China media and entertainment lawOur Beijing-based entertainment attorney, Mathew Alderson, will be speaking on a panel at Southwestern Law School in Los Angeles on January 19th. The panel is entitled “China and Hollywood: Distribution and Censorship in a Cross-Pacific Partnership“.

Mathew’s panel is part of the Southwestern Law School’s 14th Annual Media Law Conference, whose theme this year is: Keeping the Beat in a Crazy Year: Blurred Lines and Border Crossings.

Mathew’s panel will focus on how to work within China’s legal system on new productions and on how to deal with the unique challenges China presents when doing productions there. The event will be moderated by Covington’s Nicholas Francescon. The other panelists will be J. Martin Willhite, General Counsel and COO of Legendary Pictures, and Sheri Jeffrey from Hogan Lovells. The Conference is presented by the Biederman Entertainment and Media Law Institute and the Media Law Resource Centre.

If you are interested in China media and entertainment law or media and entertainment law generally (particularly IP law), you should go. The conference runs from 1 pm until 7 pm, with the post-event reception scheduled to last until 8 p.m. Go to this link to register.

We hope to see you there.

China arbitrationThe below is a summary of recent decisions impacting China arbitration.

Anti-monopoly disputes are not arbitrable in China

In August 2016, the Jiangsu Provincial Higher People’s Court held that anti-monopoly cases involve the public interest and therefore such disputes cannot be arbitrated between private parties. The court was hearing a case where the plaintiff had entered into a distribution ggreement with a manufacturer that contained an arbitration clause. The plaintiff sued the defendant in Nanjing Intermediate People’s Court accusing it of abuse of market dominance. Defendant alleged the court lacked jurisdiction as there was an arbitration agreement between the parties. The court not only rejected the jurisdiction objection but it also rejected the request for arbitration becuase the agreement designated more than one arbitral institute which made the arbitration agreement invalid.

The Jiangsu Provincial Higher Court affirmed the Intermediate Court’s ruling on appeal and listed the following three reasons why anti­monopoly cases may not be arbitrated:

  1. Relevant laws and judicial interpretations expressly provide for civil litigation to resolve civil monopoly disputes.
  2. Public policy considerations favor litigation over arbitration.
  3. Anit-monopoly cases involve the public interest, third­-party interests and consumer interests and therefore override the preference of the parties for private dispute resolution under the arbitration clause.

Failing to Specify The Arbitral Seat in An Arbitration Clause May Result in an Unenforceable Award: 

In Wicor Holding A.G. v. Taizhou Haopu Investment Limited the Taizhou Intermediate People’s Court refused to enforce an ICC arbitration award because the arbitration clause in the Joint Venture Agreement was invalid for having failed to specify the arbitral body for the arbitration. The Joint Venture Agreement mandated that the parties’ disputes be arbitrated “in accordance with ICC mediation and arbitration rules“ but the Court found this did not clearly specify that the ICC be the arbitral body and without a clear choice for the seat of arbitration, the arbitration provision was deemed invalid. The Supreme People’s Court upheld this ruling and since the ICC award was improperly rendered on the basis that the arbitration agreement was valid, enforcing the award would contradict the social and public policy of China.

Editor’s Note: The clear lesson from this decision — and one we have many times emphasized on these pages, is that there is a right way and a wrong way to write an arbitration provision and you will pay the price if you write one incorrectly. We estimate that around half of the China contracts our China lawyers review or see contain arbitration provisions with readily identifiable errors.

SCIA Updates its Rules to Hear Investor-State Arbitrations.

The Shenzhen Court of International Arbitration (SCIA) published updated rules that will enable it to hear investor-state disputes and to administer arbitrations under UNCITRAL rules. These updated rules went into effect in December 2016 and they make SCIA the first arbitral body in mainland China to administer investor-state disputes.

* This post was guest-written by Chris Campbell, a foreign legal consultant who graduated from Tsinghua University with an LLM in Chinese law and international arbitration. Chris has worked on various projects related to trade and International Arbitration in mainland China, Hong Kong, and East Timor.

