Saturday, February 12, 2011

A few new things

First of all, I have to give credit to the outstanding China Law Blog:  This Blog has been publishing about Chinese Business Law since 2006.  It is a truly outstanding blog.It's the first place I'm looking for when it comes to information.

That said, this is an IP-focused blog.  However, when I run across something I think our readers would enjoy, I will make a quick post about it.

First up is this excellent but short article from the WSJ:

The idea is that China needs Coal (they suffered an energy shortage this winter) whereas the USA has come coal mines in the Pacific Northwest.  The first issue is that US ports are not well equipped massive coal shipping.  In China, not only do they have numerous big ports, but they are also promoting more shipping ports - even by TV commercials.    The second issue is the environmental concerns - the local damage to the mining area as well as the global warming concerns.  Environmental damage in the northwestern states has long been an issue, as mining not only destroys the location where it is, but is devastating to water quality downstream.  Secondly, global warming is very real and might be a bigger, long-term concern that is slowly but surely affecting us all.

It is interesting to note that in global climate negotiating simulations, China and India tend to be reluctant to conform to emissions standards due to increased cost.  It is not that they don't care, but rather want to develop their countries first and then worry about emissions.  However, sometimes being green is also being efficient.  For a good talk about green design, see here :

The second Topic today is Guanxi - which is more like business gift giving.  In some extreme cases it is straight-up bribery, but often there is a fine line between that and Chinese business culture.  When I was in China, every time two Chinese groups met, there was an exchange of gifts, or, at least, someone (normally the one with more money) would pick up the tab.  Even broke college students, who might make 1000-2000 CNY a month wouldn't let us pick up are 300 CNY Karaoke tab.  Chinese culture about gifting and receiving and treating to meals, both in a business concept and a social concept is very different.  In fact, if I remember the model ethics rules well enough, what is expected in China could result in disbarment in the USA.

Of course, this helps business get done, but sometimes it can go sour and backfire.  It's both interesting and different, but you can read a good article about it here:

Thirdly and quickly, there was an interesting map about labor unrest in China, seen here:  There's no shock to me that Shenzhen, my wife's hometown, is the hotspot for labor unrest.  Shenzhen is the largest area for factories in China, and also is a huge area for factory towns.  While the workers earn two to three times what they would earn in the country, they work very long hours doing repetitive tasks, live in crowded living conditions, and have high suicide rates.  I have also heard stories where the company locks them in their dorms at night to keep people from escaping, but when there is a fire people can't get out and there are significant fatalities.  These conditions are so bad that they are certainly criminal in the USA, but companies realize that in the US, after benefits, auto workers (for example) might make up to 65$ an hour, complain, leave work early, etc...  Meanwhile, you can pay a Chinese worker 65$ a month, they will put in 12-hour days, be eager to learn and grateful that you are paying them so much, considering income in the country might be 300$ a year.  China says they only have 20,000 people in poverty, but the count poverty as under 600 CNY a year (about 90$)  While it certainly goes further than 90$ does here, it's a pitiful sum for a family income.

The IP topic of the day is a basic "how to" manual for IP in China from IP Dragon:  I recommend people just open it up and read the article, because it is so short and crisp that I don't think I can summarize it better there.

What is interesting is the different methods of enforcement:  Administrative, Customs, Civil and Criminal.

It seems Administrative is quick, low cost, and shuts something down right away.  The problem is there are no damages other than return of goods, and hence it is very easy to open another factory under another name and just keep infringing anyway.

Customs seems interesting - but I have yet to see someone get pulled over for a fake LV bag, though I am certain there are hundreds of faked goods throughout customs.  It seems like a good thing to do, but the amount of counterfeit goods is so high i fear this will be very limited enforcement.

Thirdly there are civil actions in court.  While this might actually award damages, they are (of course) more drawn out and much more expensive.  However, some concerns exist in the Chinese courts, such as "how will judgement be enforced?" and also "can i recover?"  Remember, it does no good to sue someone with no money.  For all you know, the legal fees are more than the recovery.

Lastly there are criminal penalties for IP breeches, which can result in imprisonment or high fines... the problem here is just like the US courts - there is a higher evidentiary burden to meet and the infringer might be good at hiding the ball (or the LV bag) and escape criminal penalties.

It's very interesting, I'd recommend it for a good, quick read for anyone interested in China IP.

Anyway, that's all for today,


Friday, February 11, 2011

First Post/ Introduction

Some things shocked me as I started.  First of all, ChinaIP (one post in 2005) an China-IP (nothing) were both taken.  Somewhat shocking.

Secondly, there are 50,000 blogs started a day online.  I wonder how many of them are actually relevant and meaningful?  Regardless of the volume of blogs out there, this one will be significant.  Even those Americans who exist underneath a proverbial rock have surely heard about the stable growth of the Chinese economy over the last 30 years.  Since the institution of the one-child policy and Chairman Deng's special economic zones, China has been a hotspot for foreign business and investment.  My wife's hometown, Shenzhen, is the zenith of these Chinese accomplishments, growing from a small village of 30,000 people to a gigantic metropolis of 14 million people, where it is impossible to find buildings under ten stories tall.  The 14 million number likely does not include all of the country-based migrants that work in the cities or in company towns outside of Shenzhen.  Yes, there is a town of 500,000 workers, living 8 to a room smaller than a studio apartment, working at least 12 hours a day to make your iphones and ipads.  Despite this, they still get paid several times what the farmers do, but that's a discussion for another blog.

