Feed aggregator

Basic China Due Diligence. Is This Chinese Company Legitimate?

China Law Blog - Tue, 06/24/2014 - 17:25

I spoke at a seminar last week in Chicago on what companies that source their products from China need to be doing to avoid litigation. Number one on my list was to “choose a good Chinese partner.”  I went on to say that the odds of having problems with a legitimate Chinese company are a lot lower when you deal with a “legitimate” Chinese company. I then talked of how legitimate Chinese companies do not like getting sued and will usually work to avoid that.

Needless to say, an attorney button-holed me to ask the next logical question: “how do you distinguish between a Chinese company that is legitimate and one that is not?”

My answer was along the following lines:

  • The first thing you do is ask the Chinese company to send you a copy of its business license. Do not be afraid to do this. Chinese companies do this all the time. If the Chinese company refuses to send this to you, walk away.
  • You then need to have someone fluent in Chinese and with knowledge about Chinese business licenses examine the one that you have been sent. Our China attorneys typically look at these for the following:
    • To determine whether it is real or fake. We do this by comparing the information on the business license provided to us with the corresponding information on the relevant Chinese government website — typically the local SAIC — State Administration for Industry and Commerce). If the business license you have been provided is fake, you walk away.
    • To see when the company was formed. We like to compare what the real business license says against both what we were told (by email or whatever) and also what the Chinese company says on both its English language and its Chinese language website. If there are different years given in different places, we get suspicious and we ask more questions.
    • To see where the company is located. We like to compare this too against both what we were told (by email or whatever) and also what the Chinese company says on both its English language and its Chinese language website. If there are different addresses given in different places, we get suspicious and we ask more questions.
    • To see what the scope of the Chinese business is, as listed on its registration. If the scope is “consulting” and our client thinks it will be ordering ten million dollars worth of widgets from a factory, we get really suspicious. Looking at the scope is a good (though not always fool-proof) way to determine whether you are dealing with a manufacturer or a broker.
    • To see the amount of registered capital. If the amount is too low, the odds are good that it is not a manufacturer. If the amount is really high, the odds are good that this is a big company.

Doing the above is not nearly enough due diligenc for big deals, but it is a fast, relatively cheap way to get a much better sense about a Chinese company. Just the above is not going to be enough to guarantee a good long-term relationship, but it oftentimes is enough to let you know that you do not even want to attempt a short-term one.

For more on China due diligence, check out the following:

Categories: Chinese IP

How To Avoid China Corruption Charges

China Law Blog - Mon, 06/23/2014 - 08:12

It has been about a month since China’s police accused GlaxoSmithKline’s former head of China operations of making  illegal payments to Chinese doctors to boost GSK drug sales. Last fall witnessed the high-profile trial, conviction, and life sentence of Bo Xilai, the former head of the Chongqing Communist Party, on bribery charges. These two cases send a clear warning: Beijing is cracking down on corruption. Hard.

The GSK case shows that China will not tolerate corrupt activities by foreigners in sensitive industries, especially when such activities result in higher consumer prices. Beijing going after a foreign company for allegedly increasing health care prices is a smart political move, especially since the Chinese web is rife with complaints about exactly that.

But at the same time, it has become clear that Beijing is serious about rooting out corruption. The Party leaders in Beijing know that widespread corruption weakens their legitimacy and they are looking for ways to combat it. The important link between the Bo Xilai and the GSK cases is that they both involve defendants — a political elite and a foreign entity — whose arrests have engendered widespread discussion and sent a strong signal that no one in China is safe from prosecution. While Westerners are mostly complaining about the GSK arrests (multiple GSK employees have been arrested in addition to its former head of China operations), the Chinese internet is mostly loving it.

As a foreign company doing business in China, how should you react to the recent corruption crackdown?

First, resist the temptation to assume that China’s corruption crackdown is a bad thing for your business. China absolutely does engage in selective enforcement of its laws and foreigners absolutely will bear the brunt of that selective enforcement. But having said this, we are not aware of a single instance where the Chinese government has imprisoned an innocent foreigner or shut down a foreign business that fully complied with Chinese laws. In other words, if you scrupulously abide by Chinese law, you should be just fine, and stricter enforcement of China’s own anti-corruption laws should actually level the playing field between those who operate legally and those who do not.

Second, do not waste your time complaining about Chinese rules and regulations. The laws are what they are and your job as a foreign company doing business in China is to comply with them. American and British companies are already required to obey their own countries’ anti-corruption laws — the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act — that prohibit corruption globally, including in China, and so you really have no excuse for not already having an anti-corruption compliance program. However, you also should know that China’s anti-corruption laws are in at least some ways stricter than U.S. and British anti-corruption laws, so you cannot just assume that you are in compliance with China’s laws simply because you are complying with your home country laws. You must familiarize yourself with China’s anti-corruption laws and follow them as well.

Third, and most importantly, if your company has commercially benefited from actively or passively engaging in corrupt activities related to China, you need to immediately switch to operating a legally compliant business or you leave China.

You need to review what your China operation is actually doing (not what you sitting in New York or Los Angeles would like to believe it is doing) to ensure that your company is truly complying with Chinese law. I love telling of how a Beijing consultant I know listened to his client bragging on the phone of how his China operations were “100% corruption free” and then a few hours later (while sitting in the reception area waiting for his client to come out for lunch) heard one of that client’s employees engage in a bribery transaction.

And do not bother trying to justify violations by arguing that China’s laws are vague or that because other companies in your industry have gotten away with proscribed activities, you can too. Though both arguments may once have been true, in today’s China, any commercial gains from corruption are now outweighed by the legal and business risks. China has issued a clear directive that foreign companies bear the responsibility for ascertaining, understanding, and complying with applicable legal requirements and it is your job to heed that call.

All of this means that comprehensive compliance procedures are the new business norm in China. Note the word comprehensive; doing an internet search on your China employees and the Chinese companies with whom you conduct business is barely even a first step. You must know your employees and your Chinese counterparties thoroughly and that could mean months of due diligence investigations and document review. You then need to stay current with your knowledge through regular reviews.

China has made clear the risks of not complying with its laws. Your job now is not to complain, but to comply.

Categories: Chinese IP

Negotiating With Chinese Companies More Powerful Than You

China Law Blog - Wed, 06/18/2014 - 06:18

Just read this Harvard Business Review article on “How to Negotiate with Someone More Powerful than You” and could not help but be reminded of almost every Chinese negotiation in which I have been involved. Scratch that. Every Chinese negotiation in which I’ve been involved.

When foreigners come to do business in China, it is easy to forget how unbalanced the power is at the negotiating table. We’re in their house and things are complicated and weird. However, the Chinese enjoy, and are quite good at making us want to check our brain at the door.  For more on this, check out Doing Business With China. The Ten Keys and Take Your Brain With You, Or How NOT to Handle Your Chinese Legal Matters.

