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Remarks at International Forum on Innovation and Intellectual Property, Guangzhou, China

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Tuesday, October 27, 2009

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Secretary of Commerce Gary Locke
Remarks at International Forum on Innovation and Intellectual Property
Guangzhou, China

Good morning.

Thank you Ambassador Huntsman.

This year marks the 60th Anniversary of the People’s Republic of China. Since 1949, China has grown to become one of the strongest and most vibrant economies in the entire world. In the past 30 years, since the reforms initiated by Vice Premier Deng Xiaoping, hundreds of millions of Chinese have joined the global middle class as China has become a destination for capital, for ideas and for innovation.

And one of the best illustrations of this transformation is China's burgeoning trade relationship with the United States. Today, more than ever, we live in a world where the Chinese and American economies are interconnected. We are one another's second-biggest trading partners.

The pace of change right here in Guangdong Province is most striking of all. Thirty years ago, Vice Premier Deng Xiaoping chose a small fishing village not far from here as China’s first Special Economic Zone.

Today, that village makes up Shenzhen, which boasts a population of 14 million people and is one of China’s most dynamic cities.

The Pearl River Delta is now a thriving example of market principles at work.

There are more than 100,000 factories that make every type of product imaginable—from iPhones and flat screen TVs to cell phones and high fashion apparel meeting the demands of consumers around the world.

Through a variety of government incentives, rules and regulations, Guangdong has created an environment that encourages the creation of a strong manufacturing and export-driven economy.

These measures have served China and its people well for 30 years, and will continue to do so in the future.

But we also know that the Chinese economy is increasingly moving up the global economic value chain, where growth is created not just by the power of a country’s industrial might, but also by the power of their ideas and their inventions.

The next critical step is for China to develop more homegrown inventors that sell high-value and high-tech products here in China and around the world.

If China, and in particular Guangdong Province, is going to make this transition, it will have to create a system of laws and a regulatory infrastructure that rewards and protects those who take risks to develop new innovations.

And a cornerstone of that effort must be a rigorously enforced intellectual property regime.

If innovators fear that their inventions or ideas will be stolen, then one of two things will happen—they’ll either stop inventing, or they’ll decide to create their inventions elsewhere.

Here in Guangdong Province, this issue is particularly relevant. In 2008, China awarded more than 370,000 patents. And last year, firms based in Guangdong Province obtained more patents than firms based in any other single Chinese province.

In fact, companies located in Guangdong Province are also China’s traditional leaders for patent applications and trademark registrations. And Guangdong-based IT innovators lead all Chinese companies in the number of patent applications filed under the Patent Cooperation Treaty.

Guangdong Province has the potential to be China’s epicenter of innovation. And the stronger intellectual property laws and enforcement are, the greater the incentive for domestic and foreign innovators to create their products right here.

In the past few years, China has taken several steps to protect the IP of American and other foreign companies operating within its borders.

China has addressed some intellectual-property infringement issues. For example:

  • The Guangdong Intellectual Property Office settled 198 of the 199 patent-related complaints it received.
  • In China last year there were nearly 2,500 trademark infringement cases of overseas rights holders, a 35 percent increase over 2007.
  • And 250 criminal cases were resolved in 2007 involving intellectual property rights infringement and product counterfeiting for goods valued at 870 million RMB.

But despite these steps, American companies in fields as diverse as technology, entertainment and pharmaceuticals still lose billions every year in China from intellectual property theft.

In short, much more needs to be done.

Strongly-worded IP laws are only as valuable as the civil and criminal penalties people face for breaking them—and China’s enforcement of IP laws is often uneven, and penalties assessed are often too mild to carry deterrent value.

For example, the U.S. government has received reports of occasional aggressive intellectual property law enforcement in Shenzhen, while receiving consistent reports of very lax enforcement elsewhere, including, unfortunately, right here in Guangdong.

For this reason, the U.S. Department of Commerce as well as other arms of our government seeks to expand our work with our Chinese counterparts on enforcement efforts.

The United States and China have already taken a series of steps to ramp up awareness and promotion of intellectual property protection.

  • Last December, Patent and Trademark Office (PTO) officials stationed in Guangzhou participated with China Customs officials from Guangdong province in a training program on how to identify counterfeit goods.
  • And in April, PTO Guangzhou and the State Intellectual Property Office jointly organized a program on patent filing and enforcement in Shenzhen.

