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Congress Looks to Stop U.S. R&D From Landing in Other Countries

By Kenneth Corbin, CIO
December 06, 2012 09:26 AM ET

CIO - House lawmakers on Wednesday weighed options to curb the flow of technology-related intellectual property developed by U.S. companies to foreign competitors, particularly the large and emerging markets like China, India and Brazil.

The fierce battle over intellectual property

At the final hearing of the House science committee's subcommittee on investigations and oversight in the current session on Congress, lawmakers aired their frustration that so much U.S.-led research and development, much of it supported by public funding, yields technologies that land in the hands of the country's economic rivals, often as the result of government coercion or outright theft.

"While the U.S. invests significant taxpayer resources in public as well as in private-sector research and development, other nations remain dedicated to acquiring the fruits of our labor. Their efforts to acquire U.S. technology have clearly had a significant impact on U.S. trade, our GDP and the U.S.'s standing as a world leader in research and development and innovation," says Rep. Paul Broun (R-Ga.), the chairman of the subcommittee. "Unfortunately, measuring that impact has proved very difficult."

The witnesses at the hearing outlined the various ways that technology can seep out of U.S. companies, ranging from piracy and corporate espionage to licensing agreements or the foreign acquisition of domestic firms.

In some markets, most notably China, technology transfer is just a cost of doing business, explains Dennis Shea, chairman of the U.S. China Economic Security and Review Council. In that country, companies looking to set up a factory or other facility are commonly subjected to the requirement that they enter into a joint venture with a domestic company, often one backed by the government.

While those arrangements provide the Chinese firm access to valuable intellectual property, which it can then repurpose for its own profit, many U.S. businesses acquiesce because the market opportunity is so great.

"No one's forcing you to do business in China, but companies, since it's such a large market, feel compelled," Shea told the panel.

Lawmakers are quick to point out that the issue of technology transfer isn't just a concern for the private sector. Citing data from the Congressional Research Service, Broun noted that in fiscal 2012, an estimated $139 billion in federal funds were allocated to R&D programs run out of a number of agencies.

The R&D group Battelle projected that the total volume of U.S. investment in research and development from government, business, academic and nonprofit sources would tally around $436 billion this year.

"American citizens have a huge stake in what American firms do with their innovations," says Rep. Paul Tonko (D-N.Y.), the ranking member on the subcommittee.

"It is no secret that it is faster and cheaper to adopt new technologies than it is to develop them. It comes as no surprise that with the development of a global marketplace, the intense competition for market share, and the movement to a more open and integrated world economy, governments have turned to policies that will enable their firms to exploit the innovations of others," Tonko adds.

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