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Cable From U.S. Embassy In Beijing Reveals U.S. Perspective on Trade Relationship

For all of the tough talk coming out of Congress as the United States and China embark on a high profile trade summit today, a confidential memo sent by U.S. Ambassador Jon M. Huntsman at the beginning of 2010 illustrates how the fortunes of the two countries have changed in modern times, and how the leadership of the United States is scrambling for innovative ways to readjust as its economic clout fades.

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For all of the tough talk coming out of Congress as the United States and China embark on a high profile trade summit today, a confidential memo sent by U.S. Ambassador Jon M. Huntsman at the beginning of 2010 illustrates how the fortunes of the two countries have changed in modern times, and how the leadership of the United States is scrambling for innovative ways to readjust as its economic clout fades.

The memo, dated January 28, 2010, appears to be addressed to various arms of the United States government, including White House advisors David Axelrod and Larry Summers, who at the time was the Director of the National Economic Council.

The document acknowledges that China’s market was the only source of growth for many American companies in 2009, and ponders the wisdom of aggressive retaliatory measures against China for not strictly protecting U.S. intellectual property rights, and for implementing policies that favor Chinese companies at the expense of American ones in China.

Huntsman, the memo’s author, makes clear that maintaining a healthy U.S.-China relationship is a difficult balancing act and that the results of this week’s trade summit in the U.S. will be a key marker in the ongoing and increasingly rocky trade relationship between the world’s two most powerful nations.

“We face a challenging year ahead in U.S.-China relations,” Huntsman wrote this January. “Ten percent U.S. unemployment coupled with our huge trade deficit with China, China’s increasing use of industrial policies to restrict market access, and an undervalued RMB, will bring greater tension to bilateral ties. The Google case adds fuel to the fire.

“In this context, it is critical that we find ways to better advance our bilateral economic policy. This will require sustained, focused interaction on a daily basis with the Chinese, but also serious thinking about what can be best accomplished in the run-up and at the key meetings like the S&ED and JCCT. We need to find ways to keep the relationship positive, but even more important to ensure the American worker, in particular, reaps the benefits of our bilateral economic engagement.”

“S&ED” refers to the U.S.-China Strategic and Economic Dialogue, an annual meeting between the U.S. Secretary of State and Treasury Secretary with their Chinese counterparts. It was established by U.S. President Barack Obama and Chinese President Hu Jintao to address key issues between the two countries such as trade, currency policy, the U.S.’ borrowing obligations to China, climate change and global monetary policy and politics.

“JCCT” refers to the US-China Joint Commission on Commerce and Trade, the commission that is meeting today to discuss and iron out trade issues.

Huntsman’s memo, made available online via Wikileaks late last week, presents Obama Administration officials with various policy options and their risks, and proposes practical ideas on how to engage the Chinese government, business sector and Chinese citizens with the United States.

Huntsman sketches out several areas in which the U.S. government can smooth the way for U.S. businesses to expand their operations abroad, and for the Chinese to expand their operations and to invest in the United States.

He suggests, for example, expanding public-private  sector partnerships modeled on the Aviation Cooperation program. The program now has 40 U.S. corporate members and has sponsored training for more than 100 Chinese aviation professionals, and has introduced U.S. firms and technology throughout China’s aviation industry and regulatory structure.

He also suggests reaching out to U.S. state economic development programs during the National Governors’ Association annual meeting and connecting those programs to their counterparts in China.

In addition, the U.S. government should make more information about business opportunities available on the internet in Chinese, he said.

“We should create many more Chinese language web sites that are directed at key secondary and tertiary cities in China,” Huntsman recommended. “The more we facillitate access to information about American business opportunities — whether through a national database or enhanced state and local databases — the better. We believe thinking local, start-ups and grassroots first is the preferable way to go in using the Internet.”

Huntsman also made a list of recommendations on expanding tourism and educational  travel for Chinese citizens in the United States, as well as relaxing export controls for “commercially-important technology.”

These are just a few of the many ideas the former Republican governor of Utah laid out for Obama Administration officials back in the United States as he contemplated the politics of the U.S.-China trade relationship.

“Recent issues related to indigenous innovation, express delivery and online-music content, for example, underscore that USG complaints about discrimmintory policies — absent a credible threat of retaliatory action or other leverage — are falling on increasingly deaf Chinese ears,” he reported in the January 2010 cable. “China’s relatively strong economic position in the wake of the global financial crisis has intensified that trend, as has Chinese hubris that it can call the shots and determine the playbook under which it operates without disclosing the same to foreign firms. While WTO dispute settlement has worked well when applied, many of the problems we face in China’s market do not fall within WTO disciplines.”

