The Case That Could Hand the Future to China
How might the future look if China leads 5G technology? Fifth-generation cellular network technology, or 5G, will transform our daily lives with such inventions as autonomous-driving vehicles, artificial intelligence, the Internet of Things, and smart cities. Our mobile devices, interconnected with appliances, automobiles, and airplanes will wrap us in a seamless web of service and convenience. But unless U.S. policymakers and business leaders unite with an uncharacteristically singular purpose, this tech-charged future may emerge under standards set by the Chinese Communist Party.
What the moonshot once was to the United States, intellectual property theft and predatory tactics are to China today. A March CNBC poll of U.S. corporations reports that one out of five have had intellectual property stolen by China in the last year, adding to annual losses estimated by the U.S. government to be as high as $600 billion.
Before joining the private sector, my colleagues and I had posts in the FBI and CIA, where we witnessed China’s covert actions — from cyberspies who penetrate corporate research, to the suborning of U.S. scientists to academic exchange programs that offer generous grants to lure Western scientists to China. “Though most of the institutes seem focused on basic research, the programs target high technology sectors that can have military or intelligence relevance,” a senior official of Texas Tech University warned his colleagues of China’s efforts in a 2018 letter.
Despite its self-proclaimed position as a global leader in 5G, China has no monopoly over the 5G industry. That said, armed with American ingenuity and innovations, China is selling 5G equipment around the world at subsidized prices, while waging a strong campaign to dominate international 5G standards-setting bodies. China no longer seeks merely to catch up to U.S. technology predominance, but to surpass it.
As this happens, many U.S. policymakers are obliviously intent on scoring “own goals” by restructuring the business models of leading U.S. technology companies in a way that could vitiate U.S. technology leadership. Consider a case now before the Ninth Circuit Court of Appeals in which the Federal Trade Commission seeks to punish computer chipmaker Qualcomm for its longstanding licensing and sales policies. The FTC had prevailed in a lower federal district court using precedent dating back to a 1980’s dispute between rival Aspen ski resorts, one that found a “duty to deal” with competitors.
The theories behind this decision are deemed by many legal scholars to be flawed. The U.S. Department of Justice filed an amicus brief against the FTC — a decision so out of mainstream legal thought that the government chose to argue against itself. But it is the national security implications of this decision that are the most troubling.
At the heart of the case is Qualcomm’s insistence on receiving royalties for every smartphone that incorporates Qualcomm’s innovations and the FTC’s insistence that Qualcomm renegotiate these existing deals. Most vexing, however, is the duty to deal provision.
“Unless higher courts quickly fix the decision,” wrote dissenting FTC commissioner Christine Wilson, “expect foreign governments to adopt these novel theories with gusto. Foreign competitors will no longer have to steal American technology; henceforth, they can simply cite this decision for the proposition that U.S. innovators must share it. The expropriation of American technology will continue, but now under the auspices of U.S. law.”
All of this comes at a time when Qualcomm operates at the leading edge of nascent 5G technology. If the United States is to maintain its lead position of global technology standard-setter, it will be because companies like Qualcomm develop 5G standards first. Qualcomm’s $57 billion investment in research is paying off while China moves from technological leapfrogging to leadership — with 5G dominance as the prize to assert that leadership in military as well as purely commercial spheres.
The timing of this ruling is vital because the first to dominate this technology will set the standards and write the rules. The United States together with our global partners established standards and protocols for 3G and 4G networks — rules and norms that have benefitted the U.S. and global community. If China is first to develop and implement 5G standards however, their rules will impact markets, regulation and global supply chains. Such rules would facilitate surveillance and self-censorship to eclipse and erode American values of individual rights and civil liberties, as recent cases in aviation, sports, and even video-gaming have confirmed.
China has now announced an initiative to lead in 6-G through a network of satellites. America is in a battle to frame the future of a technology-driven world and way of life. If we want to maintain U.S. technology leadership and protect our values, we should be clear-eyed about the perilous consequences that could come with losing our unique lead. We can maintain our edge by legally protecting, rather than penalizing our country’s premier technology innovation companies.
Mercy Kuo is vice president at Pamir Consulting.