Though the HBR article did not address China, the following points (with my liberal additions) are particularly useful as a guide for working in China

  • Buck yourself up. If the jet lag, food, smells or lack of English are causing you some apprehension or making you feel a bit less sharp than usual, take time to focus on why you are here, and get psyched up for the day.
  • Understand your goals and theirs. Research what the Chinese side actually wants from its potential deal with you. You can be certain that the Chinese party will mask at least some of their underlying goals and negotiate from their strong position of home field advantage. Use some Art of War “position awareness” tactics yourself. Often, you should disregard a lot of what they are saying, and if you can know where things are really heading, it will let you form your own strategy and safeguards to help ensure you get what you want.
  • Prepare, prepare, prepare. Preparing in the right areas is key here. You know your business better than anyone, and you likely have thought through many of the important details you want in the deal. My law firm constantly gets contacted by American companies who want us to confirm their worst suspicions about their China deal partners after the contract has been signed or the money has been paid. I should not have to tell you but the time to conduct due diligence and an FCPA  compliance check on your China partner is before you sign, not after.
  • Listen and ask questions. I love how the article points out that “If they can’t defend it, you’ve shifted the power a bit.” This is what direct questions do in weeding out poor quality Chinese partners. If you get unspecific and/or evasive answers (like the classic phrases “No problem” or “Don’t worry about it”) you know something is up.  There is always a chance you are dealing with an underling who does not actually know the answer to something, so be careful in your assumptions. But, if you ask about the person listed as the Chinese company’s Legal Representative or what the name of the company will be on the contract (or who owns it), and no one knows or is willing to tell you – you do have a problem.
  • Keep your cool. The Chinese are expert at playing to a foreigner’s ego. You are not a great karaoke singer nor is your Chinese that good and if you are getting compliments for this sort of thing, you should realize that it is because the Chinese company wants something from you. Remember that you are there to make a good deal, not to prove how adept you are with foreign travel.

Does this match with your China negotiation experiences?

For more on negotiating with Chinese companies, check out the following:

Editor’s Note.This post was written by Arlo Kipfer, who recently joined our law firm as a paralegal. Arlo is fluent in Chinese and has been helping foreign businesses in China for the last decade, with particular expertise in bringing foreign-owned entities into compliance with Chinese law and policy. He has managed regional sourcing offices for publicly traded companies, conducted supply chain review and realignment, and negotiated with a wide range of local, regional and provincial officials. Arlo will be splitting his time between Shenzhen and Shanghai and, as a key part of our China compliance team, will be assisting clients with negotiations, factory due diligence, employee training, and other compliance matters.

Categories: Chinese IP

Foreign Company Corruption In China. If You Have To Ask…

China Law Blog - Tue, 06/17/2014 - 09:32

Just read a fascinating/spooky article by Reuters Shanghai reporter, Adam Jourdan, entitled, Spooked by probes, pharma executives ask: should I leave China? Here’s our easy answer: if you are worried about getting arrested in China for something that your company has done, you should leave. Now.

The article starts out talking of how China’s recent and ongoing “crackdown on corruption in the pharmaceutical sector has frightened foreign executives so much that some fear they could be jailed and have asked their lawyers if they should leave the country for six months. Others are thinking of going for good.”

We keep hearing (from a wealth of sources who tend to know about such things) that corruption among the foreign (and the domestic) big pharma companies is rampant in China and has been for some time. Yes, pharma executive, you can argue all that you want that you had nothing to do with it, but if your company sales in China have increased 250% in the last five years and think that just maybe some of the people in your company might have been making payoffs, you are a risk in staying in China. But I am guessing that you already knew that.

Our China lawyers are often asked by our clients who allegedly owe money to a Chinese company about  ”the risk” of their going to China or as to the “percentage likelihood” of their having a problem if I go.”

When I am asked these questions, I typically answer with something like the following:

I cannot access the risk of your going to China and I certainly cannot put a percentage on the likelihood of your getting taken hostage. But I can tell you that your going there does involve risk and I can also tell you that our China lawyers have handled a shocking number of hostage situations for people held for not paying company debts, most of which were not even really owed. And I have a friend who works for a leading risk management company in Shanghai and he tells me that office deals five to six times a month with foreign hostages held in China over debts — and that is just in the Shanghai area!

So your going to China absolutely does create a real risk. But will you have a problem on this particular trip? I have no idea.

I can tell you that your risk will be lower if you just go to Shanghai or Beijing and that your risk will be considerably higher if you go meet with this company (to whom you owe the debt) on their home turf, in their small city where they probably have a tight relationship with the local police.

But what it really comes down to is that if it were me, I would not be going to China right now. I just value my freedom too much to take on a risk like this. The consequences are just too high and I would not go. But in the end, it really is up to you.

For more on hostage taking in China, check out the following:

Our advice to those whose companies have done something illegal in China is similar.

We have gotten many a call from Americans working in China concerned about how their company “may be” engaging in illegal activities. Our advice is usually something like the following:

You can pay us a lot of money for us to investigate exactly what it is that your company is doing and what your risk is as the _______ at the company and then research the law surrounding such actions and the history of people in similar situations.

But oftentimes, this research is inconclusive because what is happening in Shanghai might not be happening in Beijing, and vice-versa. And what has happened in the last three years might not be a good predictor of what will happen in the next three months. So really, in the end, it may all be up to you. You are best positioned to know what your company is doing and if you need help on the law side, we can and should provide you with that. Are you comfortable staying? Are you confident that if the police were to knock on your door you could avoid criminal charges because you are completely innocent of having done anything wrong?

I like to conclude with the following kicker:

Here’s something that should comfort you. Though we [our China attorneys] have seen quite a few companies and quite a few people get in trouble for not complying with China laws, we have yet to see any company get shut down or anyone go to jail if they did not violate Chinese law. So if both you and your company have done nothing wrong, the odds are good that you will be fine. But of course there are no guarantees in China, or anywhere else for that matter.

In the end, YOU are the one who knows what you and your company have done in China and if your gut is telling you that there is a problem, there probably is. What I can tell you is that there is usually a lot of “chatter” about foreigners who get arrested in China before they get arrested. Usually that chatter involves expats agreeing that what so and so is doing is illegal, but one side usually argues that China does not care and will never care and the other side considerably more dubious. My favorite line is a Yogi Berra-ish “China doesn’t care, until it does, and none of us have any clue as to when that shift will occur.”

The way big pharma operates in China has long been the topic of discussion, some public:

Even before then, executives were getting worried about a wave of visits from police and regulators to their offices as well as articles in Chinese media alleging corrupt practices against many global drugmakers.

Needless to say, all of this has “prompted some senior executives to look at all contingencies”:

“Many of our clients are asking about personal liabilities and insurance, with executives asking if they are put in jail what will happen to their families and how the company will provide protection for them,” said John Huang, Shanghai-based co-founder and managing partner at law firm MWE China.

