The Chinese government and its businesses are famously comfortable with breaking the laws involving intellectual property. Examples include cheap imitations of name brand clothing, DVDs of movies still in the theaters or stealing technological innovations used when it manufactures products for U.S. tech companies.
Therefore, critics were not surprised when federal investigators in Seattle looked into allegations of IP theft involving Chinese giant Huawei. The New York Times reports that this new case involving Huawei follows up on a civil case where the Chinese company stole IP related to a robot used by T-Mobile to diagnose quality control issues in mobile phones (Huawei is one of the world’s largest smart phone makers). A jury found the company guilty in 2017 in that civil case.
Huawei is also in the cross hairs of the U.S. government, which led to the December arrest and potential extradition of Meng Wanzhou, Huawei’s chief financial officer. She is accused of misleading banks about the company’s dealings in Iran, which caused the banks to inadvertently violate U.S. sanctions. The company also fired an employee recently who was arrested on charges of spying for the Chinese government.
Stealing trade secrets to bolster Chinese economy
The general fear surrounding Huawei and other Chinese companies is that they are being encouraged and propped up by the Chinese government to achieve or further the country’s political and economic goals.
The U.S. has responded in the past with trade sanctions and other steps. The latest is a Telecommunications Denial Order Enforcement Act, which would ban the export of American companies’ technology to Chinese telecommunications companies that have violated U.S. sanctions. The Chinese telecommunications company ZTE was essentially shut down last year until the Trump Administration lifted sanctions, and both ZTE and Huawei are now once again likely to face the prospect of charges involving the theft of trade secrets.
A solution for moving forward
Licensing and partnerships can quite complicated, especially when they involve deals with large companies in foreign countries. The Chinese businesses are hurt most by getting shut down, as ZTE was. To avoid that, the companies may acquiesce to government demands that they admit guilt and agree to some sort of compliance plan.
While rarely does it involve such a large-scale dispute, theft is a concern with any sort of IP or licensing partnership. The government is involved in this case, but typically it is intellectual property attorneys who will draft an agreement for partnerships that are mutually beneficial. They can also enforce or formulate a response if a partner violates those agreements.