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U.S. - China Relations. Normalization, Not Democratization.
2009-08-03 05:39:00
I wrote this post back in September, 2008, but forgot to put it up. I rediscovered it today and though it is definitely dated (it was written by Kissinger with an eye towards the US Presidential elections) the core of it still very much holds true and still merits a post, I think. I love it when someone can take my meandering, somewhat inchoate thoughts on a subject and concisely sum them up with a pithy line. Henry Kissinger did that for me today on what the role of the United States should be with respect to democratization in China . Kissinger did that in the context of a excellent New York Times article, entitled, "Foreign Policy Factions Unsure Who Will Prevail,." The article discusses how the United States does not have unlimited international power so it must ration that power wisely. Then comes Kissinger's money quote -- and like him or not, this is a guy who knows foreign policy: "Our major effort with the Soviets,” he [Kissinger] said, recalling his time as Pr...
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China Patents Work And I Have The Proof.
2009-08-02 20:06:00
Axiom: Chinese businesses do not waste money. Axiom: Filing patents in China is expensive. Axiom: Chinese businesses are filing patents in China like crazy. Conclusion: Filing patents must be worth the money; in other words, they have value. According to Intellectual Asset Management Blog (h/t IP Dragon), "for the first time invention patent grants made to domestic [Chinese] entities are outstripping those made to foreign concerns. According to SIPO statistics, in the first six months of 2009 Chinese applicants received 18,634 patents, while applicants from overseas took 17,737; that's 51.2% and 48.8% respectively. In 2008, Chinese applicants were awarded 49.7% of the 93,706 invention patents granted by SIPO." Chinese and China patent filings are having and will continue to have worldwide implications: Clearly, all of this has major implications for granting authorities, in-house patent departments and private practice firms across the world. What a great time it is to be ...
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China And The Swine Flu. When Pigs Fly.
2009-08-02 13:04:00
If you are not reading Absurdity, Allegory and China , you should be. It just did an excellent post, entitled, "One Flu East," on what could happen to you if you come to China with an elevated temperature or even if you just come in on a plane near someone with an elevated temperature. The gist of the post is that you will be quarantined and there will be no special dispensations. The implicit message of the post, and one which applies to foreign businesses in China as well, is that once the Chinese government gets committed to something (and I mean really committed), it is difficult if not impossible to budge them. There is this idea that "guanxi" or just blame importance can cause the government to bend and that can be true. But there are certain central tenants that can take hold within the government that can become pretty much immutable. I do not know how many times I have had to tell foreign companies that do business in China that they have gone beyond the point at whic...
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China Socialpreneurs
2009-08-02 00:21:00
Crossroads blog has a post up listing China Corporate Social Responsibility related twitterers, broken out between "China Social Entrepreneurs," "China Treehuggers," and "NGOs." If you twitter and have an interest in China CSR, I urge you to check it out.

