Someone over on the China Law Blog Linkedin Group just posed a question about using non disclosure agreements (NDAs) in China. My first thought was to refer them over to one of our posts on the subject, but then I realized we have not really written anything on them since 2006. That is far too long for something so important and so effective.
We love NDAs. They are fast, cheap, easy, telling and effective. Let me explain.
If you are going to be revealing anything in China that you do not want dispersed into the public sphere, you should consider an NDA. If you are going to be showing your product, prototype or designs to a Chinese factory, you should consider an NDA. The most important thing to know about using NDAs is that they are far more effective when signed before you reveal the information than trying to get someone to sign one after they have the information you are trying to keep quiet.
They are fast, cheap and easy because they do not require much customization from company to company or from product to product. We like putting in an attorneys' fee provision and a provision regarding injunctive relief so that if the other side violates it, we will be able to act quickly to stop them from continuing to do so and we will get our attorneys fees in the process. Just putting in these provisions makes a violation less likely. We always do our NDAs in both English and Chinese. We make the Chinese version the official one and the English version just a translation for our clients. Making them in Chinese means that the Chinese courts will be able to better understand them and enforce them more quickly. It also takes away the other side's argument that it did not know what it was signing.
Well-crafted NDAs are effective in China for two reasons. First, they greatly reduce the likelihood of your information being revealed. Chinese companies are no different from anyone else and if they can help it they will seek to avoid a lawsuit where the odds have already been stacked against them. Second, the Chinese courts are pretty familiar with them and they will generally enforce them.
We also like how much we can learn from the reaction of Chinese companies to the NDAs we draft. This is the "telling' part and it is telling because we have found that if a Chinese company refuses to sign one, it is probably not the Chinese company with whom you want to do business. NDAs have become so common in China that it is truly the rare company that will not sign.
I could tell you story after story that would cause your toes to curl. And I will. Some of these are composites, but all are true:
1. Sixty year old Illinois farmer contacts us to tell us that his 22 year old (absolutely unbelievably gorgeous "girlfriend" -- I saw the pictures) is being told by the Moscow airport authorities that she cannot leave the country without putting $10,000 into a bank in Russia to prove she has an intent to return. I tell Illinois farmer (all of this for free) that I have never heard of such a thing in Russia and that it sounds really fishy to me. Farmer gets mad at me and when I email him a few months later for an update, he never responds.
We also every once in a while get contacted by someone who, for example, has absolutely no experience in the oil and gas business or with anything international, but for some completely unknown reason, is the only person in the world appropriate to help close this $230+ million deal (it's always some strange number) oil and gas deal. This person wants us to handle the legal work for a percentage of the deal and when I tell them no and that the whole thing sounds fishy to me, they fight me on it.
Our new policy is to ignore these sorts of contacts and simply say we do not do this kind of work. We have learned that telling these people of our suspicions only makes them mad. They are living in a dream world and they just do not want us to pop their bubbles. This was/is also true of many of the people I discuss below.
2. Pretty much every single month someone contacts us to help them get their money back from a "lawyer" in China or Russia that has taken their money (usually between $3000 and $8000) to do something in China or Russia and then has fallen completely off the radar. At least half the time, these people mention that they have already written some arm of the Chinese or Russian or American government and/or some Chamber of Commerce somewhere and now they want to hire us to get their money back and to report this "lawyer." We tell them that our minimum fee on such matters is so high that it will not make economic sense for them to hire us, they oftentimes respond by saying they are surprised we are not willing to help out on these things in order to protect "the profession." At which point I tell them that we have never had an experience like what they are describing with any Chinese or Russian lawyer and that the odds are overwhelming that the "lawyer" to whom they sent their money was not a lawyer at all, but just someone posing as a lawyer to get their money. I then mention that if we were to take on for free every incident where an American had sent away money to Russia or China without having conducted even the most basic research beforehand, my firm would be doing nothing but that and we would be out of business. Their response (and I am not kidding here), is usually, well I just thought you would WANT to do something about this. They then sometimes ask us how they can go about reporting the offending "lawyer" to their country's bar association and would we help them with that. I very patiently tell them that I do not know how to do that and that we cannot help them without spending hours reviewing their matter because we are not just going to go off and report a lawyer to a bar association without having solid evidence on which to do so. I then tell them that I seriously doubt that the person who did this to them is really even a lawyer in the first place because, though it is possible, it is pretty much unheard of for a lawyer in China or Russia to devote so much of their lives to education and then to securing a license and then risk all that for such a relatively small amount and the odds are overwhelming that the person who did that to them is not a lawyer. About 25% of the time they then accuse me of protecting their own.