Our outreach not only includes the Chinese government but the academic and private sectors as well.

The PTO has forged ties with universities whose professors and students are vital to changing attitudes about condoning the purchase and use of counterfeit and pirated products.

And we would like to see a firm directive from the Central Government to state-run libraries and academic institutions to dissuade these libraries from engaging in or facilitating illegal reproduction and distribution of electronic journals through the Internet.

I know that building an effective patent and trademark system is not easy—because over 200 years after its founding, the United States is still working to perfect its own.

Only a few years after the American Revolution, our third president, Thomas Jefferson, helped create the U.S. patent office because he understood two fundamental truths. He knew:

  • That long term economic growth was dependent on a continuous flow of new technologies and new ideas entering the marketplace;
  • But he also knew that without a promise of ownership protection for these ideas, innovators would never be willing to take risks to improve upon the status quo.

Although the United States continues efforts to reform our own patent system to reflect the rapid changes in the global economy, the necessity of having robust patent and trademark protections is not a matter of serious debate.

And I hope this sentiment will start to take deeper root in China. Because at stake is not just the fate of our future economic growth—but possibly the fate of our planet.

The prospect of climate change presents both a great challenge and a great opportunity. The challenge of course, is that if nations around the world don't start using less fossil fuels, we’ll all suffer from the rising temperatures, coastal flooding, unpredictable weather, and agricultural damage that the world's top scientists believe is undoubtedly in store.

But if we can somehow avoid this fate with new technological solutions to use energy more cleanly and efficiently, we will have discovered one of the greatest avenues for economic growth of the 21st century.

Worldwide, energy is a $6 trillion market—and whoever leads the charge to a cleaner, greener future will become a destination for capital, new businesses and new jobs.

China has already adopted the most aggressive energy efficiency program in the entire world, and it is on track to exceed many of its renewable energy adoption goals.

Almost 40 percent of China’s domestic economic stimulus is going towards green projects. But meeting a challenge as big as climate change will require more than just enlightened public policy.

It will also require a wave of private sector innovation every bit as immense as those that accompanied the industrial revolution and the onset of the computer and Internet age.

We will need inventors, entrepreneurs and scientists working in research labs, universities and even in private homes to discover everything from advanced batteries for electric cars to cheaper, more efficient storage devices for wind and solar power.

In today's global economy—where ideas are just as likely to be discovered in San Francisco as Guangzhou—we need to do everything we can to incentivize and empower the brightest minds to solve climate change.

And that means we have to make sure that those people or companies who take great risks to create world-changing innovations must also have the promise of reward. That is a key philosophical pillar of intellectual property protection.

When Bill Gates quit college to begin his path towards starting Microsoft, he had no guarantee of success. On numerous occasions, he faced failures and disappointments. But he kept moving forward, because he hoped that someday, all the money he invested and all the times he worked at the office until 3 a.m., just might result in the creation of something special that he could call his own.

And because Bill Gates received IP protection for his ideas, millions of people around the world have benefited.

Somewhere in the world, is the Bill Gates of clean energy, and we need to make sure he or she has similar protection.

While China has made strides in its intellectual property protection, more can and should be done to both entice foreign companies to invest here and to encourage homegrown Chinese entrepreneurship.

For instance, the elimination of overlapping jurisdictions between different Chinese agencies would help streamline the remedy process.

Consistent application of the law to intellectual property infringement and misappropriation cases would foster more certainty among users of the legal system.

And seeking criminal penalties more frequently for intellectual property and trademark infringement violations would add an important level of deterrence. Today, 99 percent of copyright and trademark counterfeiting cases in China are enforced administratively, rather than criminally.

This means that lawbreakers, such as Web sites that enable users to steal copyrighted material, can get away with a mere slap on the wrist.

So long as the cost of breaking the law is low, illegal behavior will thrive. But when laws are enforced at all levels of government, including the local levels, the incidence of bad behavior will sharply decline.

As two of the world's leading nations, the United States and China have the power and the obligation to alter history for the betterment of our people and the world.

Our strength is derived from many sources, but most of all, we owe our success to the ingenuity, intellect and creativity of our people.

The intellectual property reforms I have discussed today are an important step toward helping all our people reach their full potential and solve the problems that challenge us all.

Thank you so much for having me here.