INTA 2017 Spain IP lawyersIf you are going to be in Barcelona during INTA 2017, please let us know via an email to firm@harrisbricken.com and we will do our utmost to have one of our lawyers meet up with you there. Four of our lawyers will be there throughout the conference, including two of our lawyers from our Barcelona office, Nadja Vietz and Joaquin Cabrera. In addition to our home-grown talent, Mike Atkins (world famous for his Seattle Trademark Lawyer Blog) and Alison Malsbury (who spoke at INTA last year on cannabis trademarks) will also be attending. 

Please don’t tell anyone, but our having a Barcelona office means we know all the good places to go, including those that will not be overwhelmed by INTA hordes. 
 
As much as our China lawyers, including me, wanted to go to Barcelona for INTA in the end, work prevailed and we will all be in China or the United States for the duration.

国际商标协会2017年年会将于 5月20日-24日在西班牙巴塞罗那举行。我们衷心希望通过本次年会结识更多国际业界人士并建立友好关系。如果您也会去巴塞罗那参加此次年会,欢迎发送电子邮件到firm@harrisbricken.com 与我们联系, 我们会尽全力安排我们的律师和您在巴塞罗那见面。除了我们巴塞罗那办公室的两位律师Nadja VietzJoaquin Cabrera之外,西雅图总部的Mike AtkinsAlison Malsbury也会前往参会。Mike是拥有多年执业经验的西雅图商标律师,常年在著名的西雅图商标律师博客上发表商标法相关文章。另一位律师Alison 则在去年的国际商标协会年会上就大麻行业的商标法律问题发表演讲。

另外,我们的巴塞罗那同事熟知当地景点和文化,他们能告诉您本地人喜欢的去处,避开过于拥挤的热门旅游景点,帮助您了解巴塞罗那独特的魅力所在。

尽管我们的中国法律师(包括我自己)都非常希望前往巴塞罗那参与这次年会,但由于实在无法从工作中抽身,我们还会继续在美国和中国为您提供服务。

Sollten Sie an INTA 2017 in Barcelona teilnehmen, geben Sie uns bitte per E-Mail an firm@harrisbricken.com Bescheid und wir würden uns freuen, ein Meeting mit einem unserer Anwälte organisieren zu können. Vier unserer Anwälte sind während der Konferenz in Barcelona, einschliesslich unsere “spanischen” Anwälte aus unserem Barcelona Büro, Nadja Vietz und Joaquin Cabrera. Zusätzlich zu unserem Barcelona Team werden Mike Atkins (bekannt für seinen Seattle Trademark Lawyer Blog) und Alison Malsbury (welche bei INTA im vergangenen Jahr über Cannabis Branding vortrug) teilnehmen.
Bitte tragen Sie dies nicht weiter, aber da wir unser lokales Team haben, kennen wir auch all die Geheimtipps an sehenswerten Plätzen, welche nicht mit INTA Teilnehmern überfüllt sind.
So sehr unsere China-Anwälte, mich inbegriffen, an INTA hätten teilnehmen wollen, ging die Arbeit am Ende vor und wir werden nicht teilnehmen, sondern in China oder den USA sein.
Si va a estar en Barcelona durante INTA 2017, por favor háganoslo saber a través de un correo electrónico a la siguiente dirección: firm@harrisbricken.com y haremos todo lo posible para que uno de nuestros abogados se pueda reunir con Vd. Cuatro de nuestros abogados estarán en Barcelona a lo largo de la conferencia, entre ellos dos de nuestros abogados de nuestra oficina de Barcelona, Nadja Vietz y Joaquín Cabrera. Además de nuestro talento de Barcelona, asistirán también Mike Atkins (famoso por su Seattle Trademark Lawyer Blog) y Alison Malsbury (que habló en INTA el año pasado sobre marcas de cannabis).
Por favor, no se lo digas a nadie, pero nuestro tener una oficina en Barcelona significa que conocemos todos los buenos lugares para ir, incluyendo aquellos que no serán superpoblados con participantes de INTA.
Aunque nuestros abogados del departamento chino, incluido yo, quisiéramos ir a Barcelona para INTA, el trabajo prevaleció al final y todos estaremos en China o los Estados Unidos por la duración.

China licensing agreementChinese companies are seeking out technology wherever and however they can find it and our China lawyers have been writing a slew of China technology licensing agreements of late. Sometimes these deals come to us as China licensing deals, but other times, they come into our law firm as putative joint ventures, but after our China lawyers explain the difficulties and the costs involved in doing a joint venture our clients seek to restructure their relationship with their Chinese counter-party into a licensing arrangement.

