Presidential Memorandum Addresses China’s IP Theft and Forced Technology Transfer Practices

On March 22, President Trump signed a “Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation.” The Memorandum explains that the U.S. Trade Representative’s Section 301 investigation into China’s practices involving IP theft and forced technology transfers supports four findings:

First, China uses foreign ownership restrictions, including joint venture requirements, equity limitations, and other investment restrictions, to require or pressure technology transfer from U.S. companies to Chinese entities.  China also uses administrative review and licensing procedures to require or pressure technology transfer, which, inter alia, undermines the value of U.S. investments and technology and weakens the global competitiveness of U.S. firms. 

Second, China imposes substantial restrictions on, and intervenes in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms.  These restrictions deprive U.S. technology owners of the ability to bargain and set market-based terms for technology transfer.  As a result, U.S. companies seeking to license technologies must do so on terms that unfairly favor Chinese recipients. 

Third, China directs and facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by Chinese government industrial plans. 

Fourth, China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies.  These actions provide the Chinese government with unauthorized access to intellectual property, trade secrets, or confidential business information, including technical data, negotiating positions, and sensitive and proprietary internal business communications, and they also support China’s strategic development goals, including its science and technology advancement, military modernization, and economic development.

The Presidential Memorandum directs the Trade Representative to take action to address unreasonable or discriminatory practices by China that burden or restrict U.S. Commerce. Such actions include consideration of “increased tariffs on goods from China” and pursuit of “dispute settlement in the World Trade Organization (WTO) to address China’s discriminatory licensing practices.” President Trump’s Memorandum also calls for possible imposition of investment restrictions, requiring the Secretary of Treasury to propose ways “to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.”

A succinct overview of the Presidential Memorandum regarding Chinese-related IP theft and forced technology transfer practices as well as timeframes for implementing responsive restrictions is provided by Sarah Westwood’s March 22 article in the Washington Examiner.