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A Bold Proposal For Overtaking China

For some time now we have been tracking a below-the-radar new think tank, if that is what it is, called "DARC," or "Defense Analyses Research Corporation," a name which seems to be a nod simultaneously to the RAND Corporation and the legendary Silicon Valley R&D lab PARC.

We say "if that is what it is," because all of its public communications seem to have a tongue planted firmly in cheek. Their avatar on X dot com, for example, is an image of Captain Misato Katsuragi, the character from the anime series Neon Genesis: Evangelion, a reference which is sure to bring a smile to the face of every Millennial nerd (like your correspondent) but furrow the brow of anybody with stars on their epaulettes. Their publications are published under evocative pseudonyms such as "Lucius" and "Gryllus, Son of Xenophon."

In other words, everything we love over here at Policy Sphere dot com.

Some shoe-leather investigating through our sources revealed that "DARC" is, indeed, "for real," led by real people, with real ambitions, and is not just a blog. It may even have a budget. Our anonymous source, to whom we were connected via the anonymous messaging app Signal (of course) via a Capitol Hill source, remained cagey.

Anyway, DARC, via its "Senior Fellow" "Dean Acheson" has published one paper that we do think is so smart (and yet hilarious) that we want to bring it to your attention.

How do we close the gap with China? How do we manufacture and refine rare earth minerals? How do we retaliate to their underhanded trade practices?

Pretty simple, Senior Fellow Acheson says: seize their IP.

Why not? As the kids say, "you can just do things".

America may still lead the world in innovation (for how long?) but China has amassed a formidable lead in the kinds of "process technologies" that are needed to manufacture competitively and at scale, including crucial components like rare earths.

Writes "Acheson": "China’s rare earth export controls demonstrate that our adversaries can and will cut off vital supply chains at a moment’s notice. We do not have time for Congressional funding or Small Business Innovation Research (SBIR) grants that may or may not lead to factory-ready items or processes in five, ten, or fifteen years. Instead, we should put our adversaries on notice: if you steal our IP or make use of our stolen IP then we will come for your IP, processes, and know-how. We will seize it, wrestle it from your databases, wrench it from your machines, and bribe your employees and investors to siphon it from your facilities. We will award this IP to American companies, who will use it to protect our citizens, defend our homeland, and build the physical goods we need to make sure that you can never cut off the lifeblood of our economy.

"We call this gambit "Dark SBIR.'"

Ok, but can we legally do this?

Yes, says "Acheson," through the Trading with the Enemy Act of 1917 (50 U.S.C. chapter 53) (TWEA), a World War I-era piece of legislation that allowed the US government to seize large amounts of German intellectual property.

However, TWEA can only be invoked for countries that the US is at war with. His main recommendation is for Congress to amend TWEA to include entities which are "IP thieves and other malign actors that actively degrade America’s national security and harm American citizens."

Failing Congressional action, "Acheson" has an even more delicious workaround. TWEA defines war to include when "Congress has declared or shall declare war or the existence of a state of war." Well, the US is still technically in a state of war with North Korea since, famously, the Korean War was never formally ended but only frozen via armistice; furthermore, China is a formal ally of North Korea; therefore, the argument goes, PRC entities could already be subject to TWEA as "ally of a nation with which Congress has acknowledged the existence of a state of war."

We love it.

"Acheson" acknowledges that this would require (to put it mildly) a significant departure from prevailing jurisprudence and legal interpretations.

But, are we not at war?

Anyway, here's how "Dark SBIR" (what a terrible name for such a great idea) would work:

Under Dark SBIR, the President would designate Chinese entities as subject to TWEA seizure based on documented IP theft, sanctions violations, or other malign activities. The Department of Commerce would establish channels for American firms to submit evidence of theft and identify companies benefiting from stolen technology, with intelligence agencies validating designations. The government would then commandeer these entities' US-based assets—including patents, manufacturing processes, equipment specifications, and technical documentation stored on domestic servers or held by US subsidiaries. Simultaneously, a bounty program would incentivize Chinese engineers, factory workers, and foreign investors to provide process knowledge and equipment details in exchange for financial rewards and potential US citizenship. Coordination with Five Eyes partners and key Pacific allies (Japan, South Korea, Taiwan) would identify multinational theft patterns and expand the seizure scope beyond unilateral US actions.

