While U.S. and Chinese participants in the recently concluded second annual U.S. Clean Energy Trade Mission to China have lauded the commercial and environmental benefits of the mission to both countries, the mission also raised the profile of ongoing tensions related to China’s enforcement of the intellectual property (IP) rights of U.S. companies.

U.S. Assistant Secretary of Commerce David Bohigian, who led the mission, warned during a news conference that there have been “negative developments” in China’s IP enforcement efforts over the last year, exacerbated by problems in China’s efforts to enshrine the rule of law. Bohigian further noted that U.S. companies are declining to export their most innovative environmental technologies to China because they are concerned these technologies will not be protected.

While both governments are attempting to stimulate trade in high-technology goods and services that will assist in addressing urgent environmental issues (including the reduction of greenhouse gas emissions by China’s burgeoning industries), a backdrop of high-stakes conflicts and negotiations on the effectiveness of China’s IP enforcement regime are complicating this effort. This clash of environmental and IP objectives is active on several fronts.

One front is the cases that the United States has launched against China at the World Trade Organization (WTO) since the 2007 U.S.-China Clean Energy Trade Mission. The most significant of these cases alleges a series of violations by China of its obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, and questions, among other things, the adequacy of China’s criminal procedures for the enforcement of IP rights. While the U.S. WTO cases against China focus more on trademarks and copyrights than on high-technology patents, they are clearly indicative of the broader concern expressed frequently by the U.S. Government that China must do more to protect the IP rights of U.S. companies.

Another front is the high-profile U.S.-China Strategic Economic Dialogue (SED) - the principal mechanism used by the Bush Administration in engaging China on major bilateral economic issues. At last December’s Innovation Conference under the auspices of the SED, both sides affirmed, at the insistence of the United States, that a robust IP protection regime is critical in promoting high-technology innovation. No doubt the United States will continue to press China on IP reform in the context of the SED.

Further, looming on the horizon are the international negotiations to flesh out the “Bali Roadmap,” put in place during last December’s U.N. Climate Change Conference in Bali, Indonesia. Leaving the difficult details for future negotiations, Bali delegates agreed, among other things, to put in place mechanisms for developed countries to transfer to developing countries technologies that will help control greenhouse gas emissions. As put by some G-77 (developing country) delegates, enforcement of developed country IP rights has impeded utilization of critical environmental technologies in the developing world. The implication seems to be that developing countries will demand some relaxation of current IP enforcement standards in exchange for commitments to reduce greenhouse gas emissions. Chinese delegates further argued that, if only developing countries would relax controls on the distribution of certain environmental technologies, China would be able to help produce and distribute such technologies at low cost.

As the United States and China continue to strive for common positions on mitigating climate change, differences on IP enforcement seem certain to complicate that process.

For further information about this topic, please contact Akin Gump.