How To Get Your Business Into China. Legally.
2009-08-01 16:58:00
Spoke with a company last week that is interested in hiring people in China to oversee its China purchasing and quality control and stake a beachhold for selling its products there as well. This company asked me to set out the basics on what my firm would propose to do for them to get them going in China. I just wrote the email and figuring I might as well kill two birds with one stone, I have modified it slightly to make up this post. Here's my email: This is to follow up on our recent telephone conversation regarding what it will take for your company to hire employees in China legally and the additional actions you should take to operate legally in China and to protect your company there. 1. In order to hire people in China, you must first create a legal entity in China. There are three basic types of legal entities for foreign companies seeking to go into China. One is the joint venture in which the foreign company forms a sort of partnership with a Chinese entity. Th...
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The China Company Within A Company. Been There. Done That.
2009-07-31 08:55:00
FT.com wrote an interesting story the other day of a German advertising company whose employees had set up their own company within a company. The thrust of the article is that this sort of thing is peculiar to China and foreigners had better beware. I have received no fewer than three emails from people sending me the article suggesting I should write on it. Okay, I will, but only to say this sort of thing goes on all the time and it is certainly not peculiar to China. Not at all. The article necessarily focuses on China and it quotes someone who wrongly paints this deception as a China-foreigner thing: There is an attitude among many in the Chinese business community that foreigners are rich and stupid and therefore fair game; that deceiving them is somehow acceptable in a way it wouldn’t be if they were Chinese,” says one intellectual property lawyer who has worked in China for nearly two decades, and who asked not to be named to avoid repercussions for his business. ...
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How To Avoid Getting Kidnapped In China. Plan In Advance Or Go Home.
2009-07-29 02:47:00
The other day, in a post entitled, "China Hostage Situation. Now IS A Good Time To Pay Your Debts," I wrote about some U.S. executives who were being held hostage in China over nonpayment of a business debt. Their US based company had gone bankrupt and when they went over to China to explain all this to their Chinese suppliers, they were taken hostage. I have since learned that they were eventually released, though I do not know whether a payment precipitated that release or not. My friend Shaun Rein, of The China Market Research Group just came out with an article for Forbes, entitled, "How To Avoid Getting Kidnapped In China." Shaun's thesis is that if you are going to do business with another company in China, you should find an "uncle" first who will be able to mediate any disputes that might arise between the two of you: Before entering a partnership with a Chinese company, you should find an "uncle"--a person both parties trust who will be able to mediate differences. Th...
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The Foreign Corrupt Practices Act. Can You Say China Relevant?
2009-07-27 04:06:00
I was talking with Kevin O'Keefe the other day about law blogs. Kevin is the founder of LexBlog, which dominates the market for setting law firms up on blogs. Despite originally being from Wisconsin (he now lives in Seattle), Kevin knows more about law blogging than any guy alive. Despite the recession, his business is still growing by leaps and bounds, which caused me to ask him if he had any plans to expand beyond legal blogging. His response to that was that legal blogging has barely just begun and there are still a huge number of legal arenas that are under-served or not being served at all. I agreed with him and then we started talking about how certain blogs are so good and so comprehensive they just fill "the space." One of the things I love about being an international lawyer is that I get to remain somewhat of a generalist. Yeah sure, there are certain things (OEM contracts, for example) that I have done hundreds of times, but there are other things of which I need...
More About: China , Foreign , Relevant

Suing Chinese Drywall Manufacturers. Why All The Bother?
2009-07-24 16:22:00
Someone just emailed me an article on Chinese Drywall, with the question, "why do you think these lawyers are spending so much to serve the Chinese defendants." My short answer is that I have no clue. I will backtrack a bit first. The article is entitled, "Chinese-Made Drywall: A Multi-Defendant, Multi-Claim, Multi-District Litigation Has Litigators Multi-Tasking," and it is more a pitch for a bunch of money making seminars than an article designed to impart real information. With that caveat now in place, here are the "offending portions." [Ervin] Gonzalez dug in to the potential defendants, starting with a primer on how the product is made. Gypsum is mined from a quarry, heated to dry, then rehydrated to form a slurry, a paste that is then sandwiched between materials. The mining process raises questions as to whether the contaminants are natural or whether pollutants migrated from, say, a nearby farm where pesticides were used. The ingredients are supposed to be in...
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China Hostage Situation. Now IS A Good Time To Pay Your Debts.
2009-07-23 02:25:00
Just got an email from a regular and very much trusted reader. The email (with all identifiers removed) is as follows: Consumer product company had a rep office – staffed with people with US passports. Company had financial problems and needed to file for bankruptcy. The company sent one of their executives to China to advise their suppliers that they were declaring bankruptcy and would be unable at this point to pay their outstanding balances. As you can imagine, the Chinese suppliers did not take this well, and they stormed the rep office and are now holding the US citizens hostage - literally. Its been days now –and neither the police nor the embassy will help to extract the people. The whole thing was obviously not handled properly from the start – but this has turned ugly pretty quickly. Each factory is mainland owned. I’ll let you know how this turns out – I’m not involved – just hearing most of this second-hand. I hope to write a happy ending to this sto...
More About: Time , Good , Situation , Hostage

