Intellectual Property

A Real-Life 'Red Corner' For IP Theft?

Will new IP punishments have an impact on American citizens traveling to China?

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As I write this, the saga around the ongoing detention of Huawei’s Chief Financial Officer, Meng Wanzhou, continues to dominate the news. The Huawei executive’s arrest (and subsequent U.S. extradition request) in Vancouver on December 1 has become a flashpoint in the broader trade negotiations between the U.S. and the Chinese government. While it is still unclear how this chapter in that broader narrative will conclude, the ongoing dispute between the world’s leading economies continues to make news. And we all know that IP issues are at the heart of matters. (I touched on some impactful IP developments in a recent column on the topic.) The current situation also illustrates that both the U.S. and China are unafraid to use citizen arrests as ways of gaining leverage over the other. If they continue, perhaps traveling executives of leading Chinese or American companies will have to remember to pack bail money along with their passports.

For Americans, the threat of arrest in China — and the fear of a foreign judicial system tainted by strong political influence — has already been covered in popular culture. In particular, the 1997 movie “Red Corner,” starring Richard Gere, portrayed an American executive wrongfully arrested in China. Scary stuff for American audiences, and despite China’s movement towards a more independent judiciary, I would venture to say that the average American’s distrust of the Chinese legal system is at least equal to the distrust of our legal system amongst Chinese nationals. Putting aside for a second my disbelief that I saw that movie over 20 years ago, it is worth acknowledging that the threat of unlawful arrest remains a potent fear for travelers. And that fear only increases during periods of tit-for-tat arrests of business executives, as is going on today.

We should remember, however, that the actual risk of being wrongfully arrested to any given businessperson is so remote as to be negligible. As someone who has traveled to China — and felt very safe there — I think the average American has no valid cause for alarm. As does the average Chinese person visiting America. At the same time, it is always important to keep abreast of what activity could be deemed criminal in whatever location one is visiting. Because no one wants to go through what Richard Gere went through in “Red Corner,” of course.

Arrests aside, China continues to make news on the IP front that requires us to take notice. As reported by Bloomberg, the Chinese government continues to manage the transition of China from the counterfeit capital of the world to an IP rights-respecting economic leader. Part of that process has included crackdowns on what the Chinese consider patent troll-type activity, as well as florid assurances to the U.S. in trade negotiations that China is serious about respecting IP rights. Domestically, the Chinese have taken steps to strengthen their judiciary’s handling of IP disputes as well. And now the Chinese government has unveiled a long list of potential penalties for IP abusers, including personal sanctions under China’s burgeoning citizen “credit” system, and financial penalties that would make it difficult for any IP thieves to operate with government support and financial assistance.

Put simply, this newly announced punishment regime for IP theft is another mea culpa by the Chinese government for its lax policing of past misdeeds, as well as another sign of intent with respect to strengthening China’s present and future IP legal framework and infrastructure. The most immediate impact of these announced regulations will likely be felt within China’s domestic industries, while the long-term benefit of stricter IP abuse policing by the Chinese authorities will accrue to both domestic and foreign companies operating in, or sourcing goods from, China. In other words, basically every consumer product company selling in the U.S. Will these new IP punishments have an impact on American citizens traveling to China? If they are keeping things legal, almost assuredly not. Either way, whether or not these new regulations will lead to a future “Red Corner” situation for a traveling IP executive is less important than the fact that China continues to make plain its desire to turn over a new page when it comes to protection of IP rights.

Ultimately, China’s accelerating shift towards becoming a responsible IP-respecting nation is perhaps the biggest story of the year from an IP front — at least in my view. I have dedicated a number of columns to the topic this year, even as it sometimes seemed that I could draft a column every week on some aspect of U.S.-China IP relations and developments. Thankfully, however, the interesting aspects of IP law are manifold, and 2018 has not lacked in developments that have commanded careful consideration by the IP community. For my part, it is my continued honor to bring you this column on a weekly basis, and I am grateful to my editors and my 2018 interviewees for their help in making this column a (hopefully) worthwhile read. Most of all, I want to acknowledge the readership for their continued support of this column and all of ATL’s great and varied content. To all, I wish a wonderful year-end and extend my wishes for a wonderful 2019, filled with personal and professional success, good health, and peace at home and abroad. Stay safe over the holidays and see you in 2019.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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