We are big fans of China licensing deals because we have seen them be a financial stimulant for so many companies, including companies with admittedly outdated or “second tier” technology. China licensing deals can be win-win transactions because the Chinese companies and Chinese citizens get perfectly fine technologies (I presume) at a good price and the Western companies get a revenue source from a formerly moribund or nearly moribund technology.

The licensing deals our lawyers have been handling in the last year or so have mostly involved computer or industrial or medical technologies where the Chinese company wants to use the licensed technology to jump-start its own technology development. These Chinese companies initially plan to license the technology from our American or European clients as stepping-stone to building their own cheaper products in China and then later using that technology and the funds they receive from new product sales to further develop and refine (and perhaps even localize) the technology and their own products to compete better with Western companies on the high end. Sometimes though the deals are with a Chinese company that wants to put the technology to immediate use to improve on existing products they sell in China.

The below is a list of initial questions I pulled from an email (modified to eliminate anything that could possibly serve as an identifier to anyone) from one of our China IP lawyers to a client based on the licensing term sheet to which the client and the potential Chinese company licensee had signed off. The email posed some initial questions, the answers to which were necessary to allow this lawyer to being drafting the licensing agreement.

1. Territory:

a. For “China,” does this include Taiwan? Hong Kong?  Macao? These three jurisdictions all have an independent patent/trademark system. We do not use the term “China” in our agreements since it is not clear. We use the term PRC to refer only to Mainland China. Given the PRC’s aspirations, even that term is not perfectly clear. To which of these countries were you referring?

b. The term “Southeast Asia” has no precise meaning. Please identify the specific countries intended to be included. In particular, what is the status of Singapore, Indonesia, Malaysia, and The Philippines?

2. Note with respect to Territory. There are a number of separate issues:

a. Place of manufacture.

b. Place where patents/trademarks must be maintained.

c. Place where sales are permitted.

The three are quite distinct and it will be important we be clear on all three. It seems to me you are proposing the following:

a. Territory of manufacture is the PRC.

b. Territory of patents is PRC, Republic of Korea, Hong Kong and Japan.

c. Territory of sales is PRC, Republic of Korea, Japan, Taiwan, Hong Kong, Macao, Viet Nam, Thailand, Cambodia, Laos, Malaysia, Indonesia, Singapore and The Philippines?

Please advise on whether the above is correct? If yes, this will require some complex drafting. But it is doable.

3. Your statement of the license grant is a typical U.S. grant, which includes the right to sublicense. We though generally advise against giving a Chinese licensee the ability to sublicense. What is you position on this?

4. For a manufacturing license, we prefer to see our clients limit the Chinese side to manufacturing only in China at a manufacturing facility you the licensor have approved in advance. Do you agree with this?

5. This agreement is for two products. How do you want to deal with the trademarks and logos for both of these products? Will the patent license also include the associated trademarks and logos? What is the current status of registration of those marks in the applicable territories? Your controlling the trademark is a powerful way for you to control the right to manufacture and sell the products and if you have not registered your trademarks in the PRC and in the other countries in which they will be sold by your licensee, you should consider such registrations in connection with this project. Let’s discuss this.

7. In your Performance Metrics section, you raise the important issue of the obligation of [Chinese company] to pursue approvals in the appropriate territories and to engage in selling the two products in those territories. Note, however, that this is extremely complex. To list out just some of the issues:

a. What is the obligation of [Chinese company] to apply for and receive approval with respect to each of the countries in which you will be granting it the licenses? What happens if [Chinese company] receives approval in the PRC, but does not even try to secure approval in the other territories. What happens if [Chinese company] receives approval for Korea but not for the PRC? How are you intending for this to all work?

b. Is the stated sales goal just for the PRC or for the entire sales territory? Have you considered separate sales goals for each country?

c. What is the penalty to [Chinese company] if it does not achieve the performance metric. For example, what if they don’t even try for Korea? We could draft it so that you can either terminate the entire license or simply remove Korea from the territory. If the sales goal is cumulative, then you would terminate the entire license. But if the sales goal is by country, then you would remove the country from the license.

d. The same applies to your company. I doubt you mean that you must pursue patents in all of the countries listed. Am I right about this? Either way, we must be clear about this. We could perhaps clarify all this by providing for three territories:

i. Manufacturing territory: PRC.

ii. Patent territory: PRC, Republic of Korea, Hong Kong and Japan.

iii. Sales territory: PRC, Republic of Korea, Japan, Taiwan, Hong Kong, Macao, Viet Nam, Thailand, Cambodia, Laos, Malaysia, India, Indonesia, Singapore and The Philippines.