What's Happening With China Legal? Read Asia Legal Blog To Find Out.
2009-07-21 15:21:00
When I worked in BigLaw, I, along with most of the other associates at my mega-firm, could hardly wait for the next issue of American Lawyer Magazine to hit our law firm's library. That magazine did a pretty decent job keeping us informed of what was going on in the legal world, and even within our own firm. It would give ratings to working as an associate at the big firms, with a commentary. My friends and I would always try to get quoted, though always anonymously. One year we bet on who would get quoted. I won by saying that we associates were pretty well informed of firm goings-on because we would get so much coverage in the American Lawyer. Now, if you want to read law firm rumors, the best place is Above the Law, (which had my firm down for a merger with Baker & McKenzie!) but it does not carry much on Asia . Asia Legal Blog is written by a legal headhunting firm so it is not going to go off on a rumor, but it is a good and free source of goings on in the Asian legal...
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China Joint Ventures. Find Me A Good One....
2009-07-16 06:17:00
Excellent article by Tina Wang up on Forbes.com. The article is entitled "KKR's Concrete Lessons In China " and it is subtitled, "A KKR-led group bought into a Chinese tycoon's cement business. Over a year later, who's in charge?" It is on a KKR cement industry joint venture in China and like so many stories on joint ventures (not just in China but just about everywhere), it reads like a bad spy/war novel. It reminds me a bit of a chapter (or two) from Jack Perkowski's book, Managing the Dragon, where Jack very graphically writes about one of his China joint ventures gone bad. Jack's story is so incredible, that if my firm had not represented parties in similar situations (right down to the unbelievable parts), I would never have believed it. Let's just say one of my favorite joint venture stories involved a client who after being hung head first outside a high floor window in Russia he decided he would gladly relinquish his controlling interest after all. For addition...
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China's Rio Tinto Arrests. Everyone Just Move Along....
2009-07-14 12:26:00
By Steve Dickinson The recent detentions of four Rio Tinto executives has caused much concern. However, the situation has been misunderstood by most in the West because of a failure to understand the legal background. The Rio Tinto employees are accused of conducting industrial espionage. Specifically, they are accused of bribery and theft of trade secrets. These acts are crimes under Chinese law. Therefore, if the accusations are factual, the four Rio Tinto employees are subject to criminal sanction in China , with typical prison sentences of up to four years. The only thing unusual about this case is the decision of the Chinese government to treat the matter not as a commercial trade secrecy violation, but rather, as a theft of state secrets. I assume the reason for this is that the allegedly stolen information is in fact highly secret and damaging to the position of the Chinese companies in the iron ore price negotiations with Rio Tinto. The Chinese are probably avoiding a crim...
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Enforcing Contracts In China. Way, Way Better Than You Think.
2009-07-13 13:23:00
By Steve Dickinson At a recent meeting of foreign businesspersons in Qingdao, I sat next to a very unhappy man who loudly stated: “Chinese contracts are not worth the paper they are written on.” I told him: “Your statement is not true. As a matter of fact, the Chinese courts do very well at enforcing clear written contracts.” As usual, I was greeted with disbelief. The problem with this person’s statement is that it becomes a self-fulfilling prophecy. People who think China will not enforce contracts tend to ignore the issue. They either enter into no contract at all or they enter into a poorly drafted contract or they enter into a contract that is not enforceable in China. This is the actual story for this particular individual. As he now knows, this attitude about Chinese contract enforcement is a mistake. My view of the Chinese contract enforcement process is based on over 30 years of experience in China. However, I am clearly not the only person who has come to this ...
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Owe Money To A Chinese Company? No Need To Pay.
2009-07-10 06:03:00
If you owe money to a Chinese company for product and you cannot pay all of your creditors, skip out on the Chinese company. Near as I can tell, there is nearly a 100% chance they will never sue you to recover. I am NOT advocating not paying your debt, but I am saying that if you have to choose among your creditors on who to pay, the Chinese company should be your choice. I am saying this based on the following: 1. About a year ago, a client had come to me for a consultation regarding a dispute it was having with its Chinese OEM supplier. The Chinese company was threatening to sue my client for about $350,000, per its invoices. My client was refusing to pay the Chinese company due to a spate of bad product. My client was seeking a $150,000 credit for the bad product and the Chinese company was refusing and threatening to sue. I advised my client not to pay anything, based on two legal maxims. One, possession is nine-tenths of the law, and two, never fund someone who is t...
More About: Money , Company

