BEIJING China faces steep intellectual property rights challenges which undercut Beijing's efforts to boost innovation, the U.S. ambassador said on Thursday, comments that drew a rebuke from China's Foreign Ministry.
Intellectual property rights (IPR) are a perennial headache for foreign companies operating in China and critics argue that poor enforcement scares off firms from transferring technology or applying for patents.
The United States has lamented that lax controls have made possible the "systematic stealing" of American innovations.
Ambassador Gary Locke said a "long road" lay ahead before rights holders in China could feel confident that their IPR would be protected under the law.
"Rights holders, including many Chinese, have told us ... that courts lack consistency in the application of procedural remedies and that damages awarded do not fully compensate for losses or fail to deter future infringers," he told a forum.
"So long as such entrepreneurs' efforts go unrewarded, China's efforts to develop an innovative, 21st Century economy will remain stunted."
China, he said, was "clearly moving in the right direction", but the most pressing issue was reform of trade secrets law.
The United States has called China's theft of trade secrets a "grave problem" as a target company can see market position and competitive advantages from research investment evaporate as a result of corporate espionage.
Foreign Ministry spokesman Qin Gang disputed the comments, saying China had made "obvious" achievements on IPR enforcement.
"On the issue of protecting IPR, we hope that the country in question can increase dialogue and cooperation and mutual understanding and not blindly exert pressure and criticize," Qin told a news briefing.
Experts have long argued that improvement in China's IPR environment would accelerate when domestic companies felt their innovations where being stymied.
On Wednesday, a coalition of Chinese Internet TV firms and U.S. film trade group the Motion Picture Association of America sued Internet giant Baidu Inc and smaller software firm Shenzhen QVOD for $50 million in damages for what they called "rampant" piracy and copyright violation.
IPR rights have also been a sticking point in China-European Union relations, with Beijing calling for a relaxation of the limits on the export of European technology.
"On the export of high-tech ... one of the biggest impediments that European companies see is the sometimes insufficient protection of IPR. That being addressed would maybe boost high-tech trade most," EU Ambassador Markus Ederer told reporters ahead of a China-EU summit in Beijing next week.
(Additional reporting by Ben Blanchard and Paul Carsten; Editing by Ron Popeski)