That said, we need to keep these various territories clearly demarcated.

8. In the performance metrics, you properly make clear that actively pursuing approval for sale is required for the license and you provide a hard deadline for one product. But since there are two products and as many as 15 different countries, this could get impossibly complex. We will need to provide a manageable way to keep track of two separate issues: the approvals to sell and the actual sales, for each product and for each country. There are many ways to do this. The simple way is to set an overall gross sales goal, without any specification of country of sales. If the sales goal is met, that’s the end of it. Then you can provide that if no approval is obtained for a particular region by a particular time for a particular product, you have the right to remove that country from the sales territory for that product. It seems this approach will work best but I would like to hear your thoughts on this.

9. Buy Back Right. It seems the buy back right for manufacture should only apply if [Chinese company] meets all of its obligations under the license. Do you agree?

Please consider the above and provide me with your comments and questions.

 

For more on what goes into a China licensing contract, check out:

China Licensing Agreements: The Extreme Basics.

China Licensing Agreements: Giving Your Technology a New and Profitable Life

China Difficulties, Netflix, and Why We Love Licensing

Nine Tips for China Licensing

China Foreign PolicyForeign Policy Magazine just came out with an exceptionally clear-headed, exceptionally valuable article on the derivations/influences of China’s foreign policy, entitled (in part and when you see the full title you will probably understand why I shortened it) How China’s History Shapes its Policies Today.

I posted it on our China Law Blog Facebook page with the following lead-in:

Great article by some truly great people. Read it. Study it. This is the sort of article that could become seminal for understanding China foreign policy. Then read it again.

Not much more to say about it other than that if you have any interest at all in China foreign policy, in China’s place in the world, or even in China at all you need (yes need, not should) go read it. Now. Oh, okay, I cannot resist: Those who cannot remember the past are condemned to repeat it.

Your thoughts?

In the last week, from most recent to oldest, we wrote about the following:

1.  How Chinese companies steal your intellectual property.

2. How terminating your employees in China can come back and bite you.

3. How difficult it can be to figure out the capital requirements for your WFOE.

4. How complicated it can be drafting a China sales agency contract. This post not only started out with the following preamble: “With China getting more expensive and more difficult for foreign companies, and with many foreign companies choosing to leave China rather than risk getting caught for operating there illegally.”

5. How China companies will counterfeit your products.

6. How China is cracking down like never before on companies with “independent contractors” in China. This was I think our third or fourth post on this just this month as we just keep seeing the number of American companies getting caught for this increasing and the penalties become more onerous. We titled this article Doing Business in China with Deportation or Worse Hanging Over Your Head and we used the following picture with that post:

China WFOE lawyer

7. A Chinese Law Bibliography.

A psychologist would look at the above seven and quickly find that they all have one theme in common. China is a difficult, even dangerous place for foreign companies doing business there, seeking to do business there, or even doing business with Chinese companies. And your salvation comes from knowing and obeying the law and being able to use the law to your advantage. Hey, that’s what we do for a living: we are China attorneys and we help foreign companies gain an advantage over Chinese companies by using the law.

But I have to admit that this all can get a bit unrelenting and that there is more to life than gloom and doom. And hey, if you knew us, you would quickly learn that in real life we are some of the nicest most optimistic upbeat people  you could ever hope to meet. Truly.

And today I aim to show that with the following link to an amazing video on North Korea/South Korea relations by a true expert in the field. Now I could tell you that I am posting this video because the relations between North Korea and South Korea are in many ways a proxy for the relations between China and the United States, and then I could go on to discuss how the relations between these four countries might impact your business with China. But I won’t even try that. Instead, I will admit that I am posting this for one reason and one reason only. Because I found this to be one of the funniest things I’ve ever seen. Maybe it is because I have done many a TV (and radio) interview myself (too early in the morning or too late at night) in a room with the door closed and sometimes with one or both of my daughters making noise in the background, and always living in fear that one just might burst in while I am talking, as they so often used to do when I was on my cell phone talking to a client. Heck, at a certain age, they used to mimic me or try to get me to laugh while on those calls. So maybe I find the following video and article so incredibly funny simply because I can so relate to it. Be that as it may. No ulterior motives here. No China business scare tactics here. Just an attempt to get you to laugh and enjoy.