Exporting To China 101
2009-07-08 23:28:00
A client recently sent me a blogpost and asked me if I "thought it made sense." The post is entitled "Organizing Your Export Trial Run," and, yes I do. Not only does it make sense, but it also has a slew of very helpful links. So if you are in the business of exporting to China (or to anywhere else), you should check it out.

Hey Sucker, We've Got Your China Trademark And Your're Goin'
2009-07-08 12:51:00
Over the last six months or so, my firm's work for Chinese companies going international has zoomed, and with that, my knowledge of how Chinese companies "handle" foreign companies has zoomed as well. One of the things I have learned is that Chinese companies understand the value of trademarks -- YOUR trademark. Let me explain. I am going to have to be very vague here so as to avoid revealing any confidential information, but I can be specific enough so you can get the gist. Two stories: 1. Chinese company manufactures product for US company. Product ships from China with US company name on it and US company distributes it throughout North America. China company also sells its product in North America under its own brand name. US company is trying to get Chinese company to lower its prices and Chinese company is balking. US company is talking of finding another manufacturer. Chinese company tells me that people in China "very friendly" to them registered the US compa...
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Sex! Drugs! Prostitution! China And The US By The Numbers.
2009-07-07 20:27:00
The Aimee Barnes Blog just did a post, entitled, "Sex, Drugs , Weapons and Cash: China vs United States," comparing the United States and China on all sorts of numbers/statistics relating mostly to sex, drugs, crime and health. It makes for fascinating reading, particularly, if (like me) you are the kind of person who remembers off the top of your head, exactly what Bob Gibson's ERA was in 1968 (1.12). Check it out.
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Cultural Norms As Law Enforcement Mechanism. Why Demand Letters Still Work
2009-07-07 13:12:00
Wikipedia defines a demand letter as a "letter stating a legal claim (usually drafted by a lawyer) which makes a demand for restitution or performance of some obligation, owing to the recipients' alleged breach of contract, or for a legal wrong." Typically, these letters conclude with the lawyer threatening to sue or the non-lawyer letter writer threatening to go his or her attorney. Such letters have become so commonplace in the United States that they most of the time fail to instill much fear into or much action from their recipient. I know of some lawyers who no longer will write such letters, believing that US companies will not seriously discuss any settlement until sued. I know of a company that manufactures a somewhat dangerous product and it receives maybe 100 lawsuit threatening letters a year from around the world. Before I started representing this company, they would respond to every letter by seeking a quick out of court settlement. I convinced them to change...
More About: Work , Letters , Law Enforcement , Cultural , Mechanism

The China Liability Wall. What I Meant To Say....
2009-07-06 12:23:00
An East Coast lawyer contacted me the other day seeking help for his client in writing an outsourcing contract with its Chinese manufacturer. We talked for maybe 10 minutes regarding these contracts and then he told me he had called me because of what I had to say about always requiring the Chinese manufacturer to agree to buy product liability insurance. I paused for an uncomfortably long time thinking about how I could not believe I had ever said this. Finally, I asked him what he was talking about. He then said "in the Washington Post article." I then said, "oh," and did a very quick Google search and came up with a very interesting 2007 article (I had never before seen), entitled, "Liability Lawyers Struggle to Pierce Chinese Curtain." That article has me down for the following: Smaller importers are increasingly writing liability insurance into their contracts with Chinese manufacturers and paying third parties to test product quality, said Daniel P. Harris, a Seattle...
More About: China , Wall

