US accuses China of “industrial-scale” AI theft. China says it’s “slander.”

The United States is gearing up to address what it describes as China's extensive theft of intellectual property from American artificial intelligence laboratories. According to a report by the Financial Times, this crackdown comes in the wake of accusations surrounding DeepSeek, a Chinese AI model that OpenAI claims was developed using data derived from its own models. In recent months, other AI companies have voiced concerns about competitors employing a technique known as distillation to unlawfully acquire their intellectual property. Google has previously reported that entities, not exclusively from China, have attempted to replicate its Gemini AI chatbot, promoting the model over 100,000 times in efforts to create more affordable imitations. In a notable instance, Anthropic highlighted that firms such as DeepSeek, Moonshot, and MiniMax allegedly engaged in similar tactics, generating over 16 million interactions with their AI model, Claude, through roughly 24,000 fraudulent accounts. Furthermore, OpenAI has confirmed that a significant number of cyber intrusions it has encountered originated from Chinese sources. US officials warn that these distillation attacks pose a serious risk, potentially enabling China to rapidly advance in the AI sector. Michael Kratsios, the director of the White House Office of Science and Technology Policy, noted in a memo that there is substantial evidence indicating that foreign entities, primarily from China, are conducting widespread campaigns aimed at distilling advanced US AI systems. Kratsios specifically pointed out that these campaigns utilize tens of thousands of proxy accounts to avoid detection while employing jailbreaking methods to access sensitive information. In response to these threats, the US government plans to provide domestic firms with intelligence to help them defend against such attacks. While AI companies have accused these operations of breaching their terms of service, legislative action from Congress may soon enhance the legal framework for American enterprises combating this alleged fraud. Kratsios mentioned that the government is considering strategies to hold foreign actors accountable for their extensive distillation operations. The House's Select Committee on China has already urged Congress to instruct the Commerce Department’s Bureau of Industry and Security and the Department of Justice to classify model extraction as industrial espionage and to impose significant penalties to deter further attempts by Beijing to appropriate American innovations.