However, a new change in the Chinese markets is the new Chinese innovation.  I can not call Chinese innovation truly "new" for a country that invented gunpowder, noodles, the compass, the printing press, paper, bells, forks, plowshares (maybe obvious before John Deere), Rice, Salt, Silk, and numerous other things, but rather the advent of modern Chinese innovators.  China was a clear leader in trade, technology, and population in the world until the institution of the Canton System in the 18th century, where trading was limited and consequentially China's development slowed greatly.  However, the country's long history of determination and innovation is something that is not easily forgotten by the Chinese people.  So, when trading was again opened by the People's Party, it is not shocking that the Chinese have responded with deft efficiency and have quickly caught up with the west.  After living in Chicago for five years and visiting most of the major cities in the USA, none of these can compare to dazzling Pudong area in Shanghai, or the new skyscraping sprwal of Shenzhen.  Washington DC, a place i consider the most historic and spectacular city in this country, can scarcely compare to the ancient structures around Beijing, or even China's new government accomplishments, which were on full display during the 2008 Olympics.

That said, while people in the US will look at their little plastic toys or their clothes from the mall and see the "made in China" tag, China has been undergoing a modernization of their industries.  The automotive industry is huge in China, and they have set up numerous factories all over the country producing cars (and sometimes shipping the parts back here to the USA).  While US companies certainly are taking advantage of cheap Chinese labor, the Chinese consumers are ravenous for American-branded products.  I think for the last few years, General Motors has been more successful in China than here in the USA, and there is no doubt that the Chinese market is vastly growing.  I don't think this is news to those who keep tabs on the markets, so I will guess most of my readers are already aware.

However, what I do think is relatively new is the innovation of modern Chinese products.  Just last year I was at the tech fair in Shenzhen, and there were 9 convention centers full of new Chinese products - not clothes or souvineers, but tablet PCs, 3d TVs, automobiles, and the less conventional, such as green energy, new circuitry, chemical innovation, new studies substantiating Chinese Traditional Medicine, and many other things.

However, Chinese products are so eager to catch onto the American image of fast, easy, advancement and prosperity, that the tech fair was feast for a trademark or copyright lawyer's eyes, speckled with rampart and flagrant infringement.  Let alone, once you think every product requires a thick layer of patent protection, and likely in mutiple countries, one can not help and look around and wonder "where are the lawyers?"  To my knowledge, there are only a few american lawyers, and fewer still law firms, doing IP law in China.  While this might be because there is a lot of legal outsourcing to local Chinese firms, it is still difficult to mistake those markets for anything but a tremendous opprotunity.

It is  my ambition to get in the thick of these markets and provide comprehensive legal services, however, as i have just finished law school, I am working on acquiring the skills and resources to do the business I want to do.  There are also a few major issues that must be traversed before international IP legal services full become viable in China.  While i have only done some cursory research on the topic, there are three major problems with IP in China:

1)  Enforceability - Unlike the US courts, where non-compliance with judgments is is a serious offence, it is sometimes difficult for Chinese courts and Chinese Companies to enforce laws and contracts.  Hence, All agreements must be submitted to the Chinese offices, in the Chinese courts, and be written in Chinese, as well as English.  Secondly, infringement may not occur by a big company trying to take advantage of an idea, but rather by many small factories producing infringing products.  Yes, you can raid and shut them down, but there are many factories and they are all under capitalized, so recovery of judgments is difficult.

2)  Unfamiliarity with the Chinese system - Because the Chinese system of laws developed largely independently from ours, their system is different.  Even I, as I'm writing this, am not sure exactly how the system is different.   It is just simpler, easier, and cheaper to hire a Chinese firm and have them handle all those parts of the case.  While I know very little about Chinese Law Firms, I am quite certain they charge less than US-based law firms and that they work very hard and are very successful.

3)  Culture - It should be no news that Chinese culture is very different from ours.  While they are eager to modernize and westernize in some respects, at some level the biggest change is to western suits or the Chinese business uniform (which looks a lot like going to golf here in the US).  Business deals are often struck while drinking heavily, at a spa, and include conversations that would be far out of place amongst any US business relationship.  Even a very savvy US businessman could get lost amongst the different customs.

However, I think, it is vital we develop a real cross-border firm where we can adapt to both cultures, making these international transactions and litigation smooth and efficient.  While they are in a totally different business, one can look at KFC for a model.  KFC in the US is marketed to people with very basic tastes in a tradition of heavy, southern food.  Hence the flavors are all mild, the food is very, very greasy.  However, Chinese KFC is much lighter, spicier and they incorporate some Chinese traditional ideas - such as a Beijing wrap (kinda like Beijing duck).  Hence, by adapting to the other culture, yet not changing what makes KFC KFC, they have been very successful both in China and stateside.  This idea of adaptability could make a firm with feet in both countries tremendously sucessful.  It is my quest ot learn to do this work and do it at an international firm, and if for some reason I can't find a firm, I will eventually start my own.

In the meantime, this blog is going to be about exploring cross-national US/China Intellectual Property issues. I certainly welcome any ideas or discussion, and I'd love to speak with anyone about these matters.

I hope you enjoy :)