Beyond Tariffs – The Intellectual Property Rights Dimension of the US-China Trade War

The trading relationship between the U.S. and China has not only been complex and continuously tense, but it is also deeply interdependent. This complexity necessitates careful consideration of many variables: target sectors, domestic political motivations, international economic implications, impacts on supply chains, and implications for consumers. Tariffs and trade restrictions were first imposed as stated, to correct trade deficits and to curb improper trade practices, including those presented within the larger context of geopolitical and strategic competition. The escalation of the trade war meant that both countries would have related incentives to negotiate with each other. However, these negotiations were unsuccessful due to attempts by both sides to engage in nationalist protectionist policies and retaliatory measures. The legal and policy considerations in this matter require an in-depth analysis of violations of multilateral trade obligations, the basis for the tariffs, trade remedies, and interpretation of international law principles. However, beneath the economic dimensions lies a relatively unseen legal front centered on intellectual property. There have been constant accusations by both countries regarding theft and inadequate IP enforcement framework. The resulting standoff brought to light the issues of cyber espionage, IP infringement and unfair use of intellectual property.

 

Tracing the roots – How it started and how we got here?

Among the various points of contention, intellectual property remains central. While the United States alleges that China has been undermining its IP rules and making forced technology transfer as a precondition for trade agreements, China has alleged that the restrictive trade policy and protectionist measures undertaken by the US are hampering the growth, development and access of the third world countries to critical inventions and technologies. [i] Among the primary concerns raised by the United States administrative authorities were the investigations[ii] conducted by the United States Trade Representative (USTR) which revealed instances wherein China had engaged in theft of trade secrets, systemic biases, unreasonable policies and weak Intellectual property enforcement mechanisms. 

Efforts to resolve the dispute: The US-China Economic and Trade Agreement

The United States and the People’s Republic of China entered into an economic and trade agreement that governs the general obligations regarding intellectual property rights. The parties agreed to maintain the coherence of the legal framework and to protect confidential information, trademarks, patents, and other intellectual property rights. The agreement regulates the scope of prohibited acts, nature of liability, burden of proof, and measures to protect information and penalties for violation. The contracting parties undertook measures to combat online infringement, piracy and counterfeiting. [iii] 

Besides this phase one agreement there have been several other attempts by both the countries to resolve the intellectual property disputes. Bilateral negotiations such as the Strategic & Economic Dialogue and the U.S.–China Joint Commission on Commerce and Trade (JCCT)[iv] have paved the way for the countries to discuss on aspects like intellectual property protection and licensing framework to ensure that enhanced market access does not compromise the intellectual property of individuals.

It would be inaccurate to suggest that the two countries have been invariably unresponsive to the allegations and the complaints raised by the other. There have been several instances where both China and the US have noted the issues and have constructively made amendments to their respective laws and policies. One example was the United States of America filing a complaint with the World Trade Organisation (WTO) that China acted inconsistently with respect to its commitments and the terms of the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement by requiring technology transfer as a precondition for a grant of license, administrative approvals, discriminatory treatment of foreign investment, and requiring entities to disclose sensitive technical information (trade secrets) and many other activities with respect to intellectual property rights that violated TRIPS and WTO rules. To remedy the above concerns China reformatted regulations updating the Foreign Investment Law (2020) and the Administrative Licensing Law. The laws imposed administrative accountability to protect confidentiality and eliminated mandatory technology transfer.

The luxury goods battle

Amidst the on-going tariff battle between the two countries, the conflict between the luxury goods industry in both these countries seems to be a hot topic. This issue arises when consumers choosing to purchase dupes of luxury goods from Chinese manufacturers when they don’t obtain a price relief from the pre-owned market in the United States. This pattern of consumer behavior however sparks several intellectual property concerns, particularly trademarks. The retaliatory measures taken by both the countries aims at attracting new buyers.

