Treasury Secretary Scott Bessent said Tuesday that the United States will investigate China’s open source models for signs of intellectual property theft and threatened sanctions against Chinese AI companies if intellectual property theft is confirmed.
“We’ve been seeing a lot of talk about open source models emerging and threatening the large-scale language model in the United States,” Bessent said on FOX Business Tuesday. “This administration supports the open source model, but what we do not support is the theft of intellectual property. Especially when we see foreign models stealing from our great companies, we can sanction them for this theft.”
Bessent’s comments were first reported by Bloomberg.
This statement comes amid fears that the growing power and popularity of Chinese models (most recently Moonshot AI’s Kimi K3) could damage the business models of top US AI companies such as OpenAI and Anthropic and their ability to raise more funding to continue developing frontier models.
On Monday, Axios reported that the Trump administration is considering an outright ban on China’s open source model, although some dispute this claim.
For months, AI companies have warned against campaigns by foreign actors to copy and reintroduce their AI technology as open source. In April, the White House announced it would work closely with AI companies to combat theft.
US sanctions against Chinese models add to the list of strategies the government is trying to maintain its lead in the AI race. After restricting China’s access to advanced chips and tightening export controls, the US government has now signaled it may target AI models themselves, a move that could signal a significant escalation in technology competition between Frontier Research Institute and China’s open source alternatives.
Model distillation is a technique that allows you to transform some of the functionality of a larger model into a smaller system that is easier to run. However, not everyone agrees that distilling another company’s model constitutes theft.
Earlier this month, Microsoft CEO Satya Nadella criticized large research labs for making this very assumption. “I find it ironic that the status quo has reversed to impose restrictive conditions on distillation when we need great innovation coming from model providers who have fair use rights to train models on publicly available data.”
AI lab training practices continue to pose legal risks for companies. Anthropic received permission this week to begin writing down authors’ checks as part of a $1.5 billion settlement after a judge ruled that the company illegally downloaded and stored millions of copyrighted books to train its AI.
Additionally, some industry insiders argue that distillation isn’t the only reason China is catching up with U.S. AI companies.
“We know that distillation is a very small component in our ability to create good models, and it’s a practice that everyone does, including companies in the United States,” Hugging Face CEO Clem Delangue said on a recent episode of TechCrunch’s Equity podcast. “If it were as simple as distillation to build successful AI models, there would be many other countries, including the United States, with much better open source AI. The reality is that China has a very good research team and a much more open and collaborative approach to AI than the United States.”
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