Jahsia Cooper

April 3, 2018

Dr. Steven C. Roach

INR 4502. 001

International Organization Research Paper

The World Intellectual Property Organization is an international agency that is

one of sixteen organizations that make up the United Nations. With 191 member states,

and188 of them being members of the United Nations, the World Intellectual Property

Organization, also refereed to as WIPO, is responsible for many functions that help bring

states together. One of the main functions of this agency is to promote “innovation and

creativity for the economic, social and cultural development of all countries, through a

balanced and effective international intellectual property system” (World Intellectual

Property Organization).

The promotion of creativity and innovation allows for countries, businesses and

individuals to hopefully improve the lives of others through the use of intellectual

property. According to the World Intellectual Property Organization, “Intellectual

property refers to creations of the mind: inventions; literary and artistic works; and

symbols, names and images used in commerce.” If any of intellectual property is newly

invented, the inventor has an exclusive right to their innovation. However, the only way

to receive this exclusive right is if the innovation is processed with WIPO before

someone else processes the same or a similar product.

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 WIPO’s other function is to make sure that innovators receive this exclusive right

when the product is processed. WIPO enforces these rights through the use of granting

protection either through copyrights, patents or trademarks to the innovator for a

specified amount. Despite the fact that all three-protection grants protect intellectual

property, they all protect different things. Copyrights protect literary and artistic works.

Patents allow for individuals or corporations to have an exclusive right to their product.

Trademarks help protect items that may define a companys’ brand. Each of these are

allotted a various amount of time that the product is able to be protected by WIPO before

repercussions from infringement ceases. While there are tools set in place to protect these

new innovations, there are still ways of getting around intellectual property rights.

International and domestic theft of intellectual property is an increasing problem

due to the progression of technology and the expansion of resources in a race to become

the worlds top leader. For example, the number of people who utilized the internet in

2012 rose by 8.8% increasing the number of users to about 2 billion. This means with the

world population of 7 billion, there was a penetration rate of 34%. This significant

increase in internet usage means that when theft occurs, it is the job of the World

Intellectual Property Organization to step in and handle the problem. However, WIPO

doesn’t just step in as soon as the problem occurs. It is the responsibility of the innovator

to bring the issue to WIPO.

With that being said, theft of intellectual property can stem from all sources such

as individuals, businesses and countries. If that is the case, how is WIPO supposed to

respond to a situation where one of the more dominant member states of the organization

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is stealing intellectual property from another dominant member? How is the World

Intellectual Property Organization supposed to respond when this country is continuously

stealing but it’s for the improvement of that country’s’ economy and livelihood? Do the

ramifications from doing so have a detrimental affect on the state at fault?

The first way to combat this problem would be for WIPO to impose sanctions on

the state that is breaking said law. One sanction that is normally given is a reduction in

aid from WIPO and the UN whether it may be technological resources or money. One

state that tends to receive sanctions quite often is China. China is known for stealing

intellectual property from other countries, especially the United States.

For example, in America, it costs about $600 billion a year for intellectual

property theft from China. That means that the American economy is losing $600 billion

a year in intellectual property due to the theft from the Chinese government and

businesses. But because these are two different states, how do they know what each other

defines as intellectual property? Well according to the World Trade Organization (WTO)-

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement)

(1994) from number 2 under Nature and Scope of Obligations under Article 1 from

General Provisions and Basic Principle Rights, it states “ For the purpose of this

Agreement, the term “intellectual property” refers to all categories of intellectual property

that are the subject of sections 1 through 7 part II.”

A prime example of China stealing intellectual property from the United States

would be copyright infringements on certain products such as the iPhone. China created

the HiPhone, which is essentially considered to be the cheaper version of Apple’s original

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product. There are also companies in China such as Xiaomi, Weibo and Youku that are

fake versions of American companies such as Apple, Twitter and YouTube. By having

these fake versions of American companies, it produces competition in the market for

these products despite the fact that consumers may not be paying for what they intended.

One of the reasons why this problem continues to grow is because “The Chinese

government has become more explicit in its encouragement of domestic companies to

pursue technology transfer from foreign companies” says Rebecca Liao, a US-based

corporate attorney and China expert. These foreign companies come to China because it

is cheaper for them to pay for labor and materials but in turn they end up getting their

intellectual property stolen. Is it actually worth going to a foreign company to produce

goods at a cheaper if your ideas are just going to be stolen?