*   *   *   *

Huang and two pharmaceutical executives said some managers were reconsidering the legal risks involved in holding any position where they were responsible for some of the thousands of marketing and sales staff that global firms employ across China.

Lawyers said some executives and in-house counsel had sought legal advice about leaving China to avoid getting caught up in any future probes. Some top managers were actively pursuing career options outside China, said one source.

Others were contemplating a more temporary escape until the worst blew over.

“They are thinking about leaving China short-term, staying out of the country on a three or six-month rotation,” said another Shanghai-based lawyer, who asked not to be identified because of the sensitivity of the subject.

By moving abroad, executives would avoid being arrested should there be any formal investigation into their firms, lawyers said. Executives had sought advice on relocating to Singapore, Hong Kong and other destinations, they added.

Some international firms were also finding it harder to attract staff to China, said the two pharmaceutical executives at separate global drugmakers, who declined to be identified because they were not authorized to speak to the media.

Amazingly enough, some claim not to see increased risk:

Other executives believe the GSK case is a one-off event and are more focused on not falling foul of the U.S. Foreign Corrupt Practices Act (FCPA), which can apply to a wide variety of firms that have business ties to the United States.

I have yet to talk with anyone doing substantial business with China who is not convinced that China is serious about clamping down on corruption. There is dispute about how China chooses its anti-corruption targets, but there is no dispute that this anti-corruption drive is very real and will not be ending soon. The article reflects this latter view by stating noting that “[t]he crackdown, which shows no sign of abating, coincides with a wider campaign by President Xi Jinping against corporate and official graft.”

Or to cite CLB’s own Steve Dickinson quote in the article:

That would be a mistake [thinking GSK is a one-off event], said Steven Dickinson, partner at law firm Harris Moure in the Chinese port city of Qingdao.

“Every week I write an email saying you’re missing the point – you won’t have time to get hit by the U.S. law because you’ll be in jail in China,” Dickinson said.

If you are doing business in China or with China and you have any concerns about you or your company getting into trouble for corruption, you should read the following and you should institute a China corruption compliance program right now (our phone lines are open!). Actually, let me rephrase that, if you are doing business with or in China, you should institute a China corruption compliance program right now and you should read the following:

Categories: Chinese IP

China’s Forty Hour Work Week Is Mandatory. Except When It’s Not. Part II.

China Law Blog - Mon, 06/16/2014 - 08:05

In China’s Forty Hour Work Week Is Mandatory. Except When It’s Not, I wrote of how China’s labor law permits a flexible working hours system for senior management as an exception to the basic work week rule (it seems most municipalities enforce a 40-hour work week). This system can benefit employers needing greater employee hour flexibility, without having to pay overtime every time their employees work outside the basic hours.

However, employers should proceed with caution.

First, even for employees under the flexible working hours system, employers are legally required to provide adequate rest time to these employees. Though “adequate rest time” has been left undefined in some jurisdictions (Beijing being one of them), some are clear on what they require by this. Shanghai, for example, requires employers provide at least one day every week as rest time for their employees designated under the flexible working hours system.

Second, you often cannot avoid paying overtime simply by implementing a flexible working hours system. Even in the case of a salaried employee system, some municipalities (Shanghai and Shenzhen immediately spring to mind) require employers pay 300% of an employee’s normal wages for time spent working on a Chinese legal holiday. For this reason, we tell our clients that the safest approach is for them not to have any employee work on Chinese national holidays, if at all possible.

It also needs to be emphasized that employers cannot use a flexible working hours system with low level management and non-management employees, unless those employees fall under one of the following five categories:

  1. offsite sales personnel
  2. personnel permanently based out of town
  3. long distance transportation personnel
  4. non-production on-duty personnel
  5. others in special work positions that may arrange their own work and rest schedules.

For example, it may be possible for you to secure approval from the local agency for your off-site sales managers or for your long-distance transportation employees who are constantly on the road, but note that you must secure the requisite permission from the authorities before you can apply a flexible working hours system to any employees who fall under the above five categories.

In May 2012, China’s Ministry of Human Resources and Social Security issued Draft Regulations on Management of Special Working Hours (“Draft Regulations”) for public comments. These regulations would have clarified various issues relating to the flexible working hours system.  These Draft Regulations would have revised the above-mentioned categories by adding a new category: “employees in positions relating to technology, research and development, and creative work who may arrange their own work schedule with no attendance record requirement.” The Draft Regulations kept categories (1) and (3) above, as well as senior management, as positions eligible for the flexible working hours system.

But these Draft Regulations have yet to take effect and until they do, the existing regulations are what apply, and as far as non-senior management employees are concerned, you can only use the flexible working hours system with those who fit into one of the five categories listed above.

 

Categories: Chinese IP

Australia-China Film Industry Forum. Tuesday, June 17 at SIFF.

China Law Blog - Sun, 06/15/2014 - 14:18

Mathew Alderson, our firm’s lead China media and entertainment attorney, will be speaking at the Shanghai International Film Festival again this year.

This year, Mathew will be moderating a panel at the Annual Australia-China Film Industry Forum on Tuesday June 17th. This panel will be discussing new opportunities for sino-foreign co-productions, with panelists Susan Xu, Vice General Manager, China Film Coproduction Corporation, Tony Zhang, Vice President, DMG Entertainment, and Director/Producer Pauline Chan.

Moderators of other panels and roundtables taking place at the Forum include Ellen Eliasoph, President and CEO of Village Roadshow Entertainment Group Asia, and Geng Ling, Managing Director, Soundfirm Beijing. The Forum will include delegates from Fox Studios AustraliaAnimal LogicFilm Australia, and a wide range of other production, post-production and digital effects executives.

For more information about the Australia-China Film Forum contact the Australian Embassy Beijing

The Forum follows closely on from the New South Wales Screen Industry Beijing Roundtable, an industry event that took place last month during the China Beijing International Fair for International Trade in Services (CIFTIS). Mathew participated in a roundtable discussion at that event along with Wayne Borg, Managing Director, Fox Studios Australia, Ron Saunders, General Manager, Beyond Productions, Australia, Geng Ling, and moderator, Grainne Brunsdon, Manager Stakeholder Relations, Screen NSW.

With China movie box office and movie attendance both growing at around 30 percent year-over-year, we are expecting both good attendance and much excitement at both this year’s SIFF and at the Australia-China Film Forum.

Categories: Chinese IP

Kickstarter And China Manufacturing. You Are So Wrong On Your China Risks.

China Law Blog - Sun, 06/15/2014 - 05:48

Every so often we get calls from companies either in the process of raising funds on Kickstarter or just having completed their Kickstarter fund-raising.

Almost invariably, our conversation goes something like the following:

Company with product:  We just raised money on Kickstarter and we have lined up a China manufacturer for our product and we are thinking it is time to get a China lawyer involved, though we do not have much money for legal yet.