China OEM Agreements. Why Ours Are In Chinese. Flat Out.
2009-07-05 20:18:00
Had a nice conversation with a potential client last week. Company has a great new product it wants made in China . Like many companies starting out in China, this one is in the process of shopping for its China lawyers and my firm was one of four suggested to it by its regular corporate counsel. Our conversation was interesting because we were the fourth law firm with whom she had spoken. This gave me an opportunity to ask how we differed from the other three firms and, not surprisingly, we really differed, both in how we bill for these things and, more importantly, how we typically handle these contracts. I told this company that we would almost certainly do their OEM contract in Chinese and I quoted them a flat fee for doing that, along with an English language translation. They told me that the other law firms were saying that the contract would be in English and they would "need to" charge by the hour and it would even be impossible to estimate how long it would take due ...
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China's Internet Censoring. Hate To Say I Told You So, But I Told You
2009-06-30 17:07:00
Back when the media was getting all hot and heavy (sexual reference intended) on China 's plans to require internet filtering software, I did a post, entitled, "Two China Things Of Which We Dare Not Speak (And Sex Is Not One of Them)." In that post, I explained why we virtually never write about proposed laws and why I had not written anything on the filtering software. I gave the following reasons: I do not like writing about proposed laws for the following reasons: 1. There are so many laws already on the books and being enforced that need coverage more. Laws on the books will impact you right now. Proposed laws may or may not ever come into being. 2. China has a very real habit of saying it will institute a new law and then never doing so. It floats new laws to gauge reaction. If the reaction is negative, the law oftentimes never comes into being. 3. China has a very real habit of instituting new laws and then never enforcing them. This often happens when the new law is neg...
More About: Internet , Hate , Told , Censoring

China's Labor Law. The Bark Is The Bite.
2009-06-29 04:47:00
Got a call last week from the HR officer of a US company. She was looking for my firm to assist her on a labor law issue. The US company's China WFOE had laid off a female employee who had come back saying she was entitled to ten months pregnancy pay. The employee gave three legitimate sounding reasons for this entitlement. I learned that this employee's yearly salary was about $3600 and that the WFOE was in Shenzhen. I also learned that this employee did not have a written contract and that the WFOE did not have an employee manual. I told the HR officer that for us to research whether this ex-employee was entitled to what she is seeking, we would need to research the laws of China, of Guangdong province and of Shenzhen. I then told her that the cost of our doing that would be so close to what the employee was seeking and that I was very dubious that our research would reveal any cost savings (particularly because this employee had no written contract and this WFO...
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China's Anti-Monopoly Law. One Year On.
2009-06-24 11:39:00
I actually began my legal career as an antitrust lawyer and I though there has so far been no call for it on our China matters, I have very much tried to keep up with China's slowly developing antitrust laws. So I was delighted to sit down (metaphorically speaking) with Josh Gartner Managing Editor of Publications for AmCham China for an interview on recent developments in China's anti-monopoly law. This interview can be heard as an iTunes podcast here and on AmCham's site (gosh, I'm right there with Nancy Pelosi and John Kerry) here. Or you can read the transcription below, stripped of all my overly long pauses and interminable "uhmmms." Welcome to China Brief Insight. This is Josh Gartner of AmCham China. I’m very excited today to be joined by Dan Harris of Harris & Moure law firm. Dan is a very well-respected lawyer. He is also well-known in China for China Law Blog, which he writes together with Steve Dickinson, who is also with his firm based out of Qingdao. Today,...
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Registering Your Trademark In The US And China On The Cheap.
2009-06-23 07:54:00
Many years ago, a very good client of mine (in a China related business) called me in a panic. The client had gone to its regular US corporate counsel and asked about using a trade name on product it would be importing from China. Its corporate counsel said it saw no problems and my client went ahead and imported the product. This turned out to be a bad move. A very bad move. As soon as the product hit the US, it was stopped at customs as counterfeit. Within hours, my client received a fax from one of its direct (and probably most hated competitors), saying that the imported product was counterfeit and that if my client did not pay $25,000 and destroy all of the boxes with the trade name on it, it would be facing a lawsuit. For ease of reference, let's call this competitor "the enemy." My client came to me and we met with a top flight local trademark lawyer (that same afternoon) and we all determined that the enemy was absolutely right. My client was using the enemy&ap...
More About: Cheap , Trademark

