Previously we discussed the Communist Party of China shunning investments in the welfare of its people and protection of our environment. Avoiding these costs creates unfair advantages in commercial sectors. The Communist Party takes a similar approach to avoiding innovation costs.

According to the US Department of Justice, Communist Party proxies steal $200 billion to $600 billion of US intellectual property (IP) every year. A PRC wind turbine manufacturer stole IP from AMSC, a US company with wind turbine technology, that threatened the victim’s survival as a going concern.

PRC companies use stolen research and design to manufacture products that they sell abroad. The sellers expend cash on manufacturing goods—sourcing materials, training workers, configuring space, marketing, delivery, etc. They avoid both the investment in innovation and the uncertainty of designing a product that fails or sells. Not having to earn a return on investment in IP, PRC companies can sell knockoffs of legitimate firms’ products at lower prices.

If a PRC company, say, stole the research IP for designing military drones, built similar vehicles, and sold them to another country, the Chinese company could sell the equipment for much less than the company that created the IP.  The Chinese company could earn a profit with a markup on the manufacturing costs components alone. That’s worse than not fair. It imperils US investment and investors, innovation, and innovators.

US political leadership could rebalance risk and change this condition quickly. It could pass legislation that allows US victims of IP theft to collect returns on their innovation investments from the PRC companies’ customers. Transactions require at least two parties. Both benefit from the seller stealing IP. Once buyers believe that they may have to pay for the IP component of developing and delivering new technologies, they will slow their purchases from IP thieves.