Agatha Kratz, an expert on the Chinese economy at the European Council on

Foreign Relations stated that “what is at stake is policies by the Chinese government that

require foreign companies in China to share their technologies either with the state and its

regulators (for national security concerns)…This isn’t IP theft per se. Instead, it is a way

to strong- arm foreign companies into sharing and disclosing their technology.” China

does this to better their economy because it is working.

For example, China has become one of the world leaders in patents. Chinese

inventors have received 28% more patents between 2016-2017. And according to the IFI,

China’s BOE Technology Group, a company best known for computer and TV displays,

has seen a 63% increase in patents placing it at number 21 on the IFI’s list of top 50

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recipients. Whether or not stealing intellectual property has a direct correlation to their

increase in patents, China is starting to take over the world economy.

And with the number of U.S patents being received by China and the $600 billion

worth of intellectual property being stolen a year, it is hard for the U.S to have WIPO

place harsh sanctions on countries who are stealing from them without it having a

negative impact on the American economy and international trade relations. For example,

according to the Office of the United States Trade Representative, U.S goods and services

trade with China had a total estimate of $648.5 billion in 2016. Out of that total, $169.8

billion were exports and $478.8 billion were imports.

Although it is challenging to place harsh sanctions, there are three different ways

that the United States can take action against China if need be. The first one is for the

United States to update a new watch list with the Department of Commerce. The mission

of the Department of Commerce is to promote job creation and economic growth by

having fair trade, providing the tools necessary for commerce and constitutional

democracy while fostering innovation while strengthening U.S economic and national

security. By updating the watch list, it allows the department to track the Chinese entities

that continuously steal American intellectual property. In doing so, it gives American

companies access to see which of these Chinese corporations are engaging in theft and

allows them to make decisions when it comes to international business agreements

whether it be to cease all interactions with these foreign companies or to press charges

through WIPO.

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 Another action that can be taken is to force the Department of Treasury to impose

sanctions against the Chinese companies that are on the watch list. For example, in 2017

there was case that was formed between China and the U.S because a Chinese company

called ZTE Corp., which is a telecom equipment maker, was taking American technology

and incorporating into their own and illegally selling it to Iran. ZTE Corp. was also

responsible for making 238 shipments to North Korea of this telecom equipment.

Because of this, it was reported to the Department of Treasury and the Department of

Commerce. The Chinese company “not only violated export controls that kept sensitive

American technology out of the hands of hostile regimes like Iran’s, they lied…about

their illegal acts” according to U.S Attorney General Jeff Sessions.

As a result of this, not only does the company have to pay $900 million as a

sanction, but they also have a seven-year suspended denial of export privileges, three

years probation, compliance and ethics program and also a corporate monitor. If they

don’t comply with any of the agreements during their seven-year suspension, they will

also have to pay a $300 million fine. When asked about the whole case, Chinese Foreign

Minister Wang Yi stated “The Chinese government consistently opposes foreign

governments putting unilateral sanctions on Chinese companies. At the same time, we

have always asked our companies to operate legally abroad.” The only problem with a

seven-year suspension for ZTE Corp. is that they will now be receiving no supplies from

American companies, which indicates a problem because ZTE Corp. relies on the U.S for

25-30% of the supplies needed to make their own goods.

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 Prior to this case, another major issue was in 2015 under the Obama

administration. President Obama enacted an executive order in play to place cyber-

sanctions on multiple Chinese government hackers that would in turn change into

economic sanctions for whoever was responsible. The United States threat to impose

these sanctions worked when Chinese President at the time Xi Jin Ping agreed to a

settlement with President Obama to work collaboratively to open a joint investigation

together. Because of this agreement, China’s commercial hacking dropped about 90%

after the settlement was made according to Dmitri Alperovitch who is the co-founder of

the cyber-security firm CrowdStrike.

