Long Home to Piracy, China Increases International Patents

China is rapidly growing into a world-class patent holder, even though America remains the largest source of patent applicants, according to a report by the World Intellectual Property Organization. America and China, while distant from one another today, may some day grow closer in other areas of intellectual property, too.

In 2006, Huawei Technologies of China filed for more international patents than Dupont, Hewlett Packard, Honeywell, Procter and Gamble, IBC, Cisco, or Microsoft. Indeed, Huawei ranked 13th internationally among corporations in 2006, up from 37th in 2005. Among American corporations, only 3M, Intel, Motorola, and Qualcomm filed more international patent applications.

These developments are remarkable because for decades China has been a scofflaw of intellectual property and remains so for copyrights and trademarks. The International Intellectual Property Alliance has estimated that between 85% and 90% of trade in copyrighted works in China is controlled by piracy.

America is the largest global source of copyrighted works — books, recorded music, computer software, films, etc. Total copyright industries account for more than 11% of American economic activity, according to a recent report by the International Intellectual Property Alliance.

American copyright holders lose billions of dollars annually from lost sales in China and dozens of other countries where intellectual property has little currency. Businesses invest in intellectual property only where it can be protected, developed, and traded. International protection of all intellectual property would be enormously valuable to American economic growth.

In much of the world, intellectual property protection has little past and little future. Even in such countries as Russia, South Africa, Argentina, and Brazil, relatively few, and in some instances a declining number of patents are registered. Intellectual property protection will not likely soon improve in these countries.

But patents in China are increasingly distinguishable from other forms of intellectual property. They have particular value for manufacturing, an area where China has a large share of world activity. In 2002, China accounted for less than 1% of international patent applications. By 2006, that share had grown to nearly 3% and is likely to grow more in coming years. During the same period, the American share of international patent activity declined from 37% to 34%.

The U.S. Trade Representative's Web site reveals 694 documents for a search of the following key words: "China" and "intellectual property." Despite amassing substantial information on the topic, including many complaints from American business interests, the office of the Trade Representative in the past two decades has taken few effective steps to deal with the near absence of protection for most forms of intellectual property in China.

Recently, the U.S. Trade Representative filed a complaint against China at the World Trade Organization based on alleged subsidies to Chinese manufacturers and other unfair trade practices. But even if America were to prevail at the WTO, an uncertain outcome at best, it would do nothing to protect American intellectual property interests in China.

Government subsidies are often hard to prove and harder to stop. Piracy of intellectual property is often easy to prove, but few governments take it seriously.

The hesitancy of the U.S. Trade Representative to elevate trade in intellectual property to a higher priority may reflect broader social ambivalence about intellectual property protection.

Today, with widespread and efficient copying technologies, there is little perceived incremental cost to stealing many forms of intellectual property. Although not nearly as universal as in China, piracy remains a problem here in America.

Perhaps even more troubling, social norms here at home condone piracy. On practically any high school or college campus in America, some students have pirated music, videos, computer programs, and knockoff clothes and watches. Many students have no compunction about downloading music or software free of charge.

Efforts to enforce intellectual property rights on campus are often met with incredulity and the Internet defense: information on the Internet is presumed free and beyond legal enforcement.

Countries protect property rights when it is in their economic interest to do so. Someday, China will discover that its economic interests, like America's, are closely tied to the protection of all forms of intellectual property. Only then will the flow of knockoff videos, computer software, and Rolex watches will grind to a halt.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.