 

China Lawyers

 

From all of us, to all of you,

Happy Hanukkah, Festivus, Kwanza, and Winter Solstice, and Merry Christmas too!

ENJOY the season/holidays!

Cómo proteger su IP en China y de China

El próximo 16 de diciembre daré una charla en una de mis ciudades favoritas y sobre uno de los temas que más me apasionan: Cómo proteger su IP en China y de China. Esta ponencia se enfocará en la protección de la propiedad intelectual relacionada con el hardware y los productos del Internet de las Cosas (IoT), pero tendrá una aplicación homogénea a casi cualquier producto o servicio. Pulse aquí para registrarse.

Mi ponencia es un Hardware Massive Event (un grupo verdaderamente maravilloso – con el que tuve la oportunidad de realizar una ponencia en el Hardware Massive de Shenzhen justo el mes pasado). Hardware Massive describe el evento de la siguiente manera:

Nuestro destacado ponente será Dan Harris, miembro fundador de Harris Bricken (www.harrisbricken.com), un firma internacional de abogados con oficinas en Seattle, Barcelona, Beijing, Portland y San Francisco que se centra en representar a nivel internacional a compañías europeas y estadounidenses, así como a compañías extranjeras (incluyendo empresas chinas) en los Estados Unidos. Dan publica y expone con asiduidad sobre derecho internacional, con un enfoque en la protección de los negocios extranjeros y sus operaciones internacionales. También es un bloguero prolífico ampliamente seguido, y publica como co-autor el premiado blog “China Law Blog”. www.chinalawblog.com

Dan ha sido entrevistado sobre asuntos relacionados con el derecho internacional por la Revista Fortune Magazine, The Wall Street Journal, Fox News, CBC, BBC World, Revista Forbes y CNN, entre otros. Varios de sus artículos sobre derecho internacional se publicaron en revistas líderes como el Wall Street Journal, el Bloomberg Law Reports, Forbes Magazine y el National Law Journal.

Descripción de la Ponencia: Ya sea produciendo o bien vendiendo productos en China, las compañías extranjeras que establecen negocios en o con China necesitan saber cómo proteger su tecnología y su propiedad intelectual para evitar que ésta sea falsificada, pirateada o malversada. Hay riesgos sustanciales que las compañías deben identificar y encarar para proteger sus valiosos activos en IP. Entender el mundo de la IP en China y cómo defender sus derechos e intereses puede ser una excelente apuesta a largo plazo.

 

Un artículo reciente publicado en Quartz Magazine estableció que la mejor forma de enfrentarse el robo de la IP en China es básicamente no hacer nada, ya que hay muy poco que uno pueda hacer al respecto. Algunas compañías chinas harán todo lo posible para apropiarse de su IP, y nuestro ponente no discutirá dicha realidad . Pero, en lugar de quedarse sentado viendo como alguien se apropia de sus ideas, Dan, de forma práctica y vehemente sostiene que si se toman los pasos legales adecuados, Usted puede proteger su IP de forma efectiva: no tiene sentido pasar por todo lo que implica crear y desarrollar su producto sólo para regalarlo. En su ponencia, Dan explicará formas de proteger su IP en China y de China. Proveerá métodos que son factibles y que de hecho funcionan, incluso para las “Startups” que se atreven a fabricar en China por primera vez.

La agenda del evento es la siguiente:

17:45-18:00: Inscripción y Networking

18:00-18:10: Introducción por Ignasi Pascual

18:10-19:00: Dan Harris: “Cómo proteger su IP en China” con sesión de preguntas y respuestas.

19:00-20:00: Bebidas con networking y turno de preguntas

Para mayor información acerca de este evento, por favor diríjase aquí. ¡Espero verle!

 

China lawyersOn this Thanksgiving Day, we want to take a time out to express those things related to China for which we are thankful. Just to be clear, we are focusing on China, not because we think China takes priority over everything else (because it does not), but merely because this is a China blog. So with that caveat, here goes:

1. We are thankful for our readers, here and on our Linkedin and Facebook pages. We are thankful for your loyalty and we are especially thankful for being able to interact with you. We are thankful for your comments and your emails, from which we learn all sorts of new things and from which we are challenged. But most of all, we are thankful and we are honored that you trust us for your information. Before we even started this blog, way back in January, 2006, we wrote the following Mission Statement for it:

We want to start a conversation with, for and about the person who wants practical information on starting and growing a business in or involved with China.

We will be challenging various misconceptions the West has about law in China, including that the law in China does not really matter or that guanxi can supplant it. We will help you figure out how you can use the law as both a shield and a sword. We will give insights to achieve practical solutions, while doing our best to entertain. We know lawyers are not popular, and though we are ourselves really quite likable, we recognize the need to avoid those things that incite lawyer hatred. We will strive to avoid legal jargon and namby-pamby language that attempts to camouflage our views or to avoid controversy.

We want our blog to be a place for both conversation and controversy. We expect many of you will disagree with us much of the time and we are fine with that. We will always strive to avoid boring you or being unwilling to take a stand. We are not going to be afraid of being wrong—in fact, we want you to tell us when and how we are wrong. If you want “legalese” or long strings of caveats, you are going to have to pay exorbitant legal fees to get that elsewhere.

We will tell you more than just that the law is this and this is what needs to be done to comply. We will discuss how the laws as written may say one thing, but our experience dictates something else. We will tell you when you need to do more than just follow the law to succeed, and we will set out exactly what that something else is. We will regale you with stories about the Chinese lawyers with whom we work, the foreign and Chinese businesspeople with whom we deal, and even the places we go. There will be times where our lawyer ethical rules will make us unable to name names, but we will always work to tell the full story.

It has become a blog cliché to implore readers for their input, but it is so important we must join the crowd on this. We do not purport to know everything about Chinese law. That is impossible. Our strengths are forming companies in Chinadrafting international contracts with Chinese companies (in English and in Chinese), intellectual property protection and international litigation and arbitration. We welcome your comments, suggestions and ideas on any area of law relating to conducting business in China. China is anything but monolithic and we will be relying in large part on you, our readers, to round out this site with your own stories.

In plain language, we ask that you write us early and often. We will review your comments before we post them, but that does NOT mean you should not criticize us or disagree with us. Our review will be to filter out comments that are without substance and/or personally abusive. We want to encourage a high level of discussion, but we will not ban or delete your comments just because you come after us.

You, our readers, have exceeded our wildest dreams by not only commenting often, but commenting with intelligence.

2. We are thankful that whenever relations between the United States seem to be on the brink, both countries seem to re-realize the importance of the other and pull back, even if just a little.

3. We are thankful for each and every award we have received, both as China bloggers and as China lawyers because we know none of those would have been possible without you.

4. Most of all, we are thankful for all the great friends we have made through this blog and through our work, who are far far far too numerous to mention. You are our everything.

Again, thank you from all of us (both in the U.S. and in China) to all of you!

May each and every one of you have a Happy Thanksgiving.

China Media and Entertainment LawOur lead China media and entertainment lawyer out of Beijing, Mathew Alderson, was recently interviewed for a VICE Sports story by Joshua Bateman, entitled, The UFC With Chinese Characteristics. The full text of the interview is below, with the publisher’s kind approval.

Alderson: I understand the UFC [Ultimate Fighting Championship] business is to be conducted by a Nevada LLC. The company promotes and produces mixed martial arts events broadcast free-to-air or through subscription services. I understand the company to have a broadcast deal with Fox Sports. The company is reportedly in discussions with Chinese buyers or investors. You are therefore interested in the effect Chinese ownership or investment may have on the management and regulation of the company.

At the outset, it should be appreciated that Chinese ownership of the Nevada LLC (or any other non-PRC company) would not, of itself, bring the company under Chinese regulation. The company would continue to be subject to regulation in the place in which it is established (Nevada and the United States) and the place or places in which it conducts business. The UFC would only become subject to Chinese regulation to the extent it conducts business in China. As a foreign company, the UFC could only promote its events in China with the assistance of a local partner with the necessary permits and licenses. Production of TV programs in China would also require the assistance of such a partner, probably a local co-producer. This is because foreign investment is restricted in the sectors in which UFC operates.

I answer your questions with these introductory remarks in mind.

VICE Sports: Is it possible Chinese regulators would view the UFC as a media company, and that would impact investment opportunities or how the company is regulated in China?

Alderson: Yes, it is possible because the UFC business model involves promoting live events and producing and broadcasting TV programs. These are sectors in which foreign investment is restricted. The impact would depend on whether the UFC established an entity in China and whether that entity is wholly Chinese or partly foreign-invested. A foreign-invested entity would attract greater scrutiny. The impact would be less if the Chinese market were approached by licensing content into China.

VICE Sports: If the UFC were to be acquired or were to accept investment from a Chinese company, would there be political/regulatory pressure in China for the company to alter its management or board structure to have more Chinese representation?

Alderson: Again, it would depend on where the company is operating and where the investment is made. There would be more scope for such pressure if a unit of the company were established in China, whether as a fully Chinese company or as a foreign-invested company. It would be much harder for Chinese owners to exert, or be subject to, this kind of pressure in holdings outside of China; although, if they had the necessary voting rights, Chinese owners could — like any investors — control or at least influence management abroad.

VICE Sports: If current UFC ownership does not sell the company but instead attempts to expand in China going forward, could they do so on their own or would they most likely need to join forces with a Chinese partner?

Alderson: They would need Chinese partners because foreign investment is restricted in the sectors in which they would likely be operating. The most likely business models are joint ventures and co-productions.

China patentOn Tuesday one week ago, the Financial Times’s Beyondbrics blog published a very interesting piece by China First Capital’s Peter Fuhrman on innovation in mainland China as compared to Taiwan. The piece focused on the push-back Fuhrman experienced after an article he co-wrote holding up a Taiwan-based company (Largan Precision) as an example of a high-tech, high-net-profit business of the kind mainland China has yet to produce. The thrust of Fuhrman’s piece — that innovation is something that cannot be simply created overnight by government mandate — is something with which I heartily agree, but some of the things he says about China’s patent system bear further discussion.

First there’s this:

There are specialist patent courts now to enforce China’s domestic patent regime. But, the whole system is still weakly administered. Chinese courts are not fully independent of political influence.

And anyway, even if one does win a patent case and get a judgment against a Chinese infringer, it’s usually all but impossible to collect on any monetary compensation or prevent the loser from starting up again under another name in a different province.

Though it’s generally true that China’s courts (and the courts of many other countries) can be subject to political influence, at least in my experience, in 95%, maybe 99% of cases this will not be an issue for anyone attempting to enforce patent rights in mainland China. If this were truly a common factor, one would expect China court decisions to show a bias against foreign litigants, but studies have failed to find any such bias. Yes, it is possible for low-level patent infringers to simply abscond, avoid paying damages, and set up elsewhere — I would say this is especially an issue for trademark infringement — but this is rarely an issue for the much larger companies that are typically the subject of patent infringement cases. Though it’s difficult to make hard-and-fast judgements about which countries are better at enforcing IP rights, I have not found any major difference between Taiwan and mainland China in this regard. If Taiwan is better, it is not overwhelmingly so.

Then there’s this:

Another troubling component of China’s patent system: it awards so-called “use patents” along with “invention patents”. This allows for a high degree of mischief. A company can seek patent protection for putting someone else’s technology to a different use, or making it in a different way.

There are two ways to view this statement, to both of which I take exception.

The first is that Fuhrman is talking about so-called “new use” patents, that is patents that claim a new, inventive use of a known article. A classic example of this would include using a known lubricating oil to treat a disease. I think most people would agree that discovering such a new use, where it would not have been obvious (Chinese law is stricter in this regard than say, US law), is exactly the kind of innovation patent systems exist to protect and encourage. It is also possible to patent such inventions in Taiwan and (as far as I know) every other country in the world with a functioning patent system. The same is true of new ways to make a known article. Where the new way is inventive/non-obvious and advantageous, why shouldn’t you be able to patent this improvement?

The second is that Fuhrman is talking about so-called Utility Model patents or innovation (as opposed to invention) patents. Though laws vary between countries that grant Utility Model patents, they are typically designed to protect innovations that do not fulfill the requirements for patent protection (e.g., they may be obvious/non-inventive), but which are still new. The rights granted by such Utility Model patents usually are much more narrow, and the monopoly period is shorter, and they are not examined. Though Utility Model patents can be controversial, particularly because they theoretically can lead to someone being able to file something that, on the face of it, could even cover the wheel (and did, in Australia) utility models exist in many countries that have thriving tech industries, including Taiwan. The fact that so-called “paper-tiger” applications have been filed that appear to cover well-known technology, but which are in fact completely unenforceable, hasn’t deterred innovation in countries with Utility Model systems.

Finally there’s this:

It’s axiomatic that countries without a reliable way to protect valuable inventions and proprietary technology will always end up with less of both. Compounding the problem in China, non-compete and non-disclosure agreements are usually unenforceable. Employees and subcontractors pilfer confidential information and start up in business with impunity.

China Law Blog has written at great length about how to craft enforceable non-compete/non-disclosure agreements so as to protect your business and its IP in China, so I’m not going to say much except that in my experience Fuhrman is only correct about such agreements being “usually unenforceable” in as much as people are using agreements that simply aren’t written so as to be enforceable in China. The same is true of issues with employees and subcontractors; it comes down to the contracts you have had them sign and how you’ve decided to work with them and how you’ve gone about your due diligence.

Bottom line: yes, China does have a patent system that you can use to protect your inventions. No, if anything is holding back innovation in mainland China relative to Taiwan, it is probably not mainland China’s patent system.

* The above is a guest post from Gilman Grundy, a Senior IP Specialist for domestic appliances company Kenwood Ltd, which is part of the De’Longhi Group. The views expressed by Gilman are his own.

China Film IP
China Film IP

China film IP is hot.

During the Beijing International Film Festival last month, Mathew Alderson, who heads up our China media and entertainment practice, gave a presentation on China film IP. Presenting alongside Mathew was Tom Duke, Senior IP Liaison Officer at the British Embassy Beijing. This was a special event for the British Film Institute delegation to China.

Topics covered in the presentation included:

  • Top tips for film IP in China
  • The film business as a “restricted sector”
  • Sino-foreign film collaborations and co-productions
  • The UK-China Co-Production Treaty
  • Copyright in China
  • Contracts in China
  • The Internet and digital ancillaries

The UK Government recently published a Factsheet based on the presentation, stating as follows:

Increasing UK-China film cooperation is offering British films access to revenue streams in the Chinese market through a variety of business models. The Chinese intellectual property (IP) system has developed rapidly over the past 30 years. But a number of differences remain between international norms and the structures of the Chinese film industry and IP system. It is important for British companies to be aware of these differences and to prepare accordingly.

For more on China film IP see:

China motion picture copyrights

China’s film industry online — it’s about copyrights

 

China lawyers

Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

Probably the most common question we get is some variant of the following:

I ordered ____ number of widgets from _____ company in China and I paid them _____ dollars. They never sent me anything [or they sent me a fake or they sent me bad quality] and now they are not answering my emails? Can you help?

Pretty much 100 times out of 100, our answer (sometimes after we have gathered up more information) is something like the following:

I’m sorry, but we  are not interested in taking on your case on a contingency fee basis and I cannot in good conscience ask you to pay us to handle it.

Our lack of interest in your case stems from the following:

1. Your contract [this probably wrongly assumes that the English language PO sent to us qualifies as a contract under Chinese law] is in English. Many courts in China will not hear a case with an English language contract. This is even more likely to be the case in a place like _____. For more on the importance of your contract being in Chinese, check out China OEM Agreements. Why Ours Are in Chinese.

2. You never paid the Chinese company to whom you issued the PO and from whom you received the bad product. You instead paid some other company based in Hong Kong. This is a classic China ploy. If you sue the Chinese company it will say that you never paid them because you didn’t. Not sure if it will win on this, but it is yet another hoop you will have to jump through.

3. Your PO says that you will inspect the product before it ships. The Chinese manufacturer will contend that you either did inspect and were fine with the shipment or that you chose not to inspect and thereby relinquished your right to complain about product quality. Either way, it should make for a pretty good defense. If you are not going to inspect product before it gets sent to you, you should not have this sort of provision.

4. You say that the product you received is of bad quality but your PO nowhere mentions the quality you would be requiring. When it comes to China, if you want your product to be of a particular quality, you need to set out in great detail every single specification that will get it to that quality. China has incredibly low quality levels that are just fine for Chinese commerce and for Chinese courts. From what you have provided me, there is nothing to indicate that your Chinese manufacturer failed to give you exactly what you ordered. You say that what you received is of bad quality and I am sure that is true, but that is under US standards. Under Chinese standards you asked for 5,000 widgets and that is exactly what you got and that is probably all that is going to matter to a Chinese court. For more on why this matters and for how you should handle this the next time you have product manufactured in China, check out How To Get Good Product From China.

You might want to try to interest a Chinese lawyer in pursuing your case in China. Suing the Chinese company in the United States will probably be a waste of your time and money unless this Chinese manufacturer has assets in the United States, and very few do. I very briefly researched the Chinese company to whom you issued the purchase order and it is not even a manufacturer; it appears to be a broker of some sort and Chinese brokers usually do not have much in the way of assets in China, much less in the United States. China courts do not enforce U.S. judgments so even if you win over here, it will be of no value in collecting money from your Chinese manufacturer in China.

If you are going to continue buying product from China, you should have a contract that will work. I suggest that you read the links within this email [now this post] to help prevent this same sort of thing from happening to you again. Again, I am sorry that we cannot be of more help on this.

Maybe 10 out of 100 times, we get a response asking us whether they should pursue their case via the U.S. Embassy or the U.S. Consulate or through their own embassy or consulate (for some reason we seem to get a disproportionate number of these from Australians) may be. To which we always respond as follows:

You can try to pursue this with your embassy or consulate but they generally do not seem interested in these sorts of commercial law matters and we have never heard of a single person getting their money back using this route. This is not to say it isn’t possible, but we are not aware of it ever working. If you do go this route and it does work, please let us know.

So now a question for you, our loyal readers. Have you ever heard of anyone getting their money back on a China product purchase by going through their embassy or consulate?

China IP seminarOn April 27, I and my friend Randall Lewis, Vice President and International Counsel for ConAgra Foods, will be sharing a virtual podium for a free webinar. This webinar is being put on by LexisNexis and in it we will together be discussing the following:

  • How to choose a good Chinese partner
  • How to identify the IP assets you need to protect
  • How to structure your deal to protect your IP
  • How to conducting China due diligence
  • How to drafting China contracts to protect your IP
  • How to choose how your dispute resolution forum

LexisNexis describes it as follows:

Too many American companies go into China or start doing business with Chinese companies, without really knowing the varied risks China poses to their valuable intellectual property and trade secrets,” said Dan Harris, author of the China Law Blog. “These risks should be of utmost concern to anyone whose interests intersect with China. We will show you how to prepare your deals, avoid costly thefts and litigation and defend your IP.

Join Dan Harris of Harris Bricken and Randall Lewis, Vice President, International Counsel at ConAgra Foods, as they share strategies and real-life tales that will help government agencies craft regulations and oversight provisions and in-house and outside counsel protect IP and deal with the litigation that results when things go south.

It  will begin at 2 p.m. Eastern time and go for about 90 minutes. Go here for more information and go here to register. Not only will this webinar be free, but it also qualifies for 1.5 CLE credits!