China. The News Is Nearly Always Mixed.
2009-06-17 16:20:00
For the last couple of weeks I have been working on an outsourcing contract for a US/China company seeking to take on a very large China outsourcing project for a rapidly (even now!) growing US retailer. Negotiations have been ongoing with countless revisions. Last night, I received the following email from my client: They signed! Now I'm back in china and quarantined for possible pig flu!! Thanks for your help. Since the inception of this blog, I have refrained from using the old (and badly overused) cliché that, "Everything is possible, nothing is easy." I am using it now.
More About: News , The News , Mixed

Defective Product Recalls In China. What's That?
2009-06-16 16:22:00
I have been practicing law long enough to have seen my share of product recall disasters. The most recent was a situation involving a food company client. Our client had contracted out with another company for the manufacturing of a particular processed food product. The food product was determined to be tainted with very low levels of a potentially harmful. Our client informed its distributor of the problem and the distributor agreed it would alert the grocery stores at which the product was sold. And it mostly did. Unfortunately, however, this distributor "forgot" to alert one very large grocery store who went on to sell all of the product before learning of the recall. Needless to say, this very prominent and respected grocery store became very angry at my client upon learning of its not having been alerted to the recall. This grocery store then told other grocery stores of what had happened and our client's reputation precipitously declines and all of its profits disa...
More About: China , Product

Which Comes First, The China Trademark Or The China OEM Contract?
2009-06-15 06:21:00
I am paranoid about my clients registering their trademarks in China , pretty much before they do anything else. For a few examples of my feelings on this, check out, "China Trademark s -- Do You Feel Lucky? Do You?" "China Trademark Law: Simple And Effective" and "Trademark Protection In The Global (And China) Marketplace." The bottom line is that if you have a trademark or trade name worth protecting and you are doing any business at all in China, you absolutely must register your trademark at your earliest opportunity. But lately I have been having my doubts. Just a little. Not that long ago, a client came to us having reached a tentative agreement to sell millions of dollars of product to a Chinese city government. The deal looked good from all angles and my firm was hired to draft the contract. I discussed with my client the need to register their product's trademark in China before anyone else beat them to it. My client was concerned about this because a number of peo...
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Promising China Blog: Eileen Eats
2009-06-14 11:52:00
Despite the global recession, I remain an unabashed foodie. I figure, if I am going to eat, I might as well eat well. I am sure Eileen Wen Mooney would agree with me on that. Ms. Mooney is the author of the books, Beijing Eats and Not Just a Good Food Guide: Beijing and the oft-cited Guardian article, "Top 10 Places to Eat in Beijing." She also has been writing a superb blog for the last few months, entitled, Eileen Eats. As you probably have guessed, its focus is on food in China , mostly Beijing. The blog does a great job discussing Chinese food history, Chinese food, Beijing food, and Beijing restaurants. I heartily recommend it.
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Two China Things Of Which We Dare Not Speak (And Sex Is Not One of Them).
2009-06-12 15:52:00
I often get emails from readers asking me to write about a particular topic. There are two topics on which I frequently receive emails and on which I virtually never write. Proposed laws and China diplomatic meetings with foreign countries. Just about every time there is a rumor of a major new Chinese law, I get an email from someone asking me to write about it. I virtually never do. This happened most recently regarding the news that China would soon be requiring all computers sold within China to come with built in web filtering software. I do not like writing about proposed laws for the following reasons: 1. There are so many laws already on the books and being enforced that need coverage more. Laws on the books will impact you right now. Proposed laws may or may not ever come into being. 2. China has a very real habit of saying it will institute a new law and then never doing so. It floats new laws to gauge reaction. If the reaction is negative, the law oftentimes...
More About: Speak , Things , Dare