In a bid to end it's dependancy on foriegn intellectual property and become a global power in science and technoligy, China is attempting to foster indigenous innovation.

Are the U.S. government and busines community right to be worried about threats to free trade and intellectual property rights?

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CHILCUTT~
The secret to a long life. Is knowing when it is time to leave.

One impediment will be how China deals with the intellectual property rights or patents of their own. For instance, will China ever have a "patent powerhouse" like an IBM if it doesn't have a legal system or history of the protection of such rights?

It will be a while before this can happen. you cant raise a child in a lockstep culture then expect free thinking. the Chinese I know could not even ask questions in college for fear of the professor losing face and ending the students career. they have a huge cultural divide to cross before thinking about anything else. the reason free societies are better innovators is because there is no punishment for failing, which is 99% of the time in ground breaking developement cycles

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It was well known and understood in the software industry early on, that selling one copy of software, no matter how well the security, was all you would sell to them. They would break security and ignore the license agreement. Zillions of copies would be all over China in a short amount of time.

With that sort of attitude toward patents and copyrights, how long would they last in the software development world?

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Annoy a Liberal, Read the Constitution

If you want to get to the bottom of indigenous innovation, the Chinese policy so deeply aggravating Western business and Governments, look at the bottom of your DVD player.
Most likely the machine was made in China. For Beijings leaders, that is part of the problem.
For every DVD player sold, the Chinese manufacturer must pay a large royalty fee to the European or Japanese companies that patented various componants of the unit, such as its optical reader.
The profits made by these companys are huge..while China only recieves a fraction of the profits.

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CHILCUTT~
The secret to a long life. Is knowing when it is time to leave.

That's too bad! I really feel sorry for them.

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Annoy a Liberal, Read the Constitution

chilcutt, the economic envy you describe is considerably offset by the fact that China has done quite well, despite paying those royalties.

2006 DVD Royalty Agreement With China

A US-based technology licensing authority has signed a preliminary agreement that should ensure Chinese DVD player manufacturers pay royalties.

Chinese firms will have to pay US$2.50 to patent holders for each player they manufacture. In the past they have not always paid royalties.

But this is only an initial deal. Chinese firms will have to sign individual agreements with the US body before the issue is fully resolved.

^ True This. (China doesnt always play by the rules)

The U.S. Government has raised this issue in public.
In a speech in Italy in June, General Electric CEO Jeffrey Immelt said, " I really worry about China, I am not sure that in the end they want any of us to win, or any of us to be successfull".

And in a report for the U.S Chamber of Commerce, business consultant James McGregor wrote that current Chinese guidelines are a -"BluePrint for technoligy theft on a scale the world has never seen before".

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CHILCUTT~
The secret to a long life. Is knowing when it is time to leave.

They have some "rules", for lack of a better term, concerning products sold to Chinese companies.

The place where I work won't sell our product to be used in China, as they insist on proprietary information as to how it's made. China does buy our products, but uses them in export finished goods only.

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Disputes over indigenous innovation may eventually cast a cloud over the broader Sino-U.S. relationship.
It isnt hard to imagine battles over intellectual property and market share derailing collaborative efforts to address climate change, energy security, or global public health.
If both sides fail to develope some common understandings of technoligy developement and trade, the next decade is bound to be one of conflict and competition between them.

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CHILCUTT~
The secret to a long life. Is knowing when it is time to leave.