Briefing: Chinese draft law may strengthen protections against forced IP transfer

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China’s draft foreign investment law bans forced tech transfer, emphasizes reciprocity – Reuters

What happened: The Chinese government Wednesday released a draft of a foreign investment law that would ban illegal government interference in foreign businesses and the forced transfer of technology. The draft law prohibits authorities and their staff from using administrative means to forcibly transfer intellectual property. The draft also emphasizes reciprocity, stating that China reserves the right to use “corresponding measures” to retaliate against countries that discriminate against Chinese investment.

Why it’s important: This law, if adopted, would significantly upgrade foreign firms’ IP rights in China. In December, President Donald Trump and President Xi Jinping agreed to begin negotiating issues including forced technology transfer and intellectual property protection, and on paper, the law seems to address some of Washington’s concerns. Questions remain, however, as to how extensively the proposed law can be enforced. China has long stated that forced technology transfers are illegal and do not happen, though analysts say that forced technology transfers occur often, mainly as a result of industry-specific policies.