While commercial hacking has dropped, it still continues to pose a problem,

which is why President Donald Trump has enacted new tariffs against Chinese goods at a

price of $50 billion. We know this because last year the U.S Trade representative Robert

Lighthizer found that China was in violation of U.S intellectual property under section

301 of the Trade Act of 1974. According to companies such as Amazon and Wal-Mart,

these tariffs are going to raise consumer prices in the U.S. However, Robert Lighthizer

says that him and his team have created an algorithm that would “put maximum pressure

on China and minimum pressure on American consumers.” Whether or not the threats are

real or taken seriously, they are what’s needed for the point to get across and for the

United States to be taken seriously.

A final sanction that can be given is to inform the World Trade Organization about

Chinese industrial policies. By doing this, you allow for the World Trade Organization to

deal with the issue instead of having to personally deal with it. For example in November

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of 1999, there was a US-China trade agreement made. Prior to the agreement, the

problem was that there was evident bilateral trade imbalances between both countries and

the United States was not too happy about that. The United States argued that there was a

merchandise deficit with China compared to theirs, which was apparently much lower.

Regardless of the deficit, an agreement was made through the World Trade Organization.

The next way of dealing with theft of intellectual property between two dominant

states is by providing adequate information to the public and consumers. In doing so, it

gives light to this on going battle of stopping intellectual property theft and forces this

issue to be addressed. One way of educating the public is World Intellectual Property

Day. This day is a way to inform the world on the affects that intellectual property rights

have on innovation and creation and how they protect those rights to innovation.

One issue that is currently being addressed but with many uncertainties happens

to not come from a dominant country but from the World Intellectual Property

Organization itself. The United States is currently deciding whether or not to further press

charges against WIPO because of their actions of sending technology such as computers

to North Korea and Iran. North Korea received 16 technical assistant programs and Iran

received 48. The reason they received this technology was so the two states can have

more modernized patent offices so they are able to access WIPO’s database which

contains more than 2 million patents.

However, by trying to transfer this technology, WIPO went against the United

Nations Security Council’s sanctions against North Korea and Iran and U.S law without

the approval or knowledge of all other member states of the organization. The only

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reason why the transfer didn’t go through is because of Bank of America and the U.S

Office of Foreign Assets Control. These two organizations denied the transfer because

they believed that it was in violation of U.S law stating that North Korea is banned from

receiving specific exports.

Even though this went against U.S law, WIPO feels as though they are not in the

wrong. WIPO’s legal counsel Edward Kwakwa wrote a legal memo stating, “WIPO as an

international organization, is not bound by the U.S national in this matter.” Therefore

insinuating that WIPO does not have to abide by U.S law, which is why they are actively

searching for a way to still get North Korea and Iran the technology regardless of their

sanctions.

North Korea and Iran have these sanctions due to their continual search for

improvement in their nuclear and ballistic missile programs. This search for military

advancement is considered to be a national threat to the security of the United States

because of the type of relationship the U.S has with these countries. If they had a

progression in military resources, it would make it easier for these countries to try and

gain access to American trade secrets. Some could argue that by not allowing North

Korea and Iran to have access to technology to further improve their programs is a good

thing because it doesn’t allow them to gain access to intellectual property rights. This is a

way of one safeguarding the American government and economy and two a way of

keeping the worlds wealthiest countries wealthy and in power because these developed

countries export the most innovative ideas and hold the most patents.

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 For example, Nicholas Lardy the Senior Fellow at the Peterson Institute for

International Economics stated “IP protection promotes entrepreneurship but needs to be

balanced with anti-monopoly policies.” This denial of distribution towards North Korea

goes against one of the original purposes of WIPO, which is to promote innovation and

provide the resources available for this to happen. For example in Article 67 of the TRIPS

Agreement it explains how technical and financial support may be provided to least

developing and developing member states of WIPO. Therefore, there are too many

factors at play when it comes to WIPO providing these resources when the U.S is the one

with sanctions against these countries.

Another way of providing adequate information about the theft of intellectual

property is to have each member apart of the World Intellectual Property Organization to

have the same consensus when it comes to fighting this issue. If each state took safe

guards from preventing stolen or counterfeit goods from coming into their country, it

would reduce the distribution of these goods or force these businesses to find another

way. For example Article 69 of the TRIPS Agreement states that each member will

“cooperate with each other with a view of eliminating international trade in goods

infringing intellectual property rights.”

