Tags: asbury | race | Innovate | Steal

The Race to Innovate vs. the Race to Steal

Thursday, 04 Aug 2011 08:03 AM

By Neal Asbury

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I read an interesting Op/Ed piece that noted that China’s R&D expenditures are 1.5 percent of GDP—enough to propel China to 12.3 percent of the world’s total. The U.S. R&D expenditures by comparison are 34-35 percent of the world’s expenditures on R&D.

The article went on to trumpet the fact that “Chinese inventors filed 203,481 patent applications in 2008. That would make China the third most innovative country after Japan (502,054 filings) and the U.S. (400,769).”

This sounds good until you delve a little further. Almost all of the patents were merely slight tweaks and modifications of existing patents.
Why doesn’t China submit more legitimate patents? Because it’s far easier to simply steal and invalidate the intellectual properties of patents held by the U.S. and other countries.

The International Intellectual Property Alliance, a U.S. coalition of film, software, music and publishing groups, estimates that U.S. companies lost more than $15 billion in 2009 due to international copyright theft.

About $14 billion of the total was due to software piracy, with an estimated $3.5 billion in losses in China. It’s gotten so bad that among China’s 457 million Internet users, 99 percent of all music downloads are illegal.

Want more proof? While China has the second largest market for computer sales, it ranks only eighth in software sales. It doesn’t take a technical genius to figure out that China is carrying out systematic piracy by illegally downloading software. Where does most software originate? The U.S. of course.

A recent story highlighted a Chinese computer store that used the Apple logo to promote its products. The logo was even on the blue shirts of employees, just as Apple employees wear in the U.S. Trouble is, this was NOT an Apple store, or even sanctioned by Apple. The Chinese government said it was “looking into it.”

China is the leading intellectual property pirate because they have insidious "indigenous innovation" policies that call on U.S. companies to transfer valuable technology to participate in the Chinese market. There is no incentive for China to seek original R&D patents when they can simply alter existing patents and take ownership of it.

According to the U.S. Patent and Trademark Office, China continues to be the number one source of counterfeit products seized by U.S. Customs and Border Protection, accounting for 61 percent of all seizures in 2010.

There is growing evidence that Chinese factories employ “ghost shifts,” where employees turning out legitimate products during the day, are replaced by employees who come in at night to make an identical looking product, but usually made with inferior materials and where the original brand company receives no compensation. These products are dumped onto the ever burgeoning black market.

The U.S. will always be the world’s center of innovation and product development. It is time to realize we can’t continue to create jobs in America if hundreds of billions of dollars are being siphoned off our economy by intellectual property pirates. Intellectual property theft at a minimum costs us 3,000,000 well-paying jobs. Imagine what that would mean for our economic recovery? Imagine what that would mean for so many families that are mired in hopelessness and despair.

What makes this even worse, is most of this theft occurs against our small businesses and entrepreneurs who are the least capable to defend themselves. They simply do not have the resources to fight foreign governments colluding with their industries.

The sad truth is American ingenuity has never been greater but it is not Americans that are benefiting from their hard work and investments.

The race to innovate cannot keep pace with the race to steal and it is costing us dearly.

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