The ideas in the document, and the alternative path and tone it offers as a way to engage the Chinese, provides a striking contrast to the harrying rhetoric on Capitol Hill. U.S. lawmakers are growing increasingly impatient with the Chinese government as it unilaterally forges ahead with its growth in the global economy.

The U.S. Congress in 2010 has commissioned various in-depth fact-finding reports that are severely critical of the way China has impeded access to its market for U.S. companies with its indigenous innovation policies. The reports also document China’s efforts to require U.S. companies to share and ultimately transfer their intellectual property to local Chinese companies in joint ventures.

Last week, a group of 30 U.S. senators sent a letter to Chinese Vice Premier Wang Qishan to urge him to make progress in resolving some of the issues at today’s trade talks.

The Obama Administration’s approach of engagement rather than enragement is the only one that will ultimately bear fruit, argues Denis Simon, a long-time China hand and professor of international relations at Penn State University.

“I believe that we are going to be embarked on a trade war with China – I believe that it’s almost inevitable unless cooler heads do not prevail,” Simons said.

“The problem is that the United States is not prepared to recognize that the landscape, that the global innovation system is changing, and that the Chinese position in this system is not where it was 30 years ago,” he said. “China is in a much stronger position, it has much stronger market leverage, and we have to accept that we have to accommodate China in a way we have been unprepared to.

If we don’t understand how to develop a better working relationship with the Chinese, then we’re going to have absolutely no leverage whatsoever with China, and I would argue that we’re putting ourselves in a corner in which we’re not going to be able to call their bluff.”

Editor’s Note: The Intellectual Property Breakfast Club will hold a February 8, 2011 breakfast panel at Clyde’s in downtown Washington DC on China and IP. To register for this FREE event, click here.

Join us for a stimulating, high-level discussion!

Sarah Lai Stirland was Contributing Editor for BroadbandBreakfast.com until April 2011. She has covered business, finance and legal affairs, telecommunications and tech policy for 15 years from New York, Washington and San Francisco. She has written for Red Herring, National Journal's Technology Daily, Portfolio.com and Wired.com. She's a native of London and Hong Kong, and is currently based in San Francisco.

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Public Knowledge Celebrates 20 Years of Helping Congress Get a Clue on Digital Rights

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Screenshot of Gigi Sohn from Public Knowledge's 20th anniversary event

February 27, 2021 – The non-profit advocacy group Public Knowledge celebrated its twentieth anniversary year in a Monday event revolving around the issues that the group has made its hallmark: Copyright, open standards and other digital rights issues.

Group Founder Gigi Sohn, now a Benton Institute for Broadband and Society senior fellow and public advocate, said that through her professional relationship with Laurie Racine, now president of Racine Strategy, that she became “appointed and anointed” to help start the interest group.

Together with David Bollier, who also had worked on public interest projects in broadcast media with Sohn, and is now director of Reinventing the Commons program at the Schumacher Center for a New Economics, the two cofounded a small and scrappy Public Knowledge that has become a non-profit powerhouse.

The secret sauce? Timing, which couldn’t have been better, said Sohn. Being given free office space at DuPont Circle at the New America Foundation by Steve Clemmons and the late Ted Halstead, then head of the foundation, was instrumental in Public Knowledge’s launch.

The cofounders met with major challenges, Sohn and others said. The nationwide tragedy of September 11, 2001, occurred weeks after its official founding. The group continued their advocacy of what was then more commonly known as “open source,” a related grandparent to the new “net neutrality” of today, she said.

In the aftermath of September 11, a bill by the late Sen. Ernest “Fritz” Hollings, D-S.C., demonstrated a bid by large copyright interest to force technology companies to effectively be the copyright police. Additional copyright maximalist measures we launched almost every month, she said.

Public Knowledge grew into something larger than was probably imagined by the three co-founders. Still, they shared setbacks and losses that accompanied their successes and wins.

“We would form alliances with anybody, which meant that sometimes we sided with internet service providers [on issues like copyright] and sometimes we were against them [on issues like telecom],” said Sohn. An ingredient in the interest group’s success was its desire to work with everyone.

Congress didn’t have a clue on digital rights

What drove the trio together was a shared view that “Congress had no vision for the future of the internet,” explained Sohn.

Much of our early work was spend explaining how digitation works to Congress, she said. The 2000s were a time of great activity and massive growth in the digital industry and lawmakers at the Hill were not acquainted well with screens, computers, and the internet. They took on the role of explaining to members of Congress what the interests of their constituents were when it came to digitization.

Public Knowledge helped popularize digital issues and by “walking [digital information] across the street to [Capitol Hill] at the time created an operational reality with digitization,” said Bollier.

Racine remarked about the influence Linux software maker Red Hat had during its 2002 initial public offering. She said the founders of Red Hat pushed open source beyond a business model and into a philosophy in ways that hadn’t been done before.

