China: The Intellectual-Property Battleground

While America's leaders worry about how to curb China's increasing influence in currency, inflation, and trade issues, they are in danger of overlooking an even larger threat—one that could make those debates pointless: China is expected to surpass the U.S. in patent filings this year.

China's National Patent Development Strategy lays out aggressive targets—a doubling of the number of patent examiners to 9,000 and 2 million patents by 2015. This includes both invention patents and utility patents, which cover engineering features. An increase in these utility patents may be even more worrisome. It indicates the focus isn't simply to create the new and revolutionary, but to repurpose the ideas of others.

China is focusing its intellectual attention in the right places, industries like sustainable power and new automobile technologies. It already operates the world's fastest supercomputer and is leagues ahead of the U.S. in high-speed rail development and many forms of alternative energy. With 480,000 patents filed in the U.S. last year, according to the U.S. Patent and Trademark Office, China is expected to overtake America this year, Thomson Reuters reports.

China has made a commitment not only to new ideas, but fast-tracking their ownership. With the country mandating that products not only be sold in China but conceptualized and engineered there, winning the trade war will be difficult.

IP Abuses

The problem is compounded by Chinese intellectual-property abuses. I've experienced this in my own technology, bladeless fans and vacuums. When Chinese counterfeiters began copying our technology, Dyson Ltd. filed suit. In the first of a series of infringement cases to reach Chinese courts, the decision went in our favor. We still have many more pending a decision, having battled Chinese-owned competitors in the courts for more than 10 years. The process and resources needed to defend those patents is extensive and discouraging. For a startup engineer or inventor, the threat of intellectual-property theft can be debilitating and curb new ideas.

New ideas are essential because 21st century trade will not be defined by who makes what, but who makes things better. And while the U.S. stalls, China moves ahead. Take American jetmaker Boeing (BA), for example. Boeing has again announced a delay of its 787 Dreamliner. At the same time, China announced a joint-venture agreement with General Electric (GE) giving it access to sophisticated airplane technology, including some of the same components used in Boeing's Dreamliner. The U.S. must be smarter and tougher to succeed.

The U.S. leads all other countries in science and technology, with 40 percent of global R&D spending, according to U.S. think tank Rand. But the gap is closing. China's $87 billion in scientific research and development spending in 2009 put it fourth in the world after the U.S., Japan, and Germany, according to figures released by the National Bureau of Statistics of China and reported by the country's state-run news agency Xinhua. China employs 1.4 million researchers, equal to that of the U.S. Global research and development spending is expected to increase by 3.6 percent in 2011 to $1.2 trillion, according to the 2011 Global R&D Report released by Battelle-R&D Magazine in December. America must continue to increase investment in R&D. Beyond that, offering incentives and tax credits to corporations that engineer and manufacture locally will help drive U.S. invention.

In Britain, where Dyson is based, we might not be able to compete when it comes to mass manufacturing, but our strength lies in invention and engineering. The same is true for the U.S., birthplace of the mass-manufactured automobile. The recent financial crisis has forced a revival of the auto industry in the form of sustainable technologies—ultracapacitors, carbon fiber, and oil substitutes. It may not be Ford's assembly-line vision, but it could be the engineering revival behind American hybrid and electric cars that helps the U.S. compete. These challenges are prevalent not only in the U.S., but also in Europe—the U.K., Germany, France, and Belgium are among the European nations falling behind in the business of ideas.

U.S. Pressure

New inventions and innovations will count for nothing if the intellectual property behind these ideas can be copied and mass-produced. China aims to invest in the development of new technology while turning a blind eye to intellectual-property theft. The U.S., which spends over twice as much on litigation as it does on research, needs to do more to get tough on these copycats. As the No. 1 economy, the U.S. must pressure China to rein in patent abuses and expand trade.

China is listening. Recognizing it has a place as a global superpower, it's vowed not to use pirated software in any government offices. Acknowledging the problem is a start, but by no means the end.

President Obama's State of the Union address recognized the need for U.S. companies operating in China to be on a more equal footing to China's own. As he put it, the playing field isn't level. China's have-your-cake-and-eat-it-too attitude is a threat not only to U.S. industry, but to its reputation and long-term future as a global player. Clearly, the answer isn't exclusion or tariffs; it's diplomacy and healthy competition.

Ultimately, it may be in China's interest to relax trade restrictions and open up the market to American imports. The U.S. has signaled that a more conciliatory trade policy is a possibility, but only if China opens up its own market to American products. A little competition will go a long way toward driving new ideas for both countries.

The U.S. has shown itself to be an invention hub: entrepreneurial, risk-taking, and hands-on. If the U.S. cannot remain intellectually competitive, a few inflationary percentage points will be the least of the country's problems.

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