Foxconn Covets Intellectual Property Rights

Foxconn is a Taiwanese company but grew into a massive company doing contract manufacturing in China, where snatching intellectual property rights is part of the culture.   

A 2011 report by the U.S. International Trade Commission estimated that American firms lost $48 billion in 2009 because of Chinese infringements on intellectual property. The American Chamber of Commerce in China has estimated that “more than 20% of American companies operating in China have been asked to transfer technology to Chinese partners in the last three years,” as a column in the Wall Street Journal noted.

Foxconn seems to using the same kind of approach in Wisconsin. In short, it not only expects $4.1 billion from taxpayers, but also seems eager to grab IP rights from unsuspecting faculty, students and maybe even local companies. Exhibit A is its proposed partnership with UW-Madison. It was initially touted as a $100 million gift by Foxconn which the university would match to establish a new research center.

But it’s become increasingly clear the center will mostly benefit Foxconn. It will be called the Foxconn Institute for Research in Science and Technology, or FIRST, and by 2020 will have a minimum of 100 researchers, some of whom may be paid by the university. Its executive director will be a Foxconn employee, as the university told the Wisconsin State Journal and it will be located near the Foxconn plant in Racine County.

And it will be doing research needed for the knowledge-oriented company Foxconn now wants to become, in a complete departure from the deal it did with Gov. Scott Walker to become a manufacturing plant creating large screen, 72-inch televisions. FIRST will focus on “the artificial intelligence, 8K resolution and 5G wireless technology ecosystem that we are building in Wisconsin,” as Foxconn founder and CEO Terry Gou declared. 

But when faculty and students work on this research, who will have the intellectual property rights to any new ideas and concepts developed? 

Kali Murray, co-director of the intellectual property program at Marquette University Law School, tells me she has great concern about how UW-Madison is handling this: “They are ceding rights in areas they shouldn’t be in negotiations with Foxconn,” she says. 

Murray asked some probing questions in a story by The Verge examining the agreement between Foxconn and UW-Madison: “What does it mean to cost share with Foxconn? Does that make a faculty member in essence a joint appointment? They’re faculty of UW-Madison, but if Foxconn is paying 50 percent of their salary, in a dispute between Madison and Foxconn, who would be the employer in that situation?”

And who would have the IP rights? “The cooperation agreement lists three different types of research agreements that might come from the partnership, and only one sends intellectual property rights fully back the university,” The Verge reports. “The other two agreement types grant Foxconn the intellectual property that comes of research.” 

That seems like a problem for UW faculty, but is particularly alarming for any grad student researchers working on the project, who “could find themselves in a situation where intellectual property arising from their work defaults to Foxconn,” the story reports. “The fruits of research at UW belong to the people of Wisconsin, not to a private corporation,” the UW-Madison Teaching Assistants Association declared in a statement to the State Journal.

In a sign that Foxconn expects to win some IP rights: it is already listing a job opening for a patent attorney to work for the company in Madison.

In response to the concerns of grad students, the dean of UW-Madsion’s College of Engineering, Ian Robertson, “held a town hall and fielded pointed questions from graduate students who are concerned about the partnership’s implications for intellectual property and academic freedom,” The Verge reported. “‘We haven’t been told anything,” says graduate student Sonali Gupta. ‘We went to the town hall to get some answers and came away more confused.’” 

Perhaps that’s because there’s a veil of confidentiality over details of Foxconn’s agreement with UW-Madison. Bill Lueders, president of the Wisconsin Freedom of Information Council, condemned this in a statement to the Associated Press, calling it “obnoxious that the University of Wisconsin would agree to (a) secrecy provision in exchange for a $100 million deal that is already designed to primarily benefit the other party…These provisions should never have been agreed to.”

Then there is Foxconn’s much publicized “Smart Cities-Smart Futures” competition calling for “ideas that use technology to address smart education, healthcare, transportation, and housing challenges.” The company says it has “received 325 submissions from higher education students, faculty and staff” across Wisconsin. But who will get the IP rights to any idea that’s developed?

In answer to this question from Urban Milwaukee, the company responded that “Within the scope of this competition, Foxconn will not assert intellectual property rights related to any ideas, concepts, and or solutions.” 

But once the competition is completed, the language Foxconn used in describing the competition “reserves the right to use concepts and ideas for its own benefit,” Murray says. “It claims a universal right to any ideas.” 

And that right would probably take precedence even for students who have some IP rights through their university. “That’s what a universal license does,” Murray says.  

“I would not encourage a student to apply for such a competition as long as universal license was in effect,” she says. Murray adds that she would be even more wary with a company like Foxconn, given the ways companies from China have used intellectual property. 

Does Foxconn also have its eyes on the intellectual property of area businesses? Louis Woo, a top assistant to Gou, told the Business Journal: “We will be working with a lot of technology-related companies, if not only in Wisconsin, then around the Midwest.”

“Foxconn officials want to break new ground in computing, robotics, analytics and other advanced manufacturing techniques at the Wisconsin plant,” the story noted, and “partners in that effort could include Wisconsin businesses such as Rockwell Automation.”

But when that new ground is broken, who gains the IP rights?

That story was back in April, eight months ago, and there’s been no word of Rockwell or any other company taking Foxconn up on its offer. One tech industry insider tells me he talked to Foxconn representatives who said Rockwell CEO Blake Moret met with Foxconn leaders about Rockwell doing contract manufacturing for Foxconn. But Foxconn eventually noted it would get intellectual property rights to any products it made. “Moret blew up and walked out of the meeting,” the source says. 

Foxconn declined to confirm or deny or comment at all on an inquiry from Urban Milwaukee describing this meeting: nor would Rockwell. But if this is the approach Foxconn intends to use with state and Midwestern businesses, the word will get around quickly. Indeed, one story has already begun to circulate. Foxconn may find that patent attorney less busy than it was counting on. 

If you think stories like this are important, become a member of Urban Milwaukee and help support real independent journalism. Plus you get some cool added benefits, all detailed here.