Article 69 makes it so that administrations have to share information with each

other about infringed goods being traded. The article is intended to promote “the

exchange of information and cooperation between custom authorities with regard to trade

in counterfeit trademark goods and pirated copyright goods.”

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 The final option to deal with the theft of intellectual property between two

dominant countries is to either create new laws and treaties or to review old ones and

make adjustments to them. With the continual growth in technology, laws and treaties

need to grow and change with them as well. For example, in the 1980s the

competitiveness of technology and entertainment industries forced the U.S Government

to start paying more attention towards protecting their intellectual property rights in

international markets. Because of this, the Trade and Tariff Act of 1984 was created to

amend Section 301 of the Trade Act of 1974. The amendment of the law allows the

President to impose sanctions against countries that are failing to meet their obligations

when it comes to protecting intellectual property rights.

This can be seen in the case between the U.S and Korea. In 1985, the Office of the

United States Trade Representative utilized the amendment of Section 301 from the Trade

and Tariff Act of 1984 to threaten Korea with sanctions because they were not providing

the appropriate protection for U.S producers’ copyrights, trademarks and pharmaceutical

and chemical patents. This threat caused Korea to come to an agreement with the U.S to

enforce the laws of intellectual property rights. Those who are in violation will receive

either civil or criminal punishments.

Even then, the Trade and Tariff Act of 1984 had to be amended even more. It was

reinforced in 1988 with the Omnibus Trade And Competitiveness Act, which contained a

provision known as “Special 301.” Special 301 implemented the release of priority

foreign countries. Priority foreign countries is a way of placing countries on a list

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enabling them to be placed under investigation and receive trade sanctions if in violation

of this law. One of these sanctions includes removal of tariff preferences.

By being placed on the priority foreign country list, it may incentivize countries

that are on the list to take measures to get removed from the list. China for example has

improved its intellectual property rights protection since being placed on the list in 1989

under Special 301. Other countries as well such as Hong Kong and Malayasia have taken

precautions to avoid being placed on the Special 301 by adopting laws that enforce the

protection of intellectual property rights.

Regardless of how other countries interact with one another when it comes to

dealing with the theft of intellectual property, they adhere to the rules and laws that the

World Intellectual Property Organization makes and enforces. Your status in the

international economy doesn’t determine the severity of your punishment for breaking

intellectual property right laws. The severity of your punishment is determined on the

severity of the offense that was committed. WIPO has many ways of enforcing their rules

between two countries that have problems when it comes to dealing with stealing of

intellectual property. WIPO can impose sanctions that determine whether or not a country

receives aid and resources to build their economy. Either that or WIPO can also allow the

defending country to impose its own sanctions against the offending country. If this

occurs, the defending country most likely wont be as lenient.

At the end of the day, the World Intellectual Property Organization will always be

progressing with the continual growth in technology and will continue to update laws and

treaties to prevent the theft of intellectual property internationally.

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 Works Cited

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Organization, 2016.

Wallerstein, Mitchel B., et al. Global Dimensions of Intellectual Property Rights

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Sciences, Washington, D.C. National Academy Press, 1993.

Zhang, Jialin. U.S.-China Trade Issues after the WTO and the PNTR Deal: a

Chinese Perspective. Hoover Institution, 2000.

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 WIPO Intellectual Property Handbook: Policy, Law and Use. World Intellectual

Property Organization, 2008.

Blakeney, Michael. GUIDEBOOK ON ENFORCEMENT OF INTELLECTUAL

PROPERTY RIGHTS.

Johnson, Christopher, and Daniel J Walworth. PROTECTING U.S.

INTELLECTUAL PROPERTY RIGHTS AND THE CHALLENGES OF DIGITAL

PIRACY. Mar. 2003.

Agreement between the World Intellectual Property Organization and the World

Trade Organization (1995) ; Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS Agreement) (1994): Provisions Mentioned in the TRIPS

Agreement of .. World Intellectual Property Organization, 1996

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Nakashima, Ellen. “Treasury and Justice Officials Pushed for Economic Sanctions on
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The People's Republic of China | United States Trade Representative

Deutsche Welle. “US Set to Impose $50 Billion Worth of Tariffs on China over
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Freifeld, Karen. “China's ZTE Pleads Guilty, Settles U.S. Sanctions Case for Nearly...”
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