China’s Intellectual Property Theft and the US University System

Americans have been hearing about China’s theft of intellectual property for decades from every corner of their economic sector. From the press to the pulpit, critics of trade secret theft have been decrying China’s state-sponsored espionage, which has served as the substrate of its tectonic economic uplift in the last 40 years.

Increasingly, American universities have become the focus of Department of Justice investigations into intellectual property (IP) crimes. Several high-profile trials of professors and researchers in recent months involving Chinese nationals have increased concerns that the same spirit of freedom and inclusivity that drives vibrant innovation and discovery in our academic institutions may also be a liability in the face of China’s sometimes unscrupulous economic ambition.

The question before us is as clear as it is challenging: are the benefits of intellectual freedom and inclusivity a greater boon to the United States than the economic and geopolitical risks to which it exposes us from our Chinese competitors? The short answer is: yes, absolutely. Still, there is always room to improve security, and caught in the middle are the millions of American-based researchers who want nothing more than to live in a country where they can freely pursue their intellectual dreams.

What’s an associate professor to do?

Dime Syndicate: The Scope of the Problem

Let’s begin with a little context: there’s no doubt that China’s theft of and capitalization on stolen intellectual goods is having an ongoing major impact on the US industry. In 2015 it was estimated by American intelligence that China was stealing between $225 and $600 billion worth of trade secrets annually through economic espionage. Less than a year ago, acting Director of National Counterintelligence and Security Michael Orlando confirmed in an interview that those numbers have not changed.

Before anyone starts in with the “so what, doesn’t every country do this” line, there is theft of intellectual property and then there is theft of intellectual property. Naturally, almost everyone dabbles in this stuff, but Chinese actors represent about 80% of all prosecutions for economic espionage. In fact, the Justice Department reports that three out of every five trade secret theft cases they investigate are ultimately tied to Beijing.

In a way, it’s a compliment. Why does China steal from us? Simple: it’s because our open, free environment produces the best ideas.

But this isn’t just flattering. It’s economically dangerous. A high-profile example of intellectual theft that has been fully litigated in the case of Chinese company Sinoval Wind Group stealing proprietary wind turbine information from its American partner AMSC. Sinoval had agreed to work with AMSC to field $800 million worth of goods and services. Instead, it used its access to steal the technology — which now runs in 1 in every 5 wind turbines in China — and resulted in AMSC losing $1 billion dollars in shareholder equity and costing 700 Americans their jobs.

Of course, Sinoval was fined the statutory maximum $1.5 million penalties and given a year of probation while they pay about $60 million in restitution for this corporate crime. Undoubtedly, this will send a powerful message to the Sinovals of the world about the consequences of their underhanded activities. I’m sure you can imagine.

Anyway, you dice it, $60 million is still $60 million. There’s no point in getting fined for stealing a cow if you can get the milk for free, and the best place to skim that cream is the United States’ extraordinary university research system.

Pros: The Advantage of American-Style Inclusion

American universities host the largest contingent of Chinese students outside of China, and those students make up the highest percentage of American international students. And we should be very proud of that. The United States is the cradle of free thought and intellectual mobility in the world, and these values are not just a matter of national pride, but of national security.

In its Joint Statement of Principles of International Education (2021), the US Departments of State, Commerce and Education raised the chorus that America’s robust inclusion of international students is a cornerstone of our security and prosperity. Not only is this a country where ambitious and gifted intelligentsia from around the world can come and flourish financially, but do so because of the values of freedom and opportunity we foster.

Those values are the highly-refined fuel that powers our academic excellence, and the United States believes in keeping the door of liberty open to everyone. However, in recent years we have seen an increasing specter of Chinese infiltration behind this offer of goodwill and prosperity. Case by case, they aren’t causing alarm. If it adds up to a trend, however, we have some collective thinking to do.

Cons: The Usual Suspects

Earlier this month, former University of Kansas professor and chemical engineer Franklin Tao added another title to his already-extensive CV: convicted fraudster. The particulars of professor Tao’s case are a simulacra of a growing number of high-profile Justice Department proceedings targeting Chinese nationals working or studying in American Universities.

Professor Tao (I think we can now call him “Mr.”) was the first professor indicted under the China Initiative, a broad Trump-era national security action designed to root out Chinese intellectual espionage embedded in the American university system. Mr. Tao was employed as a full-time professor at Kansas, and had received extensive grant money from the Department of Energy and the National Science Foundation to pursue sustainable energy. What he didn’t tell any of them is that a few years earlier he had signed a five-year contract with Fuzhao University in China.

Now, contrary to what one might think, being employed by a Chinese university doesn’t by definition disqualify you from working at or attending an American one. Unlike the People’s Republic, the United States is a free and open place for students and academics of all stripes. However, that fact may be why you don’t get a research grant, and that’s exactly where professor Tao got himself into trouble. Rather than being convicted of outright theft, he was convicted on four counts of fraud for not checking several boxes on disclosure forms about his Chinese employment status. That might seem pretty minor, but Mr. Tao is facing up to 50 years in federal prison and a $1 million fine for fraud that suggests he might have been positioning himself to steal something.

Critics of these types of convictions have decried what they see as racist persecution of productive Chinese nationals who simply came to America to make a better life for themselves. There’s a lot to be said for that view. The Biden Administration canceled the China Initiative because it was seen as overly-broad and racially unsound. The contrast to Mr. Tao is Mr. Anming Hu — who was equally divested of his professor status at the University of Tennessee, Knoxville. Hu worked in the Department of Mechanical, Aerospace and Biomedical Engineering where he specialized in nanotechnology, which drew the attention of a particularly ambitious FBI agent.

After two years of FBI surveillance, the loss of his job at UT, and house arrest through his trial on a similar portfolio of charges faced by Mr. Tao, Mr. Hu was categorically exonerated when the aforementioned lead agent admitted in open court that the reason they tailed him for two years was that he refused the FBI’s trap request to spy for China in the first place. He has since been reinstated by UT, but the public outrage at un-American racial profiling is still smoldering.

Market Dynamics: The Collision of Economics and Ideals

Astonishingly, Chinese economic espionage has managed to permeate the highest echelons of American academia. Sandwiched between Mr. Hu’s acquittal and Mr. Tao’s conviction, the chair of Harvard University’s Chemistry and Chemical Biology Department and a leader in nanotechnology research, Dr. Charles Lieber, was found guilty of concealing his association with China’s Thousand Talent’s Program and Wuhan University of Technology and defrauding Harvard and the IRS. In this equally high-profile and noxious case of academic espionage, one of American academia’s international leaders in technology research — who is neither a Chinese national nor struggling financially — appears to have succumbed to a paycheck.

And boy, does China seem to believe in investing in the power of American values. The average salary of a researcher in the People’s Republic is just a little shy of $20,000 a year. However, for the trouble of being employed as a full-time professor at Wuhan despite living in Massachusetts and running the eponymous Lieber Research Group which has received over $15 million in NIH and Department of Defense funding, Beijing was paying Dr. Lieber the extraordinary sum of $50,000 a month. Obviously, the Chinese government can read the writing on the wall when it comes to academic exceptionalism.

Despite all of these complexities, what is absolutely clear is that American scientific and research institutions are producing some of the most desirable and innovative discoveries in the world and everyone knows it. If China could compete on a level playing field, they probably would. Given recent events, it seems clear they have no ambition to embrace the values of free thought, or the academic inclusivity that makes it possible. Make no mistake, intellectual property theft is a major problem that the United States will need to address in the coming decade, but there is no doubt that this will be achieved without compromising its ideals.