Watch the video first then read this article (please, please, please read the article, which analysis heightens the video and is almost as funny as the video itself) and then watch the video again. Then let us know what you think. I’m guessing many of you have already seen it, but enjoy it again; it does not get old.

Nobody panic, we will eventually return to our regularly scheduled programming. In the meantime though, have a great day. China attorneys

Myanmar Thailand VietnamRobert Walsh, sometime Seattle resident and long-time friend of our law firm (we worked on a number of China deals together and we — Dan and Steve — met up with him on our last trip to Myanmar), has spent the last four years in Myanmar, where he operates a vibrant business consultancy. Robert is fluent in Chinese and Korean and, amazingly enough, Burmese (multiple dialects), having learned Burmese while working in the U.S. Embassy in Yangon many years ago.

Robert has been sending us email updates from Myanmar for some time and we post some of them on here. Back in 2014, it was Myanmar: Open For Business? and in 2013, it was Myanmar Foreign Investment. Difficult And Expensive, But Opportunities Are There. In our 2013 post I mentioned that my law firm had “been involved in a few Myanmar matters, but truth be told, Myanmar is a difficult place in which to do business and many of the companies going there are bigger companies mostly looking to get in now and make money later. In the last year.” Since that time, our Myanmar work has actually shrunk as interest in Myanmar by SMEs has greatly waned and their non-China Asia focus these days seems to be more on Thailand and Vietnam.

It was nevertheless great to get a bolt out of the blue from Robert this week in the form of a brand new Myanmar update, set forth below.

 

4 years water is under the bridge since we opened up shop in Rangoon.

A bunch of things have changed:

-Sanctions were relaxed, then finally revoked in toto back in October of last year. Now any foreign company that desires to do so can work with any of the formerly blacklisted military crony companies, jade/gems barons, or groups associated with narcotics trafficking. We’re seeing indications that this is happening already.

-Millions more cars on the road, newer Japanese for the most part, but Korean cars have moved in as well, and offer financing. Ford and Chevy are here with local or regional partners; not selling a lot.

-Supply of electricity has gotten steadily better, but this was achieved by a series of band-aid solutions using quickly built gas turbine or heavy fuel oil facilities.

-More places to stay, more restaurants for rich white people. Prices for hotels and rents on apartments have eased up now that supply roughly equals or exceeds demand.

-The November 2015 elections went off without a hitch, with the National League for Democracy (NLD) taking the lion’s share of seats. Daw Aung San Suu Kyi was not permitted to become president, but loopholes were found to allow her an equally powerful position. The finder of that set of loopholes, U Ko Ni, NLD’s senior lawyer, was gunned down outside the arrivals hall at Mingaladon airport last Sunday (January 29, 2017).

-The American Chamber of Commerce has a Myanmar chapter with over 100 members, but I’d say less than a dozen are really active. Sanctions or none, American business has not shown a tremendous interest in this place. Oil & Gas are here, but their presence and local footprint is no larger than it has to be to administer the constellation of service companies that follow in their wake. The only American manufacturer to date is Ball Corp, and they’re here just to make cans for Coke. Coke came in back in 2012 by acquiring a local soft drinks bottler.

-Japanese and Korean business are still by far the biggest foreign presence. Our best guess is that more than 3000 Korean families are here, not all coming out of Chaebol companies, most doing business on their own accounts. If we exclude Americans working for the embassy and USAID contractors, the number of hard-core American expats is probably less than 50.

-The largest sector in which American and European business is represented is what I and others term the “Aid and Development Industrial Complex”. An emerging sub-sector is the “Peace Process Participation Industrial Complex,” which attracts many nicely paid foreign consultants.

The lyrics are different, but the tune’s the same:

-Although the government has supposedly changed hands to civilians, many upper-level ministries out in the provinces don’t seem to have gotten the word, especially if they are headed by ex- (or not so ex-) military people. The farther away from the Naypyidaw flagpole, the more clearly this is evident.

-Laws may pass, but implementing instructions are slow to make it down to where the rubber meets the road.

-Doing anything land intensive requires one take up the diligent study of various land documents issued to owners over the past 160 years. In the fringe border areas, especially where there has been a lot of fighting since independence, land documents are especially puzzling.

-The IFC/World Bank has hosted a “Myanmar Business Forum” (MBF) with eight working groups along industrial sector lines. Its aim was to engage lawmakers and ministries to draft and pass law through the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). I sat on the agricultural/forestry working group and we were actually able to get things done, in terms of getting implementing instructions for laws passed as long as 20 years ago. The most active working groups were for anything related to land tenure or hotels/tourism. Missing or poorly represented were agricultural finance and inputs (fertilizers, agrochemicals).

