing those systems may result in criminal liability Specifically it is a criminal offense to “willfully and for purposes of commercial advantage or private financial gain”471 either 1 descramble decrypt or otherwise “avoid bypass remove deactivate or impair a technological measure without the authority of 461 FISCAL YEAR 2018 SEIZURE STATISTICS supra note 160 at 32 Id 463 Id 464 See e g Sean Lavin et al Intellectual Property Crimes 56 AM CRIM L REV 1101 2019 CRS Report RL34109 Intellectual Property Rights Violations Federal Civil Remedies and Criminal Penalties Related to Copyrights Trademarks Patents and Trade Secrets 465 17 U S C § 506 a 1 A 466 Id § 506 a 1 B 467 Id § 506 a 1 C 468 18 U S C §§ 2319 2323 469 Id § 2318 470 Id 471 17 U S C § 1204 criminalizing certain violations of 17 U S C §§ 1201 and 1202 462 Congressional Research Service 50 Intellectual Property Violations and China Legal Remedies the copyright owner” that effectively controls access to a copyrighted work 472 2 manufacture import offer to the public provide or otherwise traffic in any technology product service device component or part thereof that is primarily designed or produced for the purpose of circumventing copyright protection measures 473 or 3 knowingly and with the intent to induce enable facilitate or conceal infringement provide distribute or import for distribution false copyright management information 474 Penalties for a first offense include a fine up to $500 000 and imprisonment for not more than five years those penalties increase to up to $1 000 000 and ten years’ imprisonment for any subsequent offense 475 Trademark infringement may also be criminal in certain circumstances In particular it is a criminal offense to intentionally traffic or attempt to traffic in 1 goods and services and knowingly use a counterfeit mark on or in connection with those goods or services 2 labels or other similar packaging “knowing that a counterfeit mark has been applied thereto the use of which is likely to cause confusion to cause mistake or to deceive” 3 “goods or services knowing that such good or service is a counterfeit military good or service the use malfunction or failure of which is likely to cause serious bodily injury or death the disclosure of classified information impairment of combat operations or other significant harm to a combat operation a member of the Armed Forces or to national security” or 4 a drug when one knowingly uses a counterfeit mark in connection with the drug 476 Depending on the circumstances of the offense the maximum penalties range from fines of $2 million to $5 million and up to life in prison for an individual or $5 million to $15 million for an organization 477 The offender is also subject to forfeiture of any property used to commit or facilitate the offense and restitution to the victim 478 China has been a source of counterfeit goods for which individuals have been prosecuted for criminal trademark infringement For example in 2010 a Virginia jury convicted two individuals of criminal trademark infringement 479 The government argued at trial that the defendants “operated a massive international manufacturing import and wholesale counterfeit goods business” by importing infringing products from China 480 The government’s investigation 472 Id § 1201 Id 474 Id § 1202 Section 1202 c defines “copyright management information” as certain types of information conveyed in connection with copies of a work including for example the work’s title the name or other identifying information of the work’s author the copyright owner and terms and condition for use among others 475 Id § 1204 476 18 U S C § 2320 a 477 Specifically the maximum penalties are generally a fine of $2 million for an individual $5 million for an organization and or imprisonment of up to ten years for a first offense Id § 2320 b For a second or subsequent offense or an offense that involves the knowing or reckless causation of or attempt to cause serious bodily injury the penalties increase to up to $5 million for an individual and $15 million for an organization and or imprisonment for up to twenty years Id Where an individual knowingly or recklessly causes death from the offense she may be fined up to $5 million and or imprisoned for life and an organization may be fined up to $15 million Id 478 Id §§ 2320 b 2323 479 Press Release U S Dep’t of Justice Jury Convicts Two New York Importers in One of the Largest Counterfeit Goods Prosecutions in U S History June 11 2010 https www justice gov opa pr jury-convicts-two-new-yorkimporters-one-largest-counterfeit-goods-prosecutions-us-history 480 Id 473 Congressional Research Service 51 Intellectual Property Violations and China Legal Remedies uncovered that the defendants “imported over 300 000 counterfeit luxury handbags and wallets into the United States from China in the names of different companies ”481 Economic Espionage and Criminal Trade Secret Misappropriation Several statutes criminalize the theft of trade secrets under certain circumstances For example it is a criminal offense to commit “economic espionage ”482 This crime requires the government to prove that a person “intending or knowing that the offense will benefit any foreign government foreign instrumentality or foreign agent knowingly” 1 stole or without authorization appropriated took carried away or concealed or by fraud artifice or deception obtained a trade secret 483 2 without authorization copied duplicated sketched drew photographed downloaded uploaded altered destroyed photocopied replicated transmitted delivered sent mailed communicated or conveyed a trade secret 484 3 received bought or possessed a trade secret knowing that it has “been stolen or appropriated obtained or converted without authorization” 485 or 4 attempted to commit or conspired to commit any of those acts 486 A violator of these provisions will be fined not more than $5 000 000 and or imprisoned for up to 15 years 487 An organization that violates these provisions will be fined not more than the greater of $10 million and three times the value of the stolen trade secret to the organization 488 Certain thefts of trade secrets are criminal as well as civil offenses Thus it is a criminal offense for anyone “with the intent to convert a trade secret that is related to a product or service used or intended for use in interstate or foreign commerce to the economic benefit of anyone other than the owner thereof ” and who also intends or knows that the offense will injure any owner of the trade secret to knowingly 1 steal or without authorization appropriate take carry away or conceal or by fraud artifice or deception obtain such information 489 2 without authorization copy duplicate sketch draw photograph download upload alter destroy photocopy replicate transmit deliver send mail communicate or convey such information 490 3 receive buy or possess such information knowing that it was “stolen or appropriated obtained or converted without authorization” 491 or 4 attempt or conspire to commit any of those acts 492 Anyone who violates these provisions will be fined and or imprisoned for up to 10 years 493 Any organization that violates these provisions will be fined not more than the greater of $10 million or three times the value of the stolen trade secret to the organization 494 481 Id 18 U S C § 1831 483 Id § 1831 a 1 484 Id § 1831 a 2 485 Id § 1831 a 3 486 Id §§ 1831 a 4 – 5 487 Id § 1831 a 488 Id § 1831 b 489 Id § 1832 a 1 490 Id § 1832 a 2 491 Id § 1832 a 3 492 Id § 1832 a 5 493 Id § 1832 a 494 Id § 1832 b 482 Congressional Research Service 52 Intellectual Property Violations and China Legal Remedies Individuals associated with the Chinese government have been indicted under these provisions In 2014 the U S Department of Justice DOJ announced that “five Chinese military hackers” had been indicted for economic espionage and criminal trade secret theft 495 The indictment alleged that “the defendants conspired to hack into American entities to maintain unauthorized access to their computers and to steal information from those entities that would be useful to their competitors in China including state-owned enterprises ”496 According to DOJ the indictment alleged that in some cases “the conspirators stole trade secrets that would have been particularly beneficial to Chinese companies at the time they were stolen ” In other cases the conspirators “stole sensitive internal communications that would provide a competitor or an adversary in litigation with insight into the strategy and vulnerabilities of the American entity ”497 In announcing the indictment DOJ noted that the defendants were known members of the Chinese military 498 Recently DOJ also announced indictments against two Chinese individuals who allegedly “probed for vulnerabilities in computer networks of companies developing COVID-19 vaccines testing technology and treatments ”499 Those intrusions were allegedly part of “a hacking campaign lasting more than ten years to the present ” targeting companies “with high technology industries” in eleven countries 500 The indictment charged the alleged hackers with conspiracy to commit theft of trade secrets and conspiracy to commit computer fraud among other charges 501 Computer Fraud and Abuse Act IP violations involving cyber intrusions may violate the Criminal Fraud and Abuse Act CFAA 502 which criminalizes intentionally accessing a computer “without authorization or exceed ing authorized access ” and thereby obtaining information contained in a financial record information from “any department or agency of the United States ” or “information from any protected computer ”503 The CFAA also criminalizes unauthorized access or exceeding authorized access to a protected computer “knowingly and with intent to defraud ” which results Indictment United States v Wang Dong et al No 14-cr-118 W D Pa May 1 2014 Press Release U S Dep’t of Justice U S Charges Five Chinese Military Hackers for Cyber Espionage Against U S Corporations and a Labor Organization for Commercial Advantage May 19 2014 https www justice gov opa pr us-charges-five-chinesemilitary-hackers-cyber-espionage-against-us-corporations-and-labor The defendants were also charged with violations of the Computer Fraud and Abuse Act See id see also discussion infra in “Computer Fraud and Abuse Act ” 496 See U S Charges Five Chinese Military Hackers supra note 495 497 Id 498 Id quoting statement of then-U S Atty Gen Eric Holder 499 Indictment United States v Li Xiaoyu et al No 4 20-cr-6019 at 1 E D Wash July 7 2020 Press Release U S Dep’t of Justice Two Chinese Hackers Working with the Ministry of State Security Charged with Global Computer Intrusion Campaign Targeting Intellectual Property and Confidential Business Information Including COVID-19 Research July 21 2020 https www justice gov opa pr two-chinese-hackers-working-ministry-state-securitycharged-global-computer-intrusion 500 Two Chinese Hackers Working with the Ministry of State Security supra note 499 501 Id see also Li Xiaoyu No 4 20-cr-6019 at 1 502 18 U S C § 1030 503 Id § 1030 a 2 The statute defines a “protected computer” as a computer that is 1 exclusively for the use of a financial institution or the U S government or if not exclusivity for such use then used by or for a financial institution or the government and the offending conduct “affects that use” by the financial institution or the government or 2 a computer “used in or affecting interstate or foreign commerce or communication including a computer located outside the United States that is used in a manner that affects interstate or foreign commerce or communication of the United States ” Id § 1030 e 2 495 Congressional Research Service 53 Intellectual Property Violations and China Legal Remedies in furthering the intended fraud and obtainment of anything of value 504 Finally the CFAA criminalizes causing damage as a result of accessing a protected computer without authorization 505 Depending on the particular actions that lead to conviction violating the CFAA carries a penalty of a fine and or up to twenty years in prison 506 The court must also order that the violator forfeit any interest in personal property used to commit or facilitate the violation as well as any property derived from the violation 507 Any person who “suffers damage or loss” from a violation of the CFAA may pursue a civil action against the violator and obtain compensatory damages an injunction and or other relief 508 These provisions have been used to target Chinese hacking attempts in the United States In 2017 DOJ announced that three Chinese nationals had been indicted under the CFAA for hacking U S corporations for private advantage 509 The indictment alleged that “the defendants conspired to hack into private corporate entities in order to maintain unauthorized access to and steal sensitive internal documents and communications from those entities’ computers ”510 The indictment alleged that the Chinese nationals stole trade secrets emails and usernames and passwords for authorized users among other information 511 Conclusion There are numerous ways in which the Chinese government and other Chinese entities have allegedly misappropriated infringed undermined failed to enforce or otherwise violated IP rights Both IP rights holders and U S authorities depending on the nature of the violations may pursue a variety of existing legal remedies Moving forward Congress may choose to consider whether these existing legal options are sufficient to deter or remedy continued practices or future IP violations Id § 1030 a 4 Such conduct is not an offense if “the thing obtained consists only of the use of the computer and the value of such use is not more than $5 000 in any 1-year period ” Id 505 Id § 1030 a 5 The CFAA criminalizes other acts less likely to be implicated by IP theft as well See e g id § 1030 a 1 disclosure of national security or foreign relations information to others after accessing a computer without authorization or exceeding authorized access id § 1030 a 3 accessing a nonpublic computer of a department or agency of the United States id § 1030 a 6 trafficking in passwords or similar information that may be used to access a computer without authorization id § 1030 a 7 transmitting with intent to extort money or a thing of value any threat to damage a protected computer obtain or impair the confidentiality of information from a protected computer without authorization or in excess of authorized access or demand money or a thing of value in relation to damage to a protected computer 506 Id § 1030 c 507 Id § 1030 i – j 508 Id § 1030 g 509 Indictment United States v Wu Yingzhuo et al No 17-cr-247 W D Pa Sept 13 2017 Press Release U S Dep’t of Justice U S Charges Three Chinese Hackers Who Work at Internet Security Firm for Hacking Three Corporations for Commercial Advantage Nov 27 2017 https www justice gov opa pr us-charges-three-chinesehackers-who-work-internet-security-firm-hacking-three-corporations 510 Id 511 Id 504 Congressional Research Service 54 Intellectual Property Violations and China Legal Remedies Author Information Kevin J Hickey Coordinator Legislative Attorney Brandon J Murrill Legislative Attorney Nina M Hart Legislative Attorney Kevin T Richards Legislative Attorney Disclaimer This document was prepared by the Congressional Research Service CRS CRS serves as nonpartisan shared staff to congressional committees and Members of Congress It operates solely at the behest of and under the direction of Congress Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role CRS Reports as a work of the United States Government are not subject to copyright protection in the United States Any CRS Report may be reproduced and distributed in its entirety without permission from CRS However as a CRS Report may include copyrighted images or material from a third party you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material Congressional Research Service R46532 · VERSION 1 · NEW 55