Me: Well, if you are going to spend money on anything, the most important thing is your intellectual property.

Company with product:  We figured we would deal with that later. Right now we just want someone to review our NDA and then review the manufacturing contract we will be drafting.

Me: Who drafted your NDA, an attorney with China experience.

Company with product:  No, we did it ourselves. It really just needs a quick review.

Me: I have never seen a self-drafted NDA that just needs a quick review for China. To work for China, you need a China NDA, which we actually call an NNN Agreement. NDAs are geared towards preventing disclosures of information but your biggest risk in China is typically not going to be your manufacturer disclosing your information; it’s going to be your manufacturer stealing your product and selling it worldwide and to your own customers.  Also, to be effective, the NNN Agreement should be in Chinese and it should contain liquidated damages provisions. There are all sorts of other things that need to go into it as well, but these are the basics. The same holds true for an OEM Agreement. But really, my biggest concern is your IP.

Company with product:  Well, to be honest with you, when we listed the risks on our Kickstarter, we said that the risks were manufacturing delays. We didn’t even mention our IP and so I don’t see how we can pay you anything right now to protect that.

Me: Well, if you cannot afford to protect your IP, it is probably not worth your money to pay for contracts. I mean why spend money for an NNN to protect yourself against a few companies — your potential manufacturers — when you are not able to spend money to protect yourself against the millions of other people out there who could steal your product. And as I hinted, we will need to start over on these contracts, using your draft contracts for nothing more than to determine certain facts regarding what you are doing. I really think that you should at least register your key trademarks.

Company with product:  Yeah, well, I’ll talk all of this over with my partners.

I am writing on this now because twice this week I have received calls from “companies with product” who are now encountering serious (and expensive to remedy) difficulties arising from their failures to button down their IP protections when we spoke a year or two ago.

Bottom Line:  Failing to protect IP early on is probably the most common mistake made by start-up companies.

 

Categories: Chinese IP

China’s Corruption Clean-Up. Get On Board Or Go To Jail.

China Law Blog - Fri, 06/13/2014 - 07:38

Our law firm’s lead China lawyer, Steve Dickinson, is based in China. Those who know Steve know that he does not pull punches. Ever.

Our China law team (based as we are in at least three different cities at a time, but usually far more than that due to travel schedules) are constantly communicating via Yammer, Skype, text, and email, depending on the nature of the communication, the urgency of the communication, the people involved in the communication, and even the time of the communication.

I woke up this morning with the following team email from Steve, and though we usually edit (i.e. weaken) Steve’s emails, this one needs to be seen in its (nearly) unvarnished state:

1. Here is a news article on the metals probe. [Which our China lawyers had been discussing]

2. The investigation is taking place in Qingdao. [Where Steve is located]

3. The investigation has come from the PRC authorities.

4. The whole thing [allegedly] concerns a corrupt illegal system that makes use of fake import/export documentation. This system is now being attacked by the government and is being unwound.

5. The point: the days are over where companies can assume that this kind of illegal activity will be tolerated in the name of business as usual. The days where American companies can even think of making the claim that fake import/export documentation is just “doing business as usual in China” are over.

6. As a peripheral matter, this also shows that much of China’s reported trade in commodities is falsely reported and as this whole thing unwinds, it could have a major impact on the analysis of world trade flows. If all that copper comes on the market, it could destabilize the metals markets. Other commodities markets will follow: for example, soybeans and corn.

7. The current problems we are facing with [client A and client B] is part of the same theme: China is getting serious about cleaning up. These are real issues. The old notion of: “everyone in China acts illegally, so no one will get arrested,” is no longer applicable. This is not a matter of the occasional arrest of a random person. This is a systematic move by the authorities to clean up.

8. We need to keep emphasizing this to our client and to our readers and if they do not want to listen, they will be making that choice at their own peril. At least we can take comfort in having tried to protect them.

What do you think? Alarmist or prescient?

Categories: Chinese IP

We Don’t Need No China IPR strategy

China Law Blog - Thu, 06/12/2014 - 07:28

The IPR Insider had an interesting post the other day, entitled,  We don’t need an IPR strategy for China…., noting how many foreign companies still have the following misconceptions about IP in China and how those misconceptions can hurt them.

The post starts out with the misconception that abecause “I do not sell in China or Asia…I only need basic protection.” Now before I go along with IPR Insider on how dangerous this misconception can be, I do have to note that there is some truth to it in that if you are not selling your product in China AND you have no intention of ever selling your product in China, your IP protection needs in China could be minimal.

A few examples bear this out.

If you are selling a food product in just Oregon state and you may sell it in Washington State or in California some day but you will never sell it anywhere else, you really do not need to worry about China IP protection. You just don’t.

If you are having a clock radio manufactured in China under the brand name Clockey and you are manufacturing that clock radio in China but selling them in just the United States with no plans of ever selling it outside the United States, you would probably be fine just registering the Clockey name for either clocks or radios, but there is little need for you to register the name for both clocks and for radios. This is because your goal in registering the Clockey name at all is a defensive one. In other words, your reason for registering the name Clockey is to prevent someone else from registering the Clockey name and then stopping your Clockey clock radios from leaving China because your clock radios violate their China trademark. But if you are selling your Clockey clock radios in China you will want to register the Clockey name under both clocks and radios because you will want to be able to stop anyone else from selling either Clockey radios or Clockey clocks or Clockey clock radios in China and to be certain of being able to do that, you need to register the Clockey name for both clocks and radios. This would be what is known as an offensive radio.

Now that we have that out of the way, I agree with IPR Insider, when it says that “this misguided notion applies to both those who manufacture in, but sell their products outside of China, and those who have no operations within the country but produce something that has potential for the Chinese market.”

The IP Insider post also does a great job explaining why “automatic” copyrights in China are less valuable than they initially might seem:

Copyright protection is commonly seen as the most basic protection one can have, and in the majority of countries (including Europe) it’s automatic and does not require registration – only the clear assignment of the creator or rights holder. It is free and easy, and will protect creative works and designs.

For China, however, it should be noted that a copyright registration facility are available in addition to automatic protection. And there is good reason to make use of this.

IPR Insider goes on to note that “automatic” copyright protection will “in theory” protect your copyrights, but in practice it does not usually provide “the same level of protection” as if you had actually registered it.

IPR Insider then talks of how companies wrongly think that because their trademark is not well-known, that the risk of it being infringed upon or simply taken outright is minimal. IPR Insider rightly notes that IP infringement and usurpation is rampant in China and all unprotected brand names are vulnerable to usurpation. I would add that if this were not the case, my law firm’s China IP lawyers would have a lot less China IP work to do because they spend a lot of their time dealing with counterfeiting and IP infringements and IP usurpations involving trade names of which few people are aware.

For more on China IP protection and infringement, check out the following:

Categories: Chinese IP

Selling Product Or Services Into China. No Business License Required.

China Law Blog - Mon, 06/09/2014 - 19:54

A couple emails between one of my firm’s clients and one of my firm’s China lawyers just landed in my in box.  The email from the client asked the following:

Do I need to have a business license to sell our products in China?  Someone recently told me that we do, but I was under the impression that we do not.  Could you clarify for me? Our China lawyer answered as follows: With respect to your question about the business license, it depends on what you mean by “sell in China.” A Chinese business license is for companies that are resident in China. If you open up a retail store in China and sell goods, you will need a business license. If you are simply shipping product to a third party in China, you do not need a business license. I deem these emails to be “blog-worthy” both because we are often asked this question and because there are a number of people out there claiming that one must have a business license to sell product or services into China. As you might expect, a number of those who say that a license is necessary follow that up by telling you what they will charge to get you one, which basically requires that you form an entity in China (like a WFOE) to be able to get the license. I have seen too many American and European companies form a company to do something in China that they could have done from America or from Europe without the need for a China entity at all. There will oftentimes be marketing benefits from having a WFOE in China, but a WFOE is not always necessary. Just thought that you should know.
Categories: Chinese IP

The Shanghai Free Trade Zone. Yawn.

China Law Blog - Wed, 06/04/2014 - 05:58

I was talking with a China lawyer based in Beijing the other day and at one point he mentioned that he had recently been to a talk on Shanghai’s Free Trade Zone. When I asked what he had learned from that talk, he said something like the following:

Three people talked about the FTZ. One person from a big accounting firm, one from a big law firm, and one from the FTZ itself. They all essentially talked about how great it was and about how great it would be but really, neither I nor anyone else there with whom I talked could figure out one concrete reason why to bother with it.

I thought of that today after receiving a link to a Financial Times article that pretty much says the same thing. The article is entitled, Benefits of Shanghai free-trade zone still shrouded in mystery, and it pretty much says exactly what my lawyer-friend said. That a bunch of people with an interest in seeing the Shanghai FTZ become something important are out there proclaiming its importance, but when pressed on why it is important, they have no answer.

I am also reminded of a friend of mine who is in-house counsel at a very large tech company in China who is always getting calls from people at his company complaining that their company isn’t doing more with the Shanghai FTZ, especially in comparison to other foreign companies. My friend says he responds by asking what more they should be doing and what exactly other companies are doing that is leaving his own company in the dust. He says that these questions produce either stammering or silence and he has yet to receive a real answer.

So tell me everyone, why is the Shanghai FTZ so important, or is it really just not?

Categories: Chinese IP

China Lawyers On China Contracts

China Law Blog - Tue, 06/03/2014 - 20:11

Just read a post from Brian Rogers’ Contracts Guy Blog, entitled What’s the Role of a Commercial Attorney? This post very nicely sets out the attorney’s role in drafting a contract for a client. By just changing (mostly adding) a few words in that post, it would also very nicely set out the role that my firm’s China lawyers play in every contract we draft.

So that is essentially what I am going to do.

Let me start out by stating something that I tell soon to be minted law graduates looking for work. Most law firms are reluctant to hire new lawyers for international work because they prefer that those lawyers first learn lawyering before graduating to international lawyering. The reason for that is simple. Most international business law is the same as domestic business law, but with added international components and complications. In the end, the key element that domestic and international lawyers have in common is the need to serve the best interests of their clients.

The Contracts Guy post starts out with the lawyer-blogger explaining the two contexts in which he operates:

I usually operate in one of two contexts: either I’m dealing with a senior business executive (usually the CEO or the owner) of a company that doesn’t have in-house counsel, or I’m basically doing overflow work from the general counsel’s office of a largish corporation. In those cases, I’m usually dealing with someone in the sales division of the company.

The same is true of my law firm’s China contract work, except instead of our doing overflow work for in-house counsel, we do China work for the in-house counsel because the in-house counsel is not comfortable doing that work herself.

Brian explains how he sees his role as contract drafter for his clients:

I view my principal function as keeping time bombs out of my clients’ filing cabinets. Time bombs are critically unfavorable contractual provisions that are ticking away, unbeknownst to the business executives, until they explode to the (sometimes catastrophic) detriment of the company.

No different from our role in drafting China contracts.

Brian then talks about the “business issues” and the “legal issues” in a contract:

We often categorize contract issues as either legal issues or business issues. For example, whether payment terms are up-front payment, due upon receipt, or net 30 is typically a decision that business folks make. In contrast, indemnification provisions are usually considered legal decisions that are left to lawyers to haggle over.

Ultimately, though, all decisions about contract provisions are business decisions. And my role is to make sure that the appropriate decision-makers within my client’s organization are aware of the issues that are material to their decision. Important provisions my client isn’t aware of: time bomb. Important provisions that my client decides to accept, considering all the business and legal issues involved: an informed decision.

It’s ultimately up to my clients to make intelligent decisions. It’s up to me to make sure they’re making informed decisions.

The same is true for us.  Thanks Brian, for pretty much writing today’s post for us.

Categories: Chinese IP

China’s New Trademark Law And The Law Of Unintended Consequences

China Law Blog - Mon, 06/02/2014 - 09:38

China’s new Trademark Law went into effect on May 1, 2014, to great fanfare from the international IP community. The law ostensibly improves several aspects of China trademark practice: more ways to combat bad-faith filings, more protection of well-known marks, and formal time limits for decisions on trademark applications and appeals, to name a few. But as with, well, everything in China, the devil is in the details. The way a law plays out in practice may have little relation to how it is written. And although it is too early to tell how the new law will change trademark practice in China, the early indications are less than reassuring.

Consider the new time limits. Before the new law went into effect, the Chinese Trademark Office (CTMO) took its own sweet time to review a national trademark application; during the past year most applications were reviewed within 15-18 months from the date of receipt, but more than two years wasn’t unheard of. Now, under the new law, the CTMO must complete its initial review within nine months of receipt. (This brings national trademarks in line with Madrid Protocol applications, which have always been reviewed within a strict nine-month timeframe. Who says China shirks its WTO obligations?)

The time limits seem like an obvious win for trademark applicants, but the (presumably) unintended consequences became apparent even before the new law took effect. In the months leading up to May 1, the CTMO hired hundreds of new trademark examiners and completed initial reviews of trademark applications at a record pace. The CTMO examiners then began “clearing the decks” of all outstanding trademark applications, with what appeared to be a de facto nine-month time limit for reviewing such applications.

So far so good. Except that rapid-fire decisions made by barely trained staff make as much sense as an elevator in an outhouse. In the past three months, we have received several decisions from the CTMO that had no basis in either logic or law. My favorite, although I hesitate to use that word, was the decision that rejected a Spanish-language trademark that contained the article “Las” because a previously registered trademark also contained the article “Las.” This would be like rejecting “The Hobbit” because “Back to the Future” had been previously registered and both trademarks included the word “The.”

Though we can (and do) appeal these decisions to the Trademark Review and Adjudication Board (TRAB), the TRAB is also under a nine-month deadline, and we have received confounding decisions from the TRAB in the past few months. Other practitioners report similar results across the board.

The silver lining in all this is that the CTMO and TRAB are clearly taking the 9-month deadline seriously. Currently the result is another case study for the “good, fast, and cheap: pick any two” paradigm, but an optimist would say that as the new examiners become more experienced and everyone at the CTMO becomes more comfortable with the deadlines, the decisions will become more rational and we will truly be living in the best of all possible worlds.

I would not hold my breath for the above outcome, but deciding not to file trademarks in China is hardly a realistic option either. Like many things in China, Chinese trademark practice can be irrational, crazy, and absurd, but what can we do? We need the eggs.

Categories: Chinese IP

China Business Due Diligence

China Law Blog - Sun, 06/01/2014 - 09:19

Looking to do business with a Chinese company? Want to know whether that Chinese company is worthy of your business and your trust? How do you do get information on a Chinese company when certain private investigatory work in China is illegal?

What you need to do is conduct what is commonly called business due diligence. This is the sort of due diligence you do to make sure that it makes sense for you — on a business level — to conduct business with a particular Chinese company. There is also the sort of due diligence you need to conduct to make sure that you are not setting yourself up for corruption charges and there is also the due diligence you should conduct if you are buying a Chinese company or investing in one.  There are certain commonalities between these three sorts of due diligence, but they also have many differences.  We will address those other sorts of due diligence in future posts.

This one is going to focus on the business side.

The first thing you should do is conduct a Chinese-language internet search of your potential Chinese counterparty. This sort of search is not likely going to be enough to make you feel good about going forward with a $10 million deal, but it frequently can give you enough negative information on your potential Chinese counterparty to convince you not to do any deal at all. It also may be all it makes economic sense for you to do if all you are contemplating is a one time purchase from China of a USD $2500 product.

Next, do your due diligence the old fashioned way. Ask your potential Chinese counterparty to provide you with its government registration documents and, if relevant to your deal, its accounting and tax records as well.

What if your potential counterparty refuses to give you these documents? Walk away. In our experience,legitimate Chinese companies do not balk at providing such documents.

What if your potential Chinese counterparty does turn over these documents? Have someone who understands such documents review them.

And remember, anything and everything can be faked. Just by way of a few examples, the China lawyers at my firm have in our own research detected the following:

  • Company claimed to have a multimillion-dollar account at a nonexistent bank.
  • Company documents showed a subsidiary in the Marshall Islands, spelled “Marshal Island.” It had no such subsidiary.
  • Company claimed to have a branch office in a particular city, yet the relevant documents for that office (including supposed government documents) were from the wrong province.
  • Company claimed to have been shipping out product on a ship that did not exist.
  • Company claimed to have won a lawsuit in the Supreme Court of a certain country (and even produced “the decision”), but there had never been such a case.

In doing China business due diligence, you should bear in mind the following:

  • Construct your own fraud scenario. Ask yourself how the Chinese company could have staged everything it has shown you. Did it switch the factory signs before you arrived, so that it looks like it owns the factory, rather than someone else? Did it paint the old machinery to look new? Is the person with whom you are speaking really a PwC accountant, or just someone paid $100 to pose as one? We have encountered fake factories, fake lawyers, fake documents, fake accountants, fake foreigners, fake owners….
  • Focus on the operations. Look carefully at the Chinese company’s operations. Why does the company have only 100 boxes in storage when it claims to be selling 5,000 widgets a week? How can the company make 5,000 widgets a week with only enough of x material to make 100 total? Why did the company have a completely different set of employees on the same day and time two weeks apart? It pays to visit two or three (or more) times — a good fraudster can put on a show, but they are unlikely to be able to do it the same way each time. Watch for the subtle differences.
  • Get the official records yourself. Use your own people to get the Chinese company’s official corporate records from the official Chinese government sources. Though doing this is neither inexpensive nor easy, information gleaned from the official government records can often be helpful. Then compare the official records with the documents the Chinese company gave you.
  • Take company-provided introductions with a grain of salt. Speak with your target Chinese company’s vendors, neighbors, employees, and customers, especially those you find on your own. When talking with people to whom your target Chinese company has introduced you, take everything that is said with a grain of salt. It is not difficult for an unscrupulous company to buy someone’s loyalty for the duration of a meeting or a phone call and this sort of thing goes on all the time. And again, do you really know whether these people are as claimed?
  • Speak with the Chinese company’s competitors. Competitors with real businesses can and usually will tell you about their competitors, but, of course, any information gleaned this way should be taken with at least a bit of salt as well.
  • Do not delegate. Use your own trusted network to gather information on your potential Chinese counterparty. If you don’t have such a network, get one. If you can’t get one, don’t do the deal.

We could go on and on….

For more on how to do business due diligence on Chinese companies, check out the following:

Categories: Chinese IP

If You Could Have Only Two Clauses in Your China Contract, What Would They Be? Part II.

China Law Blog - Fri, 05/30/2014 - 08:28

In our first post in this two part series, we wrote about the importance of choosing the right language for a U.S. company contract with China. In this post, we talk about why the jurisdiction and forum for any disputes is so critical and how (generally) to go about choosing that.

In choosing the jurisdiction and forum for your disputes, the first thing you must consider is that Chinese courts do not enforce U.S. judgments.  In other words, you cannot take a U.S. Court judgment to China and expect to enforce it there. What this means in real life is that because few Chinese companies have assets outside of China, this inability to enforce your U.S. judgment in China will almost certainly mean that you will never collect a penny from the Chinese company against which you secured your U.S. court judgment. For more on the value (or lack thereof) of suing a Chinese company in a U.S. court, check out the following:

Some attorneys have figured out this issue on court judgments and will provide for arbitration in the United States or some third country like Hong Kong, Singapore or Canada. These attorneys argue that China is a signatory to the New York Convention on the Enforcement of Arbitral Awards and that the Chinese courts are obligated to force US arbitration awards. However, on the ground this is not always true. The fact is that US arbitration awards can be of dubious value in China. There are several reasons for this:

  • China has a strong cultural aversions to enforcing foreign arbitration awards. The courts will therefore find any reason they can to avoid enforcing a foreign arbitration award. This is especially true at the local court level. In certain types of cases there is some chance of prevailing on appeal. This is uncertain and the time delay can be so long that the whole process makes little sense. Oftentimes, rather than issue a ruling saying that they will not enforce the foreign arbitration award, the Chinese court will simply issue no ruling at all.
  • In many cases, the Chinese party will not participate in the foreign arbitration process, making any arbitration award a default award. Chinese courts are averse to enforcing default awards and the likelihood that they will enforce a foreign default from an arbitration tribunal is very low.
  • Chinese courts do not generally take orders from foreign arbitrators. Many arbitrations concern intellectual property or company management disputes that require some form of injunctive relief. Chinese courts apparently view it is an affront to Chinese sovereignty to be told what to do by a foreign arbitrator and they invariably ignore such orders from an arbitrator.

