Don’t Let China Oversee the World’s Patents

February 27, 2020


Among the many United Nations agencies, there is one that actually delivers practical value to U.S. businesses. The World Intellectual Property Organization in Geneva is a one-stop shop for filing patents, saving companies from having to register in multiple countries. The system takes in over 250,000 patent applications every year, including more than 50,000 from U.S. inventors, more than any other country. Critically, all applications have to be kept secret until they are published 18 months later.

So the U.S. has a strong interest in a well-run WIPO. The trouble is, the agency covers its own budget through user fees; it doesn’t need contributions from the member countries. That might sound like a good thing, but it makes oversight harder. There is no board of directors, and the director general enjoys absolute authority. This has led to scandals over the past 10 years, from secret shipments of high-end computer equipment to North Korea and Iran, to opening satellite offices in Russia and China without permission. One member of Congress, Brad Sherman of California, compared it to the corrupt leadership of world soccer, calling WIPO “the FIFA of UN agencies.”

That recent history and the need for deep reform that it reflects make next month’s election to choose a new director general even more important. Keep in mind this fact: Whoever is elected will exercise plenary authority over thousands of confidential patent applications, in effect the world’s most concentrated collection of cutting-edge technology.

I used to run the patent system at WIPO. We deployed state-of-the-art security to protect our computer systems and worked in a separate, carefully guarded facility. But one person always held the key: the director general, who exercises control over every aspect of WIPO’s operations. That includes direct command of the IT department, which can override privacy and security controls.

Now consider that the leading candidate to win the post is Binying Wang, a deputy director general who joined WIPO in 1992 from the China Trademark Service. Wang is certainly well qualified. What’s problematic is the influence that China could wield over her tenure.

As FBI Director Christopher Wray recently noted, China has “pioneered an expansive approach to stealing innovation through a wide range of actors.” In fact, right now the FBI is running about 1,000 investigations involving China’s attempted theft of U.S.-based technology. Whether through outright pilfering or forced technology transfer, China is the world’s most avaricious aggregator of commercial secrets – a conclusion shared by the European Union, which ranks it as the only tier one country in its recent report on the protection and enforcement of intellectual property rights. Given that pattern of behavior, and China’s goal of exerting greater influence by winning leadership of more multilateral institutions, allowing Wang to take charge would amount to a huge strategic mistake.

The U.S. has focused on China’s strategic plan to grab leadership in the most important fields of innovation, including artificial intelligence, 5G telecommunications, robotics, and quantum computing. But even the Justice Department’s recent sweeping indictment of Huawei Technologies Co. looks like a convenience store holdup compared to what could happen to the world’s storehouse of secret patent applications in Geneva. 

The commercial value of the unpublished patent applications held by WIPO is staggering. They come in through the Patent Cooperation Treaty, or PCT, a unique system that allows inventors to file one application and then wait 30 months before choosing the countries where they need a patent, giving them time to raise money or do market research, and then requiring each country to honor the original filing date. This is why virtually every U.S. company serving international markets uses the PCT system.

Because of WIPO’s importance to American industry, and concerns over the integrity of the agency’s management, the U.S. has pressed for reforms to its governance structures. These include establishing an independent body to review and approve important decisions of the executive; substantially reducing fees charged to inventors, which would make WIPO more dependent on contributions and less likely to obfuscate its operations; and guaranteeing that whistleblower complaints will be arbitrated externally. The concerns raised by China’s candidacy also point to the need for tools that would alert interested member states of any suspicious access to the PCT computer system.

So far there has been little progress, and in the tradition of UN diplomacy we complain about the most annoying failures but seem content just to tell the director general to do a better job next time. That can’t continue. The U.S. needs to support a candidate willing to pursue systemic change. Daren Tang, the head of Singapore’s IP office, is reportedly backed by the U.S., and he would be an excellent choice. There are also two other strong alternative candidates from countries that don’t thirst for technological dominance: Marco Aleman from Colombia and Edward Kwakwa of Ghana.

China, on the other hand, can be expected to use its candidate as an instrument of control over WIPO in its own national interest. Consider what has happened at the International Civil Aviation Organization, another UN agency now run by China’s former head of civil aviation. She reacted to a 2016 cyberattack on its systems likely to have originated in China by ultimately firing a whistleblower who documented the agency’s failings in investigating the breach. More recently, in the wake of the coronavirus outbreak, ICAO has not only excluded Taiwan from global efforts to coordinate a response to the virus, but also blocked mentions of Taiwan on the ICAO Twitter account, drawing widespread condemnation.

China’s WIPO candidate enjoys a political advantage from the infrastructure investments it has made in developing countries as part of its “Belt and Road” initiative. But the U.S. has a strong card to play. The State Department must make clear that the U.S. will not accept the Chinese nominee, and that if she is elected the U.S. will prepare to leave the PCT. The U.S. has long contemplated “PCT 2.0,” in which participating countries’ patent offices would share information about qualifying applications, while maintaining strict controls over unpublished inventions. Although the transition would be disruptive, WIPO would no longer have possession of U.S. inventors’ secrets.

Whether WIPO can reach its full potential in the current strategic environment is an open question. The U.S. is engaged in a new cold war with China, and this one is about innovation. If history is any guide, expect China to continue to encourage its nationals to infiltrate our companies and universities in the search for technology to help it get ahead, while the U.S. continues to push back with vigilance and aggressive prosecution of trade secret theft. Reforms that make WIPO more secure and more trusted might enable it to weather that storm. But in the current climate, allowing China to run the organization that holds our most curated and valuable inventions represents an unacceptable risk.

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