Don’t Undermine U.S. Innovation While Standing Up to China

“While we must effectively respond to China and others looking to do us harm, we must avoid inadvertently undermining the very policies which made us the leader in turning government funded R&D into cutting edge products. Unfortunately, the initial bureaucratic response is not reassuring on that score.”

One of the few areas of bipartisan agreement in Washington is that it’s time to respond to Chinese economic and military aggression. The need is underscored by a sobering report from the Senate Homeland Security & Governmental Affairs Committee’s Permanent Subcommittee on Investigations titled “Threats to the U.S. Research Enterprise: China’s Talent Recruitment Plans.” The report documents how China exploits our culture encouraging the open exchange of science in order to achieve their commercial and military objectives.

In its editorial, “China’s Bid on American Science,” The Wall Street Journal aptly summarizes the report:  “It found the U.S. government is funding research for hundreds of scientists at American universities and labs who are effectively under contract to turn over their findings to China.”

No nation can allow others to steal its cutting-edge technologies. While we must effectively respond to China and others looking to do us harm, we must avoid inadvertently undermining the policies which made us the leader in turning government funded R&D into highly innovative products. Unfortunately, an initial agency response is not reassuring on that score.

The Senate Report

The Senate Subcommittee pulls no punches on the seriousness of the threat:

This report exposes how American taxpayer funded research has contributed to China’s global rise over the last 20 years. During that time, China openly recruited U.S.-based researchers, scientists, and experts in the public and private sector to provide China with knowledge and intellectual capital in exchange for monetary gain and other benefits. At the same time, the federal government’s grant-making agencies did little to prevent this from happening, nor did the FBI and other federal agencies develop a coordinated response to mitigate the threat. These failures continue to undermine the integrity of the American research enterprise and endanger our national security.

Pilfering U.S. technology is a centerpiece of the Chinese government’s plans to dominate international science and technology by 2050. China sees foreign trained scientists and experts as an essential asset to close their economic and military gap with the United States. They’ve already made impressive strides towards achieving that goal.

In the 1990s, China sought to limit the brain drain of its most talented researchers who wanted to work in the West. However, their government soon recognized that it was well served placing scientists in foreign research facilities. The Chinese targeted 14 critical technology areas needed to meet its economic and military objectives. Much of the leading R&D in those areas is being conducted in our research universities and federal laboratories. The Senate report says:

…China was not losing brainpower, but rather it was storing its talent overseas to tap later. Chinese leaders, therefore, determined that it could be more efficient to allow its nationals to learn how to conduct research and develop cutting-edge technologies overseas and later find ways for these nationals to assist China.

In 2008, the “Thousand Talents Plan” was launched, paying its operatives in U.S. research institutions to transmit information they accessed back to China. It also recruited U.S. based researchers, scientists and experts in the public and private sectors to disclose knowledge and intellectual property they possessed in return for pay and other benefits. Those in the program are encouraged to conceal their relationships with China when applying for federal research grants, while setting up “shadow labs” in the mainland to build on the research they steal.

As of 2017, China was believed to have 7,000 researchers in the Thousand Talents program. It’s been so successful that it’s lavishly funded. Participants removed 30,000 electronic files from the U.S. before leaving for China, while others obtained proprietary information on military jet engines.

Because of increased scrutiny, the Thousand Talents Plan has moved underground but its aims remain unchanged. Additionally, China has developed 200 other “talent recruitment programs.” The Senate report chronicled how U.S. research agencies and the FBI have failed to counter the threat.

The report concludes by urging federal agencies to better monitor who receives its grants, ensuring that they fully disclose their foreign commitments and sources of support. It’s not clear why it’s believed that those being paid to purloin intellectual property and knowhow from our universities and laboratories will disclose they’re on the Chinese payroll.

The report also urges the FBI and intelligence communities to work with our research institutions to get on top of the problem.

A Proposal to Avoid

One agency response to the challenge to our technological leadership is outlined in the article “Air Force Planning IP Rights Changes to Keep Up With Foes.” The story cites the Air Force general counsel describing the need to change its procurement policies because “’it can ‘no longer afford’ to allow contractors to keep a consistently strong grip on IP amid increasing competition from Russia and China.”

The envisioned change would include moving from contractor ownership of inventions and data to a “smart IP” model to create a future system of “open architecture and open IP rights, allowing any company to compete to build or upgrade” parts over time.

The Air Force said it would consider paying more to its contractors whose intellectual property is being taken for this “flexibility.” However, according to the story, defense contractors have long complained that the Department of Defense “often overreaches in its attempts to secure rights to IP that companies have paid to develop, asking for too much access… or wanting to pay too little.”

Having the government take technologies from innovative companies to give them to competitors is a policy the Chinese would certainly recognize. Hopefully, that’s not what the Air Force has in mind. If it is, the proposal directly contradicts the Bayh-Dole Act, which gives contractors ownership of inventions made with federal funding to encourage them to pursue commercial applications in addition to the work they are doing for the government. It also violates President Reagan’s Executive Order 12591 giving contractors rights to data they create under grants and contracts. Because of these policies, government funded R&D has become a significant driver of our economy—to the dismay of our competitors.

Bayh-Dole also protects the government’s rights to use technologies it helped create by providing it with a “nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.”  That includes meeting an agency’s procurement needs.

Playing for Keeps

We’ll have to see how this plays out. If the new policy takes inventions and know-how away from contractors who’ve spent decades developing unique expertise, costs could sky rocket if fair compensation is being made for the loss they would suffer. If they’re not fairly compensated, will innovative companies want to do business with the government?

Before Bayh-Dole, many prime contractors segregated their commercial from their federally funded R&D to minimize the potential loss of IP to the government. Many small companies steered away from federal contracts altogether because agencies demanded ownership of their inventions and background rights. Further, when the government took patents away from contractors, they remained undeveloped because the incentives for commercialization were destroyed. We shouldn’t return to those failed policies in an attempt to respond to our current threats.

If we undermine the principles that have made us the most innovative country in the world, our adversaries will have achieved a coup far beyond their wildest dreams. This is no time to shoot ourselves in the foot. We’re going to need  healthy feet to run faster than our competitors. That means developing the military and the commercial products of the future. Current policies allow us to use federal R&D to accomplish both objectives. We should be very leery of changing lanes with our competitors right on our heels. Unlike a track meet, this game is being played for keeps.

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Copyright: AndreyPopov