During the early days of Public Knowledge, all sorts of legacy tech was being rolled out. Apple’s iTunes, Windows XP, and the first Xbox launched. Nokia and Sony were the leaders in cellphones at the time, augmenting the rise of technology in the coming digital age.

Racine said consumers needed someone in Washington who could represent their interests amid the new software and hardware and embrace the idea of open source technologies for the future.

Also speaking at the event was Public Knowledge CEO Chris Lewis, who said Public Knowledge was at the forefront of new technology issues as it was already holding 3D printing symposiums before Congress, something totally unfamiliar at the time.

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In Google v. Oracle, Supreme Court Hears Landmark Fair Use Case on Software Copyright

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Photo of Tom Goldstein from the Peabody Award used with permission

October 12, 2020 – The Supreme Court on Wednesday publicly struggled with the copyrightability of software in a uniquely contested case between Google and Oracle, the outcome of which could play a significant role in the future of software development in the United States.

The oral arguments were the culmination of a battle that started 10 years ago, when tech company Oracle accused Google of illegally copying its code. Oracle owns the copyright to the Java application programming interface that Google utilized to establish a new mobile operating system.

The company has sued Google for more than $9 billion in damages.

Yet Google claimed a “fair use” defense to its copying. Google copied less than 1 percent of the Java code. Even though the law generally treats computer programs as copyrightable, Google’s attorney before the Supreme Court, Thomas Goldstein, said that by adapting Oracle’s code to serve a different purpose, Google’s use was “transformational,” and entitled to fair use protections.

Goldstein said that this form of unlicensed copying is completely standard in software, and saves developers time and lowers barriers to innovation.

He referenced a famous Supreme Court precedent about public domain works, Baker v. Selden, which in 1880 declared that once information is published to the public, the public has a right to use it.

“Google had the right to do this,” said Goldstein.

Still, Oracle attorney Joshua Rosenkranz asserted that the Java code is an expressive work eligible for copyright protections. Rosenkranz further argued that Google’s use of the code was not transformational.

Justice Sonia Sotomayor appeared to suggest that jurors in the lower court case properly found Google’s use to be transformational because it took the APIs from a desktop environment to smartphones.

“Interfaces have been reused for decades,” said Goldstein. Google had to reuse Oracle’s code to respond to interoperability demands.

“It has always been the understanding that this purely functional, non-creative code that is essentially the glue that keeps computer programs together could be reused, and it would upend that world to rule the other way,” he said.

Supreme Court observers said that the high court appeared leaning toward upholding the 2016 jury verdict vindicating Google’s fair use defense.

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Fair Use is Essential But its Enforcement is Broken, Says Senate Intellectual Property Subcommittee

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Screenshot of Grammy-winning recording artist Yolanda Adams from the hearing

July 28, 2020 — “Fair use” is an essential doctrine of copyright law that is unevenly applied, said participants in a Senate Intellectual Property Subcommittee hearing Tuesday.

The hearing, “How Does the DMCA Contemplate Limitations and Exceptions Like Fair Use,” saw participants discuss whether the Digital Millennium Copyright Act still permits fair uses of copyrighted content that would be otherwise infringing.

The DMCA, passed in 1998, criminalizes the manufacture, sale or other distribution of technologies designed to decrypt encoded copyrighted material. This ban on anti-circumvention tools does not appear to account for fair use.

The fair use exception to copyright law allows the republication or redistribution of copyrighted works for commentary, criticism or educational purposes without having to obtain permission from the copyright holder.

However, Joseph Gratz, partner at Durie Tangri, said that fair use often clearly applies but is not enforced, leaving users of the legally obtained content to deal with automated content censors.

“Fair use depends on context, and machines can’t consider context,” he said. “A video, for example, that incidentally captures a song playing in the background at a political rally or a protest is clearly fair use but may be detected by an automated filter.”

When an automated filter detects a song on a platform like YouTube, it redirects advertising revenue from the creator of the video to the creator of the song, often erroneously.

Rick Beato, who owns a music education YouTube channel with over one-and-a-half million subscribers, said that he does not receive ad revenue from hundreds of his videos.

“One of my recent videos called ‘The Mixolydian Mode’ was manually claimed by Sony ATV because I played ten seconds of a Beatles song on my acoustic guitar to demonstrate how the melody is derived from the scale,” he said. “This is an obvious example of fair use, I would argue.”

Grammy-winning recording artist Yolanda Adams testified that she sees the problems of fair use employment as about more than simply receiving money.

“As a gospel artist, I’m not just an entertainer,” she said. “I see my mission as using my gift to spread the gospel — so for me, fair use is not just about money. It’s about access.”

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