3. Pretty much twice a month, we get contacted by someone who has paid money to a Chinese manufacturer (usually between $10,000 and $40,000) and received either nothing in return or counterfeit product, not anything like what was promised. Again, they are coming to us after having written some arm of the Chinese and/or American government and/or some Chamber of Commerce somewhere and now they want to hire us to get their money back on a contingency fee basis. I tell them that there is no way my firm can make money taking these sorts of cases on a contingency fee basis as we would need to spend hours reviewing the documents to see if their is a case and then hours hunting down the right lawyer in China to pursue the case and then we would need to negotiate a fee split with the lawyer in China and, anyway, and then there are the filing costs, etc. About half the time they then mention how they had heard there are no laws in China anyway. I then tell them that our position on their case would be the same in the United States because it is difficult to sue people/companies anywhere in the world when those people/companies use fake names and are constantly shutting down and opening up anew. If I am in a particularly bad mood and if I have found their nemesis online, I will note something like how the money they sent went to one city in China (or in Malaysia or in some other country) while their website claims they are located somewhere else.
4. Every couple of months we get contacted by someone who has gone to China (sometimes Korea too, though far less often) on a job that was to pay x dollars a month with nice housing, only to find that they are either not getting paid, are getting paid less, are being required to work 40 hours a week, not the 20 promised, or that the nice apartment they were promised is a not so nice apartment they are required to share with two others. And what can they do about it. I very nicely tell them that probably the best thing they can do is try to find another job or just come home.
5. And then there is the fake lawyer for the ten Americans being held in Haiti for seeking to take a number of Haitian children out of Haiti. Not only did they hire as their attorney someone who is not a Haitian lawyer and, it now appears, not a lawyer anywhere, they hired someone who is wanted in a number of countries on human trafficking charges. Somewhere I read some relative of one of the ten saying they had retained this person because he had offered to represent the ten for free and they thought he was a good Samaritan. I don't know about you, but if my ass were sitting in a squalid Haitian jail, I would be a hell of a lot less concerned with the intentions of my "attorney" than with his competence. Did it not even occur to these people to try to get the best attorney possible? Seriously.
Damjan DeNoble over at Asia Health Care Blog just did a post on someone he knows who appears to have been caught up in a China job scam. The post, entitled, "Wanna be doing health in China? Beware of red flags (of the minesweeper variety), expect lots of improvisation," talks about what drew this person in and then comments on the plethora of red flags. This person initially contacted Damjan and he told her not to do it:
A few weeks ago, a recently graduated college student wrote me an email saying that she was coming to China, and was looking for a job doing something healthcare related. She had some contacts in Chengdu and some vague promise of a work lead though that contact had gone cold in the weeks leading up to her flight. The lead had made some promises about giving her a large role in their organization.
My immediate advice was to scrap the Chengdu idea and go to either Shanghai or Beijing because her work lead would very likely materialize in nothing. It is my experience that any company willing to give someone straight out of college, who had never been in China, an 'important role' is not worth working for. Either the company is staffed with crooks, or with people who don't have any idea what they are doing. In Beijing or Shanghai she would at least have the luxury of a large English speaking population to fall back on.
In this case (unfortunately, since I was/am pulling for this person) my warnings came to pass.
The person who was to go to Chengdu wrote the following:
A week before I was scheduled to leave for Chengdu, the night before New Year's Eve, I received an email from my contact there. The startup company I was to work for, XXXX, had encountered a series of issues. Their goal is to open 100 health clinics in rural areas of the Sichuan province - at international standards of care - in the next 5-10 years. ..
The first was that the doctor responsible for overseeing and training the medical staff was forced to take a one to two year leave of absence due to a family emergency.
The second was a delay in the opening of the first clinic. The executive team had sought to open this pilot clinic in September 2009. But, due to some bureaucratic issues and because they wanted to find the best possible location for this clinic, they had not yet been able to open it.