– A second set of refinements to the Foreign Investment Laws were passed, but they do not help much. It still costs a lot of money to set up a business here. We have been doing a lot of work setting up companies as rep offices, once we were absolutely sure what the rules were, and what a rep office could/could not do. Most of our clients want our help in establishing a presence, opening a local banking account and administering expat immigration, and setting up shop. NGO’s are our biggest customers, as they now realize that registration as an NGO (as opposed to just a normal for profit company) rarely offers them anything and indeed adds restrictions on their movements and activities — in other words, not so different from China).

-Right now a fairly nasty set of visa and foreigners laws is up for passage. If pass as written, I think many foreigners will stay away or leave if already here. As it stands, many of the laws are currently on the books, and few expats are compliant because the government does not strictly enforce them. Should the government wish to do so, it can deport anyone and everyone who is not compliant, and do so at a moment’s notice. And we do see the government deporting foreigners who do things that excite their ire, usually for political or religious reasons, and occasionally for criminal behavior.

-Like it or not, there is plenty of unrest in this country, and large swathes of Kachin and Shan state are low-boil combat zones; the Kachin Independence Army (KIA) is still far from considering entering the National Ceasefire Agreement. A number of ethnic armed groups have signed the NCA and are now lapping up greenmail money and other territorial benefits, but the majority of them have not in fact been combat effective for a long time, decades in most cases. The KIA has formed a 5-member alliance of other groups that are equally belligerent and unwilling to sign the NCA under the government’s terms.

-In Rakhine state the slow-motion train wreck that is the Rohingya situation shows no sign of resolution anytime soon, and if anything, Trump’s election and anti-Muslim rhetoric has reduced inhibitions on the Burmese taking harsher action to force these people back into Bangladesh. Incidentally, slain NLD lawyer U Ko Ni was himself a Muslim, albeit from a family with generations-back residence in this country. The American embassy used to be pretty shrill in denouncing bad behavior towards the Rohingya, but since Trump’s election the United States has not said so much.

 

China negotiatingI have recently been communicating via email with a good friend of mine who has lived in Shanghai for around 20 years. He had written me about our recent series on negotiating with Chinese companies. In particular, we talked about when we push back against the Chinese companies, they are completely unprepared and assume a deer in headlights look. He then emailed me the following regarding the health care his pregnant wife has been receiving. I thought it interesting and relevant to our readers and so I secured his permission to run it here, after stripping it of all identifiers.

Enjoy.

 

Speaking of China and deer in headlights get this:

My wife receives prenatal care at a privately run maternity hospital in China. Since we have no insurance we paid 20,000RMB (3,500USD) for the prenatal package in cash. It’s been ok, getting this means she doesn’t have to take a number and wait for the 100 people ahead of her to go first as in many local hospitals. They did “fear monger” her into a useless test (because we have a pet cat) for an extra 500RMB (which I forewarned her about but she fell for it anyway). no big deal.

EVERY time since our second check up though the first thing out of the nurse’s mouths is: “have you paid for your birth package?” And it’s from 3-4 nurses each time. This has gotten annoying. Acting as a collection agency shouldn’t really fall to the “care giver”. Many people opt to have prenatal here and then go to the USA for the birth, I understand it’s a business but let’s have a little bit of professional decorum shall we?

For a basic natural childbirth package it’s 30,000RMB. But come to find out, they outsource it down the road to a local hospital. We were shown the fancy private room they rent out but if you read between the lines it’s easy to see the private hospital flips the local hospital 5,000RMB and pockets the rest. To have our “doctor” (who’s not impressive in any way) it’s a cool 45,000RMB. This doctor asks my wife’s age every visit. She’s 34 and since over 35 is considered high risk pregnancy in China and therefore more expensive, I almost get the sense he is asking each time to try to make more.

They have a shiny new center that is their showcase hospital, one nurse says that’s where we are to go and the next one contradicts her. No one is on the same page. When we pressed the customer service manager on which hospital we should go to when labor begins her answer was “you should call us to let you know what hospital to go to,” with a vague explanation about room availability as the logic behind her answer. How can you book a room for giving birth? it’s not a sure thing when the baby will come.