So if the United States courts and foreign (non-China) arbitration do not make sense, what’s left? China’s own courts.

Yes, China’s courts are far from perfect. They are more unpredictable than American courts and they certainly do sometimes favor the “home team.” But in most cases, if you want to secure and collect a monetary award against a Chinese company, China’s courts will be your best bet. And it bears mentioning that the World Bank recently ranked China 19th worldwide in contract enforcement.

And if you are going to be resolving your case in a Chinese court, you will want the language of your contract to be in Chinese. If your contract is in English the Chinese court will translate it into Chinese itself.  This effectively means that you will not know the exact contract on which you are suing until after the court comes back to you with the Chinese version. Certainly it makes better sense to have your lawyers dictate what your contract says as opposed to some Chinese court. But lately our China lawyers have been hearing that a number of Chinese courts will not enforce English language contracts at all. There is no Chinese law against enforcing foreign language contracts, but various Chinese courts have taken it upon themselves to hold English language contracts void. One China attorney told us that “English language contracts are only admissible only IF the court so chooses. They also have the right to dictate how and who translates the contract.” We heard from someone else who had his English language contract rejected by a court in Chengdu as “invalid.”

If you are going to be suing on your contract in a Chinese court with a Chinese language contract, you should go all in and have Chinese law apply. Though Chinese law provides that contracting parties are free to choose the law to govern their contract so long as that law has some relation to the transaction, choosing a foreign law will nearly always be a bad idea.

Effective litigation in China requires quick and decisive action. In particular, Chinese litigation procedure allows for preliminary seizure of assets and other pre-judgment relief that can be remarkably effective in quickly resolving issues (this is why even though Chinese arbitration can be effective, you should think long and hard before just agreeing to it). But if your contract provides for foreign law, you will be setting yourself up for delay.

The Chinese court will require the parties to prove what the foreign law is on any issue that is important for a decision. Proving the law on these points will likely be time consuming and expensive. As you can imagine, a clever defense attorney in this situation can devise an almost infinite number of objections to any statement of foreign law. Usually, the judge is not motivated to end these disputes, so the potential for delay is almost limitless. Even if the court gets to the point of making a decision, any chance of making use of preliminary relief is lost.

To repeat. In most (but certainly not all) instances, you will want a Chinese language contract, under Chinese law, with disputes to be resolved by a Chinese Court. Note very carefully, however, that I have said in most instances; each of these issues (language, law, venue) should be determined on a case by case basis.

Categories: Chinese IP

If You Could Have Only Two Clauses in Your China Contract, What Would They Be?

China Law Blog - Wed, 05/28/2014 - 18:27

Got the idea for this post from contract law expert, Brian Rogers of the Contract Drafting Blog. Brian’s post is entitled If You Could Have Only Two Clauses in Your Contract, Which Would You Choose? Brian analogized the choice of two contract provisions to choosing two tools for a deserted island stay.

Brian says that when representing buyers his principal concern is that they get what they are paying for and so he focuses on making sure that the product or service is adequately described and warranted.  That makes sense.

And when representing sellers, Brian wants to make sure that his clients get paid. That too make sense.

When it comes to writing a good China contract, the overarching concerns are the same, but these contracts have their own complications stemming from the fact that they are international.

But if I were forced to choose two contract provisions that are critical for a China contract, as opposed to a domestic business contract, I would focus on the language of the contract and the venue for any disputes.

In today’s post I will discuss why the language is so important.  In tomorrow’s post, I will talk about why the venue is so critical.

I hate dual language contracts and none of the China lawyers at my firm will write them.

If you have a contract in both English and in Chinese, which language controls? If both of the languages say that one language controls, that one language will control. So for example, if both the English language and the Chinese language versions say that the Chinese language version controls, the Chinese language version will in fact control. Similarly, if both versions say that the English language version controls, the English language version will control. These are the easy and safe examples.

It is everything else that so often gets American and British and Canadian and Australian companies in huge trouble.

If you have an English language contract and a Chinese language contract that are both silent as to which version controls, the Chinese language version will control in a Chinese court and in a Chinese arbitration. So what this means is that if your English language contract says that a product must be strong enough to withstand 1000 pounds of pressure and your Chinese language contract says that the product need only be strong enough to withstand 500 pounds of pressure and neither contract version says which language controls, the Chinese version will control and the product need only be strong enough to withstand 500 pounds of pressure.

And trust me when I tell you that our China lawyers often see dual language contracts with very different provisions in the two languages. In fact, Chinese companies just love using a contract with an English version that is more favorable to the foreign company than the Chinese version and then relying on the English speaking company to assume that the English language version will control.

But what if the English language version explicitly states that it will control? You should be okay with that, right? Not necessarily.  If the Chinese language version also explicitly states that it will control, the Chinese language version will control.  If the Chinese language version is silent, then the English language contract controls.

In China OEM Agreements. Why Ours Are In Chinese. Flat Out we talked of how our China attorneys almost always draft our clients’ contracts in Chinese, with an English language translation.That way at least our clients know what they are really signing.

In our next post, I will explain why (surprisingly enough), it usually makes sense to have your disputes against Chinese companies heard in a Chinese court or arbitration forum, rather than in your home country.

Categories: Chinese IP

China’s Media Landscape

China Law Blog - Tue, 05/27/2014 - 00:18

Danwei recently did a post entitled, A Brief Guide to China’s Media Landscape – May 2014, that provided a table showing “mainland China’s most important websites, newspapers, and broadcast news organizations, together with numbers for website traffic, circulation and audience.”

If you are interested in learning more about China’s media, I highly recommend that you check out this Danwei post.

 

 

Categories: Chinese IP

Is There An Expat Exodus From China? My Gut Says Yes.

China Law Blog - Mon, 05/26/2014 - 13:18

The Nanfang Insider recently did a post entitled, Is There an Expat Exodus in China? Not Quite. The post used a bunch of pretty much irrelevant statistics to argue that there is no such exodus.  I would contend that there has been and is continuing to be an exodus of Americans from China.

All I can talk about is what I keep hearing and seeing and that is the following:

  • Just about every single week, one of my firm’s China lawyers gets an email from an American lawyer who has been in China for five to ten years and is wanting to “go home” to the United States. Five years ago, we probably got one of these emails every year.
  • It’s not just well know expats like Mark Kitto, Charlie Custer, and Marc van der Chijs (all mentioned in the Nanfang Insider post) who are leaving or talking about leaving.  I know of a slew of well-known expats who have for all intents and purposes already left (they are living in the United States but spend maybe 10-25% of their time in China) but have never announced it. I also know of another slew of such expats who are looking to do the same. I do not feel free to name names yet, but I am sure that some of these will be hitting the news within months.
  • It is the rare parent with young kids in Beijing who does not at least talk about leaving due to the pollution.
  • The crazy-good opportunities for freshly minted American college graduates are much fewer than they were five years ago and college students are catching on to this and just not going.  Five years ago, graduates would go to China to get a job. Now they are working for a year or two in the United States to earn money to travel around the world for a year or so to gain international experience, with plans to return to the United States for grad school or a job. I know that I am generalizing here, but this is what I am seeing and hearing.

What do you-all think? Is there an exodus of Americans leaving China? Is China still the hot place for Americans?

Categories: Chinese IP

China Law Blog Events. Washington, Kentucky, Ohio, Illinois, England, and WABC.

China Law Blog - Sun, 05/25/2014 - 23:10

I will be speaking at the following events on the following dates:

1.  May 28, 6:00 p.m., at Seattle University School of Business. I am stepping in for co-blogger Steve Dickinson, who thought he would be in the United States for this, but is still in China. I will be speaking on China and IP.  I am not sure whether this talk is open to the public or not.

2. May 28, at 7:45 p.m. PT, I will be on WABC’s John Batchelor Show along with Gordon Chang. We will be discussing China’s recent crackdowns against corruption.

3. June 5, 9:00 a.m., at the MERX 2014 International Best Practices Summit, taking place at the METS Center in Erlanger, Kentucky. I will be on a China panel along with Matthew Schottelkotte, CEO of GBBN Architects, Jeff Holtmeier, Managing Director of China-US Business Development Corp., and Michael Kou President of Growth By Export, Inc.  We will be addressing the following:

  • Proven strategies for expanding into specific countries and regions
  • Tactics for determining demand for your products or services.
  • How to best navigate international regulatory, legal and related business requirements.
  • How to protect your company’s intellectual property and trade secrets.
  • Insights into vital cultural, political and economic considerations.

4. June 6, 8:30 a.m., at the Queen City Club in Cincinnati, Ohio. I, along with Dan Fales and Sean McGrory from Clark Schaefer Hackett, and Jeff Holtmeier, Managing Director of China-US Business Development Corp., will be covering the following:

The Legal “how to” sell into China while protecting your Intellectual Property; market and business development; and accounting and tax considerations including:

  • Forming an entity in China
  • Contracting with Chinese parties
  • Sizing up the economic opportunity
  • What to do (and what NOT to do) in developing the China market for your products / services
  • Financial reporting: Company registrations, statutory audits, basis of accounting
  • Tax issues and transfer pricing
  • Repatriation of profits

For more information and to register, go here.

5.  June 20, Chicago, IL, at the 10th Annual International Product Safety and Liability Association Seminar. I will be speaking on how to avoid litigation involving China and on how to prevail in litigation against a Chinese company, if it becomes necessary. For more on this event, go here.

July 14-15, London, England, at the Rembrandt Hotel. I will be speaking on protecting trade secrets in China. For more information and to register, go here.

I hope to see you there!

Categories: Chinese IP

A Post In Which I Bitch (Yet Again) About China Hotels

China Law Blog - Fri, 05/23/2014 - 10:58

I wish it were not so, but I have apparently developed quite the reputation for complaining about service in Chinese hotels.  See e.g., Beijing Sheraton Great Wall. China Writ Large Or Me Just Being Petty? Prior to my Great Wall post, I would typically point out one or two examples of bad service at a China hotel that would be incredibly unusual anywhere else.

I just got returned from a couple of weeks traveling on business through Asia, and while there, two people emailed me to say that they hoped my China hotel experiences would be better this time.

I spent time in Japan, Singapore, Vietnam and Korea. And I spent two nights in Beijing on a 72 hour (free) visa that I picked up at Beijing Capital Airport. Just as an aside, it took me all of about 45 seconds to get that visa; it is great!

I was traveling alone and there for only two days and so I decided I would go upscale. So I stayed at a very well known, very expensive, very swanky Western-owned five star hotel. The hotel is gorgeous in every way and in most respects, the service was amazing.

Nonetheless, I once again experienced an incident that again makes me wonder what the hell is up with service in China.

But before I tell you about that incident, let me note that it was only at my Beijing hotel that I had any complaints about my trip. I spent five days at a $100 a night Sheraton in Hanoi and it was great. All I really want is decent service.

So what happened at the Five Star Beijing Hotel? My first morning there I went down for a buffet breakfast. The breakfast room is gorgeous, with marble floors. I loaded up my plate, to include two tiny ears of corn and I was walking to grab some bread when I slipped and fell. Somehow, and truly amazingly, I was able to catch my fall while keeping the plate balanced; the two ears of corn flew off, but that was it. Two Americans right there clapped.

Some guy from the hotel ran over, clearly worried about my fall. I insisted that I was fine (I was) and I pointed out a puddle of water maybe a foot long and a foot wide where I fell. I then looked around and noted and pointed out another puddle maybe ten feet away. The guy who had run over to me started quietly yelling at an elder woman who immediately wiped up my puddle.  I went back to my seat, ate a bit and then decided to come back for more.

What did I see? You guessed it. Three small puddles spaced around the breakfast room, including the one ten feet from the one that tripped me up. The cleaning staff had cleaned up “my” puddle but nobody had looked around for more puddles or cleaned up the other one I pointed out. It is unbelievable to me that neither the guy nor the woman made any real effort to make sure that the floor was completely safe. It seems all that concerned them was impressing upon me that they were fixing things.

After breakfast, I met with a China lawyer friend who has been in Beijing for about a year and told him what had happened. I asked him whether my always “seeing” things like this in China was because I was being unfair or hyper-critical or what?  I asked him why it was ALWAYS China. He immediately said it’s China and not me. He said that he deals with stuff like this all the time.

He then told me of how at his son’s Chinese emblematic school the kids were told of how they were going to start playing baseball. They were to buy uniforms. His kid was thrilled and my lawyer friend went out and bought the uniform and some equipment for his son. A baseball coach was brought in and for a couple days he taught the kids some skills. On a Saturday or a Sunday, a bunch of schools got together and everyone played a game. The kid loved it. The head of the school and various government functionaries all spoke about sports in the schools, etc.

And then that was it. Just the one game. No more practices. No more games.

The China lawyer said that this was emblematic of China. The whole baseball thing was done simply to say that it had been done. It was done to look good. It was done to check something off. It was not done to inculcate the kids with baseball skills or baseball knowledge. According to this lawyer, this is what caused me to slip. China does not really concern itself with quality. It concerns itself with appearances. The goal is to be “good enough” not “great.” He said this, not me.

So again, I ask, what is going on here?

Categories: Chinese IP
Syndicate content