...There were a few other minor issues that combined with these two larger ones caused the Board to call an emergency meeting, culminating in a decision to cease operations, effective January 1st. This decision was quite unexpected and threw many lives, including mine, into disorder. After extensive conversations with members of the executive team, we decided that the role we had initially discussed for me was no longer plausible, and that it would be best for me to pursue an opportunity with another organization.
Damjan then writes of how there are countless red flags in this paragraph that are obvious to anyone has been to "China before, or worked with real world start ups in under regulated regions before:
Flag 1: Company XXXX has a very sloppy website with little information.
Flag 2: 100 health clinics in 5-10 years? Really? International Standards of Care? So that means that they are going to be staffed with doctors and nurses? In rural China? Really? We can't even do that in the West....
Flag 3: The team was looking to open 100 clinics but did not anticipate bureaucratic issues? Sounds like they did not get a very good Chinese partner to me.
Flag 4: 100 clinics and its a start up? really?
Flag 5: There was a single doctor assigned to training medical staff? One doctor? Really?
Flag 6: And this is the big one. Giving a role to someone straight out of college with no medical/hospital experience. You can't overlook that one. *It took me a lot of time to figure out that under the circumstances, my college education was not worth very much to anyone who would be worth very much to me. In general, I found that the people reluctant to give me a lot of responsibility were the ones who had the best grasp of what they were doing. So, for anyone fresh out of college, coming to grips with their own sense of worth in the world, remember the importance of working with people that are capable enough to give you less than what you think you can chew.
The best thing anyone can do to prevent these sorts of things from happening to them is to find out more about the people with whom you are dealing, analzye what you are doing and not ignore the red flags. And if you do not know enough to know what might be a red flag with respect to what you are doing then you should either bring in someone who does or seriously consider not doing it at all.
This need for due diligence is definitely not confined to China, but it does increase when doing business internationally. It will always be easy to get away with things when there is a border and a foreign language to protect you.
In contrast to the above, and just by way of example of the sort of thing that one can do to prevent the above sort of things from happening, is what I did the other day for a client who asked me to help his company go into Haiti soon. Because neither I nor my firm have any Haiti legal experience, I determined we would need a really good Haitian lawyer. I found a lawyer at a top national law firm who discussed having worked on a legal matter in Haiti. I contacted him and he gave me the name of a Haitian lawyer with whom he had worked and been very much impressed. I then contacted a number of lawyers I know in other countries in the Caribbean and got the names of more lawyers and then emailed back and forth until I now have the names of two lawyers in Haiti that are clearly highly regarded by those I know to be smart and trustworthy. All this took about an hour.
Do you have any due diligence stories, good or bad?
UPDATE: A reader sent me a link to a China Solved post that nicely sets out the following as some of the things you can/should do in performing due diligence on your China partner:
-- Reference checks are not only possible - they are a MUST. Check every company on your future partnerâs CV and any foreign client he claims to have worked with. Call each one of them and donât be shy about asking for any type of information. If you are afraid of hurting your future partnerâs feelings â DONâT BE! Professionals with nothing to hide will not be offended. If he has something to hide and you donât do a thorough background check, your feelings and pocket will be hurt badly! It is your business on the line, so donât feel uncomfortable.
-- Check the business license of your future partner to find out if he is on any black lists of the tax bureau, banks, customs, trade office etc. If you feel that you cannot do it yourself, use professional help to do it for you. It is a worthwhile expense that might save you a lot of money and trouble in the future.
-- Make sure your partner has relevant experience in your industry or a related industry. Donât be shy about asking technical questions to see if he really knows what he is talking about.
-- Donât rush into a relationship with any partner of any kind. China was here 5,000 years before you came and will still be around for another 5,000 years. Donât make irresponsible decisions that you will later regret. Donât sign - or promise to sign - any agreement or any document under pressure or in unsuitable environment such as: in a car on the way to the airport, in the KTV, in the Sauna, after 20 glasses of wine or other alcohol etc.
One of the things I (and many others) are always saying is that China is ultra-paranoid about its economic growth. The Chinese government knows/believes it must have growth of at least eight percent a year to keep its job engine running and it knows/believes it must keep its job engine running to keep its populace happy. And China very much wants to keep its populace happy.
