USITC Holds Second Unnecessary Hearing on China IP

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I am distinctly underwhelmed. Here’s what happened:

The U.S. International Trade Commission (USITC) has launched the second of two investigations into the effect on the U.S. economy and U.S. jobs of intellectual property rights (IPR) infringement in China.

The investigation, China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy, is the second report requested by the Committee on Finance, U.S. Senate, in a letter received on April 20, 2010.

In its letter requesting the investigations, the Committee stated: “Despite widespread evidence of the harm to U.S. industries, authors, and artists resulting from IPR infringement in China, the U.S. Government has not conducted a comprehensive economic analysis of the effect of China’s ineffective IPR protection and enforcement on the U.S. economy and U.S. jobs.” As requested, the USITC will deliver two reports to the Committee. The first investigation, China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the U.S. Economy, was instituted on May 5, 2010.

In the second investigation, the USITC, an independent, nonpartisan, factfinding federal agency, will describe the size and scope of reported IPR infringement in China; provide a quantitative analysis of the effects of reported IPR infringement in China on the U.S. economy and U.S. jobs; and discuss actual, potential, and reported effects of China’s indigenous innovation policies on the U.S. economy and U.S. jobs, and quantify these effects to the extent feasible. The second report will build upon the qualitative findings described in the first report. The USITC expects to deliver the second report to the Committee by May 2, 2011.

The USITC will hold a public hearing in connection with the two reports at 9:30 a.m. on June 15, 2010.

Usually at this point, I find news reports and committee transcripts before I spout off with intemperate blather on the substance of the hearing. I’m not going to do that in this case, though.

This set of hearings was all politics, so I don’t want to waste time pretending that the comments made by the panelists (who I’m sure did yeoman’s work) will somehow influence any of the lawmakers supposedly charged with reading the report(s) that will be drafted.

I wrote about this at the time of its genesis, when certain Senators wrote a letter to ITC requesting the investigation. This was not the ITC’s idea, but a political stunt.

The reference to “indigenous innovation” in the letter caught my eye. Not only has this issue, which relates specifically to a Chinese requirement for companies to participate in government procurement programs, been of high import to foreign investors over here, but it was also front and center in a new draft rule put out by China’s Ministry of Science and Technology, a rule that liberalizes the proposed regime and makes it easier for foreign companies. There is actually a good chance, therefore, that this problem has already been solved. In any event, the USTR and the US Embassy folks have been all over this issue – they did not/do not need help from Congress. (Professor Stanley Lubman has written helpful articles on this problem and the new (better) policy.)

So if all this is not really necessary, why did they do it? To be blunt (again), 2010 is an election year and the American public has the attention span of a flea. They don’t know anything about IP and don’t want to hear a politician talk about it.

However, if a politician can work it into his stump speech that he has “acted tough” against China by “forcing the administration” to report on China’s “bad acts” — well, that sounds sufficiently macho if you’re running for re-election, which Grassley is.

Even if you don’t chalk this up to a 2010 election stunt, we can at least call it business as usual in Washington. Here is an issue that is handled by USTR (here’s USTR’s IP page), the Department of Commerce, basically the Executive Branch, and because of existing trade laws, Congress does not have a great deal of room to maneuver with respect to passing new legislation.

Yeah, I’m being rather cynical on this. But I don’t think this makes any sense. The “indigenous innovation” policies are in flux, and everyone at this point is commenting on a draft set of rules that have been circulated for that purpose. In other words, everyone is just guessing about the impact of something that does not even exist yet.

Moreover, just because the ITC may have specific jurisdiction with respect to IP (it does), requesting it to investigate and prepare a report will result in exactly what? The report will be given to Congress, which will do nothing with it. In the meantime, the USTR and the Commerce Department folks will continue to negotiate with the Chinese government on indigenous innovation policies.

Waste. Of. Time.