BY DEREK SCISSORS
The Endless Frontier Act is getting hard to follow. The April version, championed by Majority Leader Schumer, was 160 pages long. The version passed this week by the Senate Commerce Committee more than doubles that. There are now many issues involved, but the bill is touted as helping the US compete with China. This can only happen with stringent protection of intellectual property (IP) generated. Otherwise, the US will enable China.
When discussing IP and the People’s Republic of China (PRC), the policy challenge includes preventing both legal and illegal acquisition. Another distinction the US has rarely made: IP defense versus offense. Defense gets the attention. But without offensive action punishing users of illegally acquired IP, bad actors will simply keep trying to steal advances generated by Endless Frontier until they succeed.
1) Defense against legal acquisition of IP generated by Endless Frontier.
Opposition to restricting participation in Endless Frontier is badly misguided. Chinese anti-competitive behavior has slowed innovation and will continue to do so. With technology in Chinese hands, new products are heavily subsidized, at the expense of the American developers. We’ve seen this movie. Defense against legal IP acquisition is the minimum required if Endless Frontier is to help the US compete.
An obvious choice is barring entities subject to the jurisdiction of countries, such as the PRC, which permit trade secret theft and cyberattacks. No funding contributions, no formation of joint ventures in related areas, and no acquisition of firms or technologies arising from Endless Frontier. Also, it should go without saying at this point that long-stalled reform of US export controls must ensure protection of Endless Frontier technology.
2) Offense against legal acquisition.
It’s impossible to identify in advance all the ways commercial parties will circumvent government regulations. As a result, there’s no way to ensure all IP developed through Endless Frontier will stay where the bill’s supporters intend. US law should be changed to preemptively discourage undesirable acquisition and limit harm that may result from it.
The objective of spending in the bill is to boost American competitiveness. IP developed in the program then somehow held by foreign firms not connected to it should not be allowed to undermine our competitiveness. The US should limit trade and investment access by these firms, for a time corresponding to the natural diffusion of the IP into the broader market, such as five years. This will reduce the incentive to seek the IP.
3) Defense against illegal acquisition.
Endless Frontier may make “research security” a staple term in policy-making. In addition to the primary question of how best to allocate money to spur innovation, an important secondary question is how to keep that innovation secure. Some advocates of Endless Frontier believe more innovation is always better. But if the goal is to outcompete the PRC, that may not be true, if the additional innovation ends up in Chinese hands.
Determining the best institutions to receive funding — for example, the National Science Foundation versus others or possible overconcentration in a few universities — includes determining which are least likely to be compromised by technological espionage. To qualify, institutions should show capacity and willingness to comply with research security requirements, not insist their own views and goals are paramount.
4) Offense against illegal acquisition.
It’s unreasonable to believe the PRC will only use legal means to acquire technology developed in Endless Frontier. And even the best defense will not always work. If bad actors can fail without consequence, many will eventually succeed. There must be punishment for individuals, companies, and countries with a pattern of undesirable acquisition of American IP.
It’s also unreasonable for members of the scientific community to believe there are trustworthy Chinese entities who operate outside Communist Party objectives. Private Chinese individuals and firms can’t refuse “improper” demands by the Chinese state. It’s the Party and Chinese government which must face clear and serious retaliation for individual attempts to steal from Endless Frontier, or its benefits will flow to the PRC.
If the Endless Frontier Act ultimately becomes law, it may include many odd amendments. But the core will remain advancing American technology, and faster than Chinese technology. This can only happen if the IP developed is comprehensively and aggressively guarded, and all those contributing to IP infringement appropriately sanctioned.
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