So virtually everything China does in the economic sphere is done with the above in mind.
But right now, China' growth is zooming along. Maybe too much. Goldman Sachs sees China growing at an 11 percent clip in 2010 "even as officials cool lending to restrain inflation and avert asset bubbles." Rumors are flying of China revaluing its currency.
The Wall Street Journal's China Real Time Report, in a post, entitled, "Take Two For a One-Off Revaluation?" sees China increasing the value of the Yuan by 5% increase:
Goldman Sachs chief economist Jim OâNeill thinks he sees it coming. He told Bloomberg News Friday that he thinks Beijing may be ready to allow the yuan to rise by as much as 5% in a one-time revaluation.
âI have a strong opinion that theyâre close to moving the exchange rate,â he told Bloomberg. âSomethingâs brewing. It could happen anytime.â
He made the comments Friday after the Peopleâs Bank of China ordered commercial banks to increase their reserve holdings, an economic cooling measure that came much earlier than most market watchers had anticipated.
* * * *
OâNeill is not the first to raise the prospect of a one-off revaluation.
âThereâs a very urgent needâ for pushing forward changes to the exchange rate, and ânow is the best time,â said Zhang Bin, a research fellow at the Institute of World Economic and Politics under the Chinese Academy of Social Science early in January. Zhang said a 10% one-off appreciation of the yuan against the dollar âwould have limited impact on Chinaâs macroeconomyâ and could deter inflows of speculative capital betting on future currency gains.
Though I would ordinarily bet against a revaluation because I believe China always errs on the side of overheating rather than on the side of a slowdown, I actually think a revaluation makes such good economic and political sense right now that I believe it to be at least possible.
What do you think?
Just cleaned up my feed reader, which meant deleting blogs that no longer post and deleting blogs that no longer interest me.
I use Feed Demon as my blog reader (I know Feed Demon is somewhat antiquated, but I have been using it since forever and I like it) and one of the things it does is list "dinosaur blogs" that have not posted for at least 60 days. I deleted most of the blogs on this list, but a number of them I was just not willing to delete. At least not yet.These are really good blogs that for I know had a lot of good/important/insightful things to say about China. These are blogs I miss and I am afraid to delete them, for fear they will come back and I will have missed something. Before I can delete them, I need to know more.
Here they are:
-- The Chief Asia Inspector Blog
-- China Business and Travel
-- Trade Media Blog
-- Experience Not Logic
-- Transnational Law Blog
-- ThinkChina
-- China Manufacturing Blog
-- Cup of Cha
-- Chinamatic
-- New Energy and Environment Digest
-- SinoFactory
-- Black and White Cat
So what has happened to these blogs? Are any planning on returning? Are they just on hiatus? Should I just go ahead and delete? What do you know?
Yesterday, we did a recommended reading post on a China Sourcing Blog post comparing India and China for sourcing, using statistics to do so. We very quickly received a comment from Joel Waldbaum making very clear that sourcing product from China is far superior and far cheaper than sourcing product (or really anything) from India:
Having lived in, and sourced from India for 30 years, and now China, for the past 5 years, I strongly disagree that India is in any way, comparable to China. The "numbers" do not really tell the true story, at all.
Logistics is a joke in India. It takes 3 days to unload/load a container ship in Mumbai. I have "lost" containers put on a train in New Delhi which somehow are missing when the train arrives in Mumbai. Yes, containers disappear from trains.
The Mumbai High Court has ruled that proven theft (proven in court) is not sufficient grounds for firing a worker. To close a company/factory with more than 90 workers requires government permission, which has till date, never been given.
India manufactures what China, for a variety of reasons, chooses NOT to manufacture: too labor intensive, too short production runs, primarily for the domestic Indian market where there are tariffs protecting the Indian manufacturer.
The real cost of Indian labor is 2-3 times the cost of China labor when you take into account productivity, Indian workers need for excessive/extensive supervision, and the costs of benefits. This is why Chinese construction companies choose to import Chinese labor to India, for projects they are working on in India, and why, till very recently, there were 40,000+ Chinese workers in India doing construction.
I am fully aware of the problems of sourcing in China. Nevertheless, India's costs and logistics make it the second choice for any product currently available in China.
With the poor response to call centers in India by American consumers/customers, I also expect China to shortly (as English in China becomes more widespread) become the destination of choice for out-sourcing.
