Alexander W. Koff is a partner in the Baltimore office of the law firm Whiteford, Taylor & Preston, LLP. He was recently appointed by the U.S. Secretary of Commerce to serve on the Maryland/D.C. District Export Council (DEC), which helps to support export related activities from that region.
The Legal Pulse: Last November, you authored a Guest Commentary for The Legal Pulse on IP and China. Any new developments?
Alexander Koff: There is some news about IP cases being settled by Western companies. Yesterday The Wall Street Journal reported that software makers Microsoft, Adobe, and Autodesk settled copyright infringement suits against a midsize Chinese steel structure engineering company. Good on its face. But the settlement was reportedly just shy of $US200,000 and split three ways. And although supposedly this does not include “undisclosed financial damages,” the use of pirated software is widely reported to be rampant.
The Legal Pulse: So you think that there is a long way to go on the IP front?
Koff: The Chinese government is saying the right things and China has solid laws on its books. But piracy remains a big problem – as is patent and trademark infringement. You can see these latter issues coming to a head in the IP lawsuits filed against Chinese firms in the United States, most notably at the U.S. International Trade Commission (ITC). The ITC hears cases brought under 19 U.S.C. § 1337 (Section 337). Section 337 cases permit companies to exclude IP violators from the U.S. market. And new filings show that cases against Chinese entities far outnumber those against any other country.
The Legal Pulse: Will Section 337 fix the problem and force Chinese firms to respect IP?
Koff: Section 337 is a powerful tool and one that should certainly be on the radar screen. But it cannot do the job alone. The Chinese authorities deserve credit for all that they are doing – and doing right. But there does need to be better domestic enforcement in China. And there needs to be a better understanding and respect for IP issues in China. I think IP issues will improve dramatically once Chinese entities realize that protecting IP helps them. They need to be vested in the fight and not feel that these rules are imposed by and benefit only the West.
The Legal Pulse: So what should companies expect next?
Koff: There is a growing trend in China to download patent applications filed in the U.S. and elsewhere, copy them, and then file for a Chinese patent based on the blatantly copied prior art. I have heard from a number U.S. firms that they have had to fight against this abuse of the patent system – sometimes to invalidate a patent granted to a Chinese entity that copies their own patent application. Patents are meant to encourage innovation. The quid pro quo is a limited monopoly in exchange for sharing the new invention with the world. Abusing that process needs to be addressed, and companies need to be aware that this practice is happening, particularly if future fights are going to be in China as U.S. companies try to export in the coming years.
The Legal Pulse: In light of the still uncertain IP protection atmosphere, do you still see U.S. firms increasing exports to China?
Koff: Likely – for two reasons. In my capacity on the Maryland/D.C. District Export Council, I see that U.S. firms want to meet President Obama’s goal of doubling exports in the next five years. They know that Jeffrey Immelt, CEO of GE, was named to lead President Obama’s new Council on Jobs and Competitiveness and read his recent Washington Post Op-Ed. Although some in the business community may question how Mr. Immelt’s Op-Ed comments gibe with GE’s reputation for offshoring jobs, and may be suspicious that many exports of intermediate goods are used in the assembly and production of final goods that are then shipped back to the United States, I think many do want to export and are keen to try. Second, and perhaps more important, China recently announced a policy to increase imports, highlighting the U.S.-China bilateral relationship.