China has a new legal weapon in mission to steal intellectual property

The cost of doing business in China has gotten still higher, as the communist state readies a new weapon in its conquest of trademarked assets.

China has long had a policy of stealing the intellectual property of foreign companies, either formalized through its trade laws requiring foreign companies doing business in China to partner with a Chinese company and share any intellectual property, or through blatant and open theft.

Now, however, China has taken it a step further by weaponizing the legal mechanism of the “anti-suit injunction.” With this, China effectively renders a company immune to lawsuits and can impose massive fines on companies for trying to take the Chinese firm to court. In western courts where rule of law has more meaning, this is used to prevent parallel lawsuits from being filed in multiple jurisdictions, such as an injunction against Motorolla Corp. from simultaneously suing Microsoft Corp. in both the U.S. and Germany (allowing both would effectively constitute a sort of double jeopardy, with the victim paying double the damages but for the same grievance).

China, however, has asserted its jurisdiction for these injunctions to be global. While China obviously cannot force other nations to recognize its laws and jurisdiction, for companies already doing business with and within China, this nevertheless has real teeth. The communist state can then simply seize assets or otherwise drive a business out of China, depriving them of a lucrative 1.4 billion customers, and rendering all prior investment into their Chinese assets a waste.

One such case is Xiaomi, which is the leading smartphone maker in the world. It has been making phones using InterDigital patents since 2013 while terms of a deal were being negotiated, a relatively common practice. When the talks broke down, however, Xiaomi was still using InterDigital’s patents, and in 2020 InterDigital decided to sue (the talks had lasted 7 years). Yet Xiaomi had beaten them to the draw and had a court in Wuhan issue an injunction against lawsuits. If InterDigital tried to press the suit anyway, it would have been fined roughly $1 million a week.

Fox Business reported trade lawyers as saying this is typical of China’s worsening habit of disregarding copyright and patent laws of foreign companies, and simply engages in transparent attempts to cover their theft in a veneer of quasi-legality. The situation hasn’t gotten any better, in that the 2020 trade deal negotiated between China and the Trump administration hasn’t improved anything. The situation with Xiamoi is one of four major cases since 2020 alone.

Charles Boustany, a former Republican congressional representative from Louisiana and member of the Commission on the Theft of Intellectual Property, an independent public advocacy agency, was quoted by Fox as saying “China’s growth and development strategy is contingent upon IP theft and forced technology transfer.”

“What the Chinese are doing is using this legal tool, the anti-suit injunction, to make it so Chinese courts—really the Chinese government—and nobody else decides how valuable intellectual property is,” Brian Pomper, a partner at Akin Gump, an international law firm and lobbying group, said according to Fox Business.

According to Jorge Contreras, a law professor at the University of Utah, considered an authority on anti-suit injunctions, “it’s a scary prospect for these international companies absolutely. This is totally the Wild West.”

The situation is not expected to get better anytime soon, Beijing’s endless promises notwithstanding. Only time will tell what China’s next move will be in its ever more aggressive push to dethrone the U.S. and assert global dominance.

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