Similarly with software development.
I have been waiting for 20 years for India to actualize its potential. It has not, and I believe it will not. China has, and will continue to grow market share from both developed, and other so-called undeveloped countries.
If you look at what India is currently manufacturing, and who are the customers (most domestic), and compare this to what China is manufacturing, a truer picture of where you should source emerges.
Walmart is not stupid. They only started sourcing in India, so that they could get permission to open stores in India, which has still not occurred. Nor have their own targets been achieved. There is not much worth buying, in comparison to China.
Because my firm does no India work, I have no direct information on sourcing from India and very little indirect information. So is Waldbaum right in claiming China is far superior toIndia for sourcing? Is India really that bad? I will say that virtually none of my clients have even mentioned India as a potential sourcing country.
UPDATE: Quality Inspection Blog has done an excellent follow-up post on this, entitled, "Pros and cons of sourcing products in India vs. China," comparing sourcing from these two countries.
The China Sourcing Blog has an interesting post, entitled, "China and India: A Comparison in Sourcing Potential," on the similarities and differences between China and India when it comes to product sourcing:
There are many similarities between China and India in today's global-economic climate. Both have over one billion citizens, both have experienced resilient growth in output, and both have greatly expanded their roles in international trade. The relatively inexpensive yet well educated workforces of these two countries have made them key prospects for the sourcing of manufactured goods. Yet differences remain in their supplier and logistical capabilities which must be taken into account by the sourcing professional.
The post sees both India and China as "capable of world class manufacturing processes." The two countries are fairly close in terms of factory productivity, but (and no surprise here) China outperforms India on infrastructure and logistics which "may explain why India is a more common site for the outsourcing of services, particularly IT services, which do not require a physical good to be brought to market." The post concludes that both are viable countries for product sourcing:
However, India should not be entirely discredited as a sourcing destination for manufactured goods. Both it and China have allocated over 10% of their GDPs toward infrastructure development which will enhance their future logistical abilities in bringing their products to the worldâs consumers. The greatest similarity between China and India: neither can be ignored by the sourcing professional.
What do you think? I would particularly love to hear from people with sourcing/manufacturing experience in both China and India.
A couple weeks ago, I did a post entitled, No IP Enforcement In China. That Cannot Be True, in which I talked about how it is just not true that Chinese courts will not enforce a foreign company's intellectual property rights against a Chinese defendant.
I then discussed a recent high profile and high damage case won by a British tea kettle company, ,and concluded that post by saying that the "next time someone says China never enforces patent rights held by foreigners, you tell them that cannot be true.
Seems I am not the only one who thinks so as the Wall Street Journal just ran an by Jones Day attorney Benjamin Bai, entitled, "Yes, China Does Protect Intellectual Property: Multinational companies just need to take better advantage of opportunities to defend their patents."
The article notes that "the picture isn't as bleak as you might think" and that [t]he key is for foreign businesses to understand how IP protection works in China and to take better advantage of the protections that exist." It then notes how patent applications in China grew to 947,000 in 2009 from 252,000 in 2002, making the Chinese Patent Office the third-busiest patent authority in the world, after Japan and the United States. China also is now the most litigious country in the world for IP disputesâwith 24,406 suits filed as compared to about 8,000 in the U.S.
Foreigners have been slower to embrace Chinese patents and Bai thinks this is because they wrongly believe they cannot prevail in IP litigation in Chinese courts:
But foreign companies can also win in Chinese courts. Neoplan, a German bus company, won an award of $3 million in January 2009 against two Chinese companies for their infringement of its design patent on buses. This case represents the largest infringement damages award ever obtained by a foreign company in China and compares well to the average patent infringement damages award of less than $50,000. Last month, a Beijing court ordered two Chinese companies to pay a combined $1.3 million in damages to a British manufacturer of electric kettle components.
Anecdotal evidence suggests the recent win rate for multinational companies in IP suits in China has been greater than 50%. In some cities the win rate exceeds 90%. While it may be premature to declare victory based on these statistics, they do suggest that it is a mistake to assume that multinational companies cannot win IP suits in China.
