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Sunday, 18 September 2016

The gold standard for trade secret theft (or is that the way of the world)? Robert Fortune and Chinese tea

While IP rights often require the balancing of private and public interests, they seldom give rise to basic moral issues. The most
graphic exception is the purloining of the commercial trade secrets of one nation to help the economy of another. This Kat has previously described the 19-century escapades of Samuel Slater, revered in the US but reviled in his UK homeland (“Slater the Traitor”) for sharing the technological secrets of the English cotton-spinning industry, and Henry Wickham, for enabling the rise of the Southeast Asia rubber industry by running off with the secrets of the Brazilian rubber tree. Against that background, the next time that Kat readers sip their favorite first flush Darjeeling tea, they should think of the following words of Sarah Rose from her enjoyable 2009 book, “For All the Tea in China”—
“In the dawn of 1848, the East India Company was planning a project that was nothing short of industrial espionage. If the Company’s scheme was successful, the largest multinational corporation in the world, the East India Company, would enact the greatest theft of trade secrets in the history of mankind (p. 38)”.
Without this espionage, it is argued, the Darjeeling tea we so enjoy today may never have come to pass. Read on.

By the 1830’s, a significant feature of economic life of the British Empire was about opium and tea. Opium was raised in the Indian east and delivered, mainly by inland waterways, to the Indian west coast (think Calcutta), and from there smuggled for sale in China, despite the protestations of the Emperor. With the proceeds, the English purchased quality Chinese tea, which it then brought home (“[n]early one in every ten pounds sterling collected by the government came from the import and sale of tea” (p. 1). The English loved their tea, but all agreed that Chinese tea was far superior to what was being produced in India. However, the Chinese took careful measures to keep secret their tea industry, including control both of the tea plants and their means of production.

This worked well enough for a while, but one side-effect of the First first Opium War (1839-1942), which opened up Chinese markets to English traders, was that China began to raise locally the poppy seeds from which opium was derived. Should this continue, England would have less Indian-sourced opium to sell, meaning it would have less revenues from which to purchase Chinese tea. The solution: develop an Indian-based tea industry that would produce tea of Chinese quality. To do this, they needed to find tea terroir similar to that in China (think the Darjeeling area and the Himalayan foothills). More importantly, they had to learn as much as possible about the secrets of the Chinese tea industry. The person tasked with this mission was a Scottish botanist/adventurer named Robert Fortune.

In swashbuckling fashion (if Fortune’s travelogues are to be believed), including pirates and gun battles, Fortune ventured into the Chinese tea-growing interior and, in 1848, succeeded, by disguising himself as a Chinese mandarin, in acquiring more than 20,000 tea plants. (In so doing, Fortune discovered that green and black tea are both derived from the same plant, camellia sinensis, contrary to the then current understanding.) However, the journey back to the proposed tea estate area in India, especially the route from Calcutta onwards, was largely unsuccessful, due mainly to mistakes (not of Fortune’s making, it would seem) regarding such things as tampering with the containers, misuse of irrigation and the general incompetency of the English staff.

A second expedition, in 1849, was much more successful and paved the way for the establishment of the quality tea industry in India. As well, Fortune managed to smuggle out of China a critical number of persons connected to the Chinese tea industry, some of whom provided invaluable insights into tea-growing and production. Stated otherwise, Fortune had purloined both the trade secrets embodied in the plants themselves and the know-how and show-how of the industry to jump-start the world of high quality Indian tea. (As Queen Victoria was quoted as saying: “We hope you get your tea from India as an encouragement to the Empire. We should all do so.”)

But Fortune’s escapades did not only serve the interests of his homeland. It turns out that the United States Patent Office sought to make use of his tea-pirating services. As Rose notes—
“In 1857, the US Patent Office hired Fortune to bring tea seeds to America. He was offered his standing rate-500 pounds a year and all expenses paid—to commit espionage for Washington. Caught up in the frenzy of industrialization, the Patent Office believed American engineers could harness steam power to automate the processing of tea…As soon as the cases arrived in Washington, the Commissioner of US Patents unceremoniously fired Fortune. …. Fortune spent much of the Civil War trying to recoup his lost fee from the Patent Office—which, it seems, he never accomplished.”
The tea industry did not succeed in the U.S. and Fortune was out of pocket for his efforts (although Kat readers should not feel too sorry for him, as he died a wealthy man).

As Rose suggests, perhaps with a degree of hyperbole, there is a bit of delicious irony in all of this, given the current lamentations of the
West about claims of Chinese trade secret espionage. Be that as it may, for this Kat, Fortune’s tale raises a fundamental question about trade secrets as an instrument of national policy. Rose has been criticized for overstating the role of Fortune in the transfer of tea-growing technology to India (and ultimately elsewhere). Fortune may have been unusual but one senses that he was not unique. If Fortune had not done it, someone else would walked off with the secrets of the Chinese tea industry for the benefit of India and the Empire.

Stated otherwise, the leakage of Chinese tea technology was inevitable; that is how countries act and that is the ultimate fate of confidential technology and know-how as an instrument of national policy. At this level, the “first-mover” advantage, a defining characteristic of trade secrets as practiced by individuals, is irrelevant. “But what about the ethics of trade secret misappropriation?”, you ask, as you pass me another cup of Darjeeling tea.

For an interview with Sarah Rose on National Public Radio, here.

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