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What The Huawei Indictment Says About How China Steals Technology


This week gives us one vivid illustration of how complicated the U.S.-China relationship can be. Tomorrow negotiators from the two countries meet for another round of trade talks. And just yesterday American prosecutors unsealed two sweeping indictments against China's giant telecommunications firm Huawei. One of those indictments alleges that the company and its CFO violated U.S. sanctions on Iran. The other charges the company with stealing trade secrets from T-Mobile.

And we're going to explore that now with Mark Cohen. He led the China team at the U.S. Patent and Trademark Office until last year. Before that, he dealt with intellectual property issues at the U.S. embassy in Beijing. Welcome.

MARK COHEN: Thank you, Ari.

SHAPIRO: This indictment reads like a screenplay. It describes in detail how Huawei tried to steal the technology powering a T-Mobile robot named Tappy so that it could build its own robot in China. The part I want to zero in on is this allegation that while this was all taking place, Huawei launched a formal program to reward employees who stole confidential information from competitors. How big a deal is this?

COHEN: Well, it's a pretty big deal. I think it supports the narrative coming from the Trump administration and elsewhere that China has embarked on a very holistic campaign to acquire U.S. technology, often illegally. And here you have a bonus program that's intended to incent employees to go ahead and steal proprietary information, which actually Huawei's own local management in the U.S. said its employees should not adhere to because they have to abide by U.S. law.

SHAPIRO: Do you think these indictments signal a change in the U.S. approach to this problem?

COHEN: They signal an escalation in an approach. The Department of Justice, the FBI announced a special effort last November to deal with economic espionage from China. I think China is viewed as a greater competitive threat. And we've seen some major cases with major losses to U.S. industry.

We always knew that there were state policies to encourage China to domestically innovate, whatever that means. And we always saw these incentives to lure back employees, Chinese Ph.D.s from the U.S. or elsewhere to work on important projects. In the Huawei indictment, we now have an indication of a corporate incentive from a major Chinese company basically to steal, which further underscores the threat that is posed by this type of activity.

SHAPIRO: So let's talk about the trade negotiations that resume tomorrow. How does this major public accusation of criminal behavior against one of China's biggest companies affect the conversations happening between the U.S. and China about trade?

COHEN: Well, the trade issues are huge. We're talking about half a trillion dollars or so in bilateral trade, $250 billion with potential 25 percent tariffs. By comparison this is relatively small, this isolated matter. But I believe it is very supportive of the U.S. narrative about the need for systemic changes in China regarding intellectual property protection and particularly trade secret protection.

But in addition to that - and I think this is more fundamental to what the administration is saying - China has created a system that abuses global IP norms, that tolerates immoral activity when it serves the national technological interests. And this case, to a degree, is a pretty convincing instance of where that toleration has led to conspiracy to steal from a company based in the U.S. and to acquire technology illegally.

SHAPIRO: The behavior described in this indictment seems so, for lack of a better word, shameless and persistent and widespread. It's hard to imagine that a public indictment like this is going to make much of a difference in what China decides to do going forward.

COHEN: You know, pursuing individuals or pursuing companies, you know, is one way to make the case. Hopefully it creates some deterrence. I think this case, to a very large extent, is at least about deterrence as it is about anything else that this kind of behavior, this kind of encouragement of theft of trade secrets will not be tolerated by the U.S. And not only that, it will be disclosed to the world, severely contradicting Huawei's statements that they don't tolerate this type of behavior.

SHAPIRO: Mark Cohen, thanks so much for joining us.

COHEN: My pleasure.

SHAPIRO: He's senior fellow at the Berkeley Center for Law and Technology. Transcript provided by NPR, Copyright NPR.

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