Foreign companies just need to know how to take advantage of these trends. Too many have made the mistake of not applying for patents and trademarks in China. Foreign patents and trademarks are not enforceable in China, just as Chinese patents and trademarks are not enforceable in the United States. Multinationals also should be willing to enforce their Chinese IP rights against infringers. Litigation success requires more than a mere willingness to sue. An in-depth understanding of the Chinese judicial system and relevant legal doctrines and an ability to maneuver through the intricacies of law and politics in China are essential for foreign companies enforcing IP rights there.
I agree.
I am going to be on a panel at the upcoming Berkeley Asia Business Conference 2010, taking place on February 20, at the Haas School of Business, University of California, Berkeley, 2220 Piedmont Avenue, Berkeley CA.
The theme of this years conference is âAsia: Shifting the Global Center of Gravity,â and the discussion will center around "whether major business and commercial activities are increasingly centered on the Asian region." The conference will address these issues from 4 perspectives:
* Macroeconomic trends occurring in Asiaâs ascent and its broader implications on capital flows and labor
* Rise of Asia as a region of business and technology innovation as well as entrepreneurship
* Challenges of leadership, organizational alignment and people management amidst relentless growth in Asia
* Implications for personal development and career growth to take advantage of Asia's rapid growth
The following will be the keynote speakers:
Arun Sarin
Senior Advisor, KKR
and former CEO of Vodafone
Lim Siong Guan
Group President
Government of Singapore Investment Corporation
Scott Matlock
Chairman M&A
Morgan Stanley Asia
Joi Ito
CEO of Creative Commons
and General Partner of Neoteny Labs
There will be "in-depth industry break-out panels" on the following:
* Cleantech, Consumer Brands, Finance, Global Operations, India, and Technology
These will feature "representatives" from Citigroup, Deloitte, Hina Group, Khosla Ventures, Matthews Asia Fund, The Gap, ZS Associates, Harris & Moure, and more!
I am going to be on the Consumer Panel with the following:
-- Jose R. Davila, Vice President of Field Human Resources, Gap North America
-- Dave Sessions, Vice President of Global eCommerce, Walmart International
-- Rand Han, Strategy Director, Bloodyamazing
Paul Tiffany, Senior Lecturer, Haas School of Business at the University of California, Berkeley, will be the moderator and our panel will be focusing on the following:
The phenomenon of globalization, through a leveraging of marketing communications, technology and consumer psychology, created a commonality of consumer behavioral patterns across nations and regions. How well can this be achieved for large cross-border firms to compete in emerging Asian market? When facing intense competition from low-cost local players, consumers with disparate incomes and behavior, fragmented distribution channels and multiple layers of barriers in compliance, politics and language, are the international consumer enterprises ready for this momentous shift? The panel will explore the following questions:
1. What are the primary challenges in branding in the Asian emerging markets?
2. What are some critical ingredients to the brand success of locals when confronting the major external firms?
3. How would the international companies blaze the way to the next growth phase in Asian emerging market?
Who's going?
Regular readers know that we seldom write about Chinese etiquette/cultural mores, figuring the real key is treating people with respect and just doing business. For examples of this view, check out our posts, entitled, China Cultural Awareness: Going Beyond Not Being An Asshole and Chinese Cultural Awareness Simplified: Don't Be An Asshole. And we also have not made this a forum where we highlight great cultural gaffes or Chinese tattoos gone wrong, figuring we will leave those things to others.
But I got a great email from co-blogger Steve Dickinson today on a cultural gaffe so common as to warrant a post.
Steve sent me a couple of New Year "Gung Hey Fat Choy" emails he had received from American companies doing business in Mainland China-- not even in Guangdong. And with those emails, Steve pointed out the following:
Here is one of those odd cultural things. Western folks want to be culturally sensitive. So they send out a Lunar New Year message. But they really mess it up. "Gung Hey Fat Choy" is Hong Kong Chinese, not Putonghua [Mandarin]. So, for the vast majority of Chinese who understand the message, this message could be seen as a brutal and nasty insult, not a positive message. It is a reminder of a former imperialist world where China was ruled from Hong Kong. In fact, to tell you the truth, most modern Chinese would not even know what "Gong Hey Fat Choy" means. They would just treat it as a series of meaningless symbols, insulting in its own way. "Gung Hey Fat Choy" is Cantonese for "gong xi fa cai." NO ONE in modern China says "Gung Hey Fat Choy." The phrase is purely from the old era, which was destroyed by the new regime. So as I say, for the small group of people who even know what this term means, it is an insult, not a positive message.