Distribution would follow three parallel tracks designed to exploit IP's non-excludable nature while avoiding the political capture endemic to Congressional appropriations. For critical national security sectors (rare earth processing, shipbuilding, advanced semiconductors), Commerce would issue non-exclusive licenses to multiple qualified domestic producers, with performance requirements (production timelines, cost ceilings) and revocation provisions for non-compliance. Exclusive licenses would reward firms demonstrating breakthrough cost reductions (75%+) using seized processes or those who surfaced seizable IP through bounty programs. Non-critical technologies would enter the public domain immediately. This multi-tier approach aims to rapidly close the US-China manufacturing gap while maintaining competitive pressure among American firms and avoiding the FAR compliance burdens that slow traditional government technology transfers.

"Acheson" believes that Dark SBIR could compress decades of manufacturing capability development into months, providing immediate access to battle-tested processes for producing rare earth magnets, pharmaceutical precursors, precision alloys, and other low-margin commodities where China has accumulated irreplaceable tacit knowledge. The liability shield for using seized Chinese IP would de-risk domestic investment in currently unprofitable but strategically essential production.

He is well aware of the potential downsides, however. He understands that China would almost certainly purge IP from US-accessible systems once seizures began, limiting the haul to whatever intelligence agencies and bounty hunters can extract; cronyism in license distribution could replicate the worst aspects of industrial policy; and the precedent of peacetime IP expropriation would fundamentally undermine the international legal architecture the US built and still benefits from in high-value sectors like software, biotechnology, and aerospace.

He acknowledges Dark SBIR is indeed an escalatory step, but frames China's rare earth export controls as having already initiated economic warfare. The legal escalation is "not as radical as it might appear" given that IEEPA and Section 721 of the Defense Production Act already authorize significant federal intervention in Chinese-owned businesses operating in America, including mandating cybersecurity practices and restricting foreign investor access to confidential information.

The most serious operational risk the author acknowledges is timing: "It would not be impossible for China to remove IP from any U.S. based servers or cloud infrastructure, so moves to seize such IP must be swift and secretive." This creates a fundamental tension—the policy's deterrent value requires public announcement, but its operational success requires surprise. The author attempts to mitigate this concern by arguing that much valuable manufacturing process technology exists as tacit knowledge held by engineers and factory workers, whom the US can target through bounties offering "fortune and citizenship in exchange for equipment and hard drives."

Okay.

Is this a serious proposal?

Not really. Congress would never pass the legislation he recommends and (to our regret) courts would immediately strike down the interpretation of TWEA he recommends. Furthermore, even if the policy were implemented in reality, it would be extremely destabilizing to all of America's relationships, and would represent unprecedented escalation with China.

And all that for too little benefit: as "Acheson" sometimes acknowledges, China's edge in manufacturing efficiency and processes is in the field of "tacit knowledge," which, by definition, does not exist in patents and hard drives, but only in the minds of teams of people who have done a complex thing together for a long time, what the French call "savoir-faire."

"Acheson" clearly senses this since he makes much of a program to extend bounties to Chinese engineers to defect. This is indeed a good idea. The US should do this. Perhaps it does this already in an unacknowledged way. But it can do this without seizing a bunch of patents of dubious value on very shaky legal grounds.

There is precedent for this: in the 17th century, to build up his own manufacturing efforts, Louis XIV of France paid princely sums to Venetian experts to move to France and lend their expertise to the Kingdom. The Most Serene Republic saw this as such a threat to its national security that it sent assassins to murder those experts…

In any case…sometimes the point of a think tank proposal is not necessarily to be implemented as it is written on a page. Sometimes the purpose is to start a discussion, and to get the reader thinking.

And at this, the "Dark SBIR" proposal is a fine example of DARC's work. We look forward to more.

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NEW: CS3D Is Just One Way In Which Europe Exploits American Economic Vitality — Second in our article series on the EU directive CS3D and how it affects American business, in collaboration with Baron Public Affairs. Read and share!