Consumers are often mistaken regarding the quality and the place of origin of the luxury products that they purchase. Identical or deceptively similar trademarks that are likely to cause confusion among the consumers regarding the identity of the goods are a prevalent problem in this context. Due to the lax implementation of measures, there exist several other instances of trademark infringements. In the Burberry v. Baneberry[v] dispute, wherein the Chinese Company, Xinboli Trading Shanghai was found to be using the renowned ‘Burberry Checked pattern’, the Burberry Equestrian Knight logo and adopted a deceptively similar name. The court not only granted an injunction against Baneberry from using the said mark, invalidated the registration of the said trademark, but also ordered it to pay exemplary damages in cost for the infringement and the damage to the reputation of the former[vi].

While the United States continues to impose tariffs, China undertook a set of countermeasures. Some of these measures indirectly created a free reign for luxury brand squatting. The same is evident through the first to file system that allows individuals to file a claim over any trademark that relatively new in China, although registered and widely popular. This provides room for malafide applicants. The same was the case with the re-entry of Manolo Blahnik[vii] in China. A pioneer in luxury footwear craftsmanship, Manolo Blahnik, was faced with an unprecedented predicament when it discovered that there already exists another business entity with the registered trademark ‘Manolo Blahnik’. Although Manolo Blahnik won the legal battle, several other major brands remain vulnerable to the loopholes of the system.

Conclusion

The United States - China trade war is commonly boiled down to a confrontation over tariffs and trade deficits, but the implications are much more nuanced and refer to larger ramifications of control, access, and respect for intellectual property. As a law student who studies this area, it is evident to me that intellectual property rights are not just legal rights and possess an enormous amount of power, innovation, and economic clout. While both countries have acted defensively (and at times, aggressively), they are also seeking to fill gaps in their systems. While China's reforms were internationally driven (suggesting they were pressured), they were and are a corruption to enforce intellectual property. The United States has acted as a balance to that, using the law to insist that China deal with this conduct, as it is evidence that international law is a relevant platform for negotiation. However, this conflict also reminds us all that global intellectual property rules need to be more inclusive and straddle innovations alongside right of access, especially with ap. Developing economies! And, in not just a discussion of enforcement, moves and measures for shared access, transparency, and ultimately eliminating global cooperation. going forward, real solutions can only occur when both nations acknowledge intellectual property as not only national interest, but shared global interests, which require equally enforced integrity and fairness.

Author: Bhakti Savith Salian, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[i] https://lawfullegal.in/the-role-of-intellectual-property-in-trade-wars-us-china-ip-disputes-and-global-impact/

[ii] FOUR-YEAR REVIEW OF ACTIONS TAKEN IN THE SECTION 301 INVESTIGATION: CHINA’S ACTS, POLICIES, AND PRACTICES RELATED TO TECHNOLOGY TRANSFER, INTELLECTUAL PROPERTY, AND INNOVATION

May 14, 2024

[iii] Office of the United States Trade Representative & U.S. Department of the Treasury. (2020, January 15). Economic and Trade Agreement Between the United States of America and the People’s Republic of China—Chapter 1: Intellectual Property. Retrieved from USTR website

[iv] https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2016/november/us-fact-sheet-27th-us-china-joint - U.S. Fact Sheet for the 27th U.S.-China Joint Commission on Commerce and Trade

[v] Burberry Ltd v Xinboli Trading (Shanghai) Co Ltd (2021) Suzhou Intermediate People’s Court, Civil Ruling (2020) Su 05 Min Chu No 1545

[vi] https://www.intellectualproperty.law/2025/04/made-in-where-exactly-u-s-china-trade-war-draws-scrutiny-on-the-origins-of-luxury-goods-and-questions-around-ip-enforcement/?utm_source=chatgpt.com#_ftn10

[vii] https://www.reuters.com/business/retail-consumer/luxury-shoemaker-manolo-blahnik-enters-china-market-after-22-year-legal-tussle-2024-11-08/