Brought to you as a public service from the good folks at China Law Blog, who wish you all a Happy New Year.
The other day I did a post, entitled "On Not "Antagonizing" China. Or How Many Enemies Does The US Need?" expressing my frustration with a United States foreign policy that seems more interested in calling China out for trade and Google issues than in dealing with the far more troubling and potentially existential issue of Islamic extremism/Iranian nukes.
Now Stan Abrams of China Hearsay, in a post entitled, "US Has Hard Time Getting China On Board With Iran Sanctions," in language far stronger than I would use (I have a 12 year old kid and Stan has cats that are apparently inured to his swearing) questions why in the world (that's my soft language, not his) China should go along with U.S. desires on Iran.
You know, itâs really easy to complain about Beijingâs treatment of Google, the value of Chinaâs currency, the grumbling of foreign investors, trade disputes, and so on. And the U.S. might be on the right side of some of those issues.
But in the international relations arena, none of that shit matters as much as who has leverage and who wants what. If Iran sanctions are a matter of top priority for the U.S., and the Obama administration truly believes that it has a shot persuading Beijing to get on board, then you donât fucking sell weapons to Taiwan mere days before a renewed diplomatic initiative on the Iran issue.
This doesnât seem like rocket science to me, but what the hell do I know? Itâs not like I have a graduate degree on the subject or anything.
Perhaps there is an alternate explanation to poor IR execution:
1. Iran sanctions are not really a top priority for the U.S. Perhaps the Obama administration just wants to appear as though they care about sanctions.
2. Iran sanctions were never going to happen anyway. This is all theater because sanctions are untenable.
3. China was never on board. Might as well piss âem off, theyâre never going to agree anyway.
Nah, I still believe that U.S. policy is uncoordinated.
I completely agree.
Article I wrote for Advertising Age/Ad Age Chinais now online. It is entitled, "Four Tips to Avoid Breaking the Law in China" and though its focus is on the legal issues that arise from marketing in China, it (if I do say so myself) does provide a good, though very basic, foundation of the common legal issues foreign businesses face in China.
I urge you to go to either Advertising Age/Ad Age China to read the full article, but to whet your appetite, I leave you with the sections on intellectual property and contracts:
Intellectual Property
China does a pretty good job of protecting trademarks, but the only trademarks it protects are those that have been registered in China or that constitute a "well-known" mark. If your client's brand name is not as well-known in China as Coca-Cola (and it is only within China that matters), you should just assume that registering it in China is the only way for you to protect it.
Because China maintains a "first to file" trademark system, the first to file for a trademark almost invariably becomes the owner of that trademark. So you must register before anyone else.
As a rule, a company should register its brand as a trademark in China before marketing it. If it markets the brand before registering, the odds are good that someone else will register that brand as its own. Many American companies have gone into China, marketed their brand, and then had to forsake it because someone else went ahead and registered it first. Trademark first, then market.
You should also consider securing a .cn and/or a .cn.com domain name.
And be aware that China, unlike many countries, provides for portrait rights, which means using someone's portrait for profit and without their consent is prohibited. So make sure you have a written agreement.
Contracts
In the U.S., important provisions left out of a contract will usually be implied by a court, whereas provisions left out of a China contract are usually treated as though they do not exist.
Here's a great example: a U.S. company purchased and received a large shipment of laptop cases from China, which featured handles that nearly always broke when used to carry a laptop. The Chinese manufacturer insisted it had provided exactly what had been ordered, and if the U.S. company had really been concerned about the handles not breaking, it would have purchased the Chinese company's $4 bags -- not its $3 bags.
In other words, the U.S. company should have specified in its contract that it would require the laptop bags be strong enough to hold a laptop.
Clarity and specificity in China marketing agreements are equally important. For instance, if you are paying to put your logo on a stadium, specify that you want it to be a particular size, on a particular wall, at a particular height, and there at particular times. If you want exclusivity, specify exactly what you mean by that.
Signing an "exclusive" contract with a stadium may mean exclusivity for one wall, when you thought you were getting it for the entire stadium. Figure nothing is implied.
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