At our most recent ultrasound, the nurse, as always, led with “have you paid for the delivery package yet?” . She even came into the ultrasound room and was literally trying to force the document into my wife’s hands  while her dress was up, legs in stirrups and belly exposed. I had visions of her signing the document on her bare belly. My wife told her we hadn’t decided (largely because of all the nurses’ greedy behavior). The nurse then turned to me and said “your wife needs to sign this.” I waved her off and said in English we haven’t decided. The room was filled with tension caused by this nurse’s aggressive behavior. She then told my wife we HAD to pay today. We paid for 40 weeks and the customer service rep told us on an earlier visit it wasn’t a problem to wait.

My wife started to worry and I argued with her a bit outside the office (we never argue). I had a sit down with the customer service manager and told her that each time we came, the nurses’ unprofessionalism has caused us to check another local hospital recommended by an acquaintance with an “in” there.

70% of birth’s in China are C-sections largely because the doctors don’t want to wait for the birth. The whole point is we are trying to avoid a C-section (my wife has had not one problem with her pregnancy). This high pressure for the money makes me feel that we are being set up for a money grab. If it’s a C-section, the cost doubles, even to have an epidural or induce labor would tack on an additional 13,500RMB and when the pressure is on, I’m sure many couples agree out of fear. The nursing staff’s behavior is akin to a boxer telegraphing his next punch, and I’ve ducked many here.

I then pressed the manager about the percentage of people who paid for a 30,000RMB natural childbirth package and then actually had a natural birth. The deer was in the headlights my friend and I put the high beams on. She said 60%, so that’s about 50/50. We were previously told that the percentage of people who paid 45,000RMB that had a natural birth was 85%.

I told her we would check the local hospital to see (it will be a third of the price) how we felt and I asked if we still wanted to use our current hospital would that be ok. Answer: Yes, of course, and a big apology for the nurses repeatedly trying to strong arm us.

Typical China experience, the more you pay the more legal/better it is.

China Lawyers NNN Agreements

North Korea as a guide to doing business in China. It’s a long story, but let me explain.

The other day I got a call from an old client who used to do business with North Korea. Yes North Korea. Many years ago, this fishing company had explored doing a deal with North Korea, during a rare quasi-thaw in U.S. North Korean relations. At that time, we had reached out to Michael Hay, who I have known since his days in South Korea, and who is — as far as I know anyway — THE lawyer to use on any North Korea matter. If there is any other such lawyer, please let us all know in the comments below!

Anyway, this phone call spurred me to Google search Michael and his law firm to see what was up, and really just to see if he was still doing North Korea work in this time of what nobody would call a thaw in US-North Korea relations. Note though that I fully recognize that there are plenty of other countries that do business with North Korea. Well there it is, Micheal’s firm, Hay, Kalb & Associates, all with a website that looks circa 1983 or North Korea, circa 2015.

On the right side of Michael’s law firm’s website, is a scrolling list of “Tips, Myths, and Facts” about doing business in North Korea, which I copied and will discuss below. I did this because so much of the information there applies to doing business in China (really just about every emerging market nation) as well. So without further ado, I list out below the Tips, Myths and Facts from Hay, Kalb and then I discuss their applicability to China in italics.

Starting with the tips:

Tip #1: There is no such thing, person or entity as an ‘expert’ on North Korea, no matter how prestigious their background. 100% true of China as well. See China Experts. Really? 

Tip #2: If you meet someone who calls themselves a North Korea expert …. run – fast. See my comment to Tip #1 above.

Tip #3: The best you can get is those with “experience” – sometimes a great deal – but usually not. There are a lot of people with a lot of China experience. But the good ones virtually always have one area of expertise, be it Chinese business law for foreigners, logistics, marketing, manufacturing, etc. See Your Chinese-American VP Don’t Know Diddley ‘Bout China Law And I Have Friggin Had It.

Tip #4: Identifying — before you go into the DPRK — the correct DPRK entity with which to deal is critical to the success of your visit. It is a fundamental aspect of the preparation required on both sides for your visit. Failure to do so may produce, unintentionally, a ‘mismatch’ and result in you and your company never actually getting the level, quality and depth of introductions to which you otherwise would have had access. This is true of China as well, but finding legitimate companies with which to deal in China is no doubt considerably easier and less government focused than in North Korea. See China Business Basics, where we talk about the undeniable benefits of choosing your Chinese “partner” wisely and Basic China Due Diligence. Is This Chinese Company Legitimate?

Tip #5: The nurturing of mutual trust with the DPRK is a sometimes painstaking, frequently immensely enjoyable, experience, which takes time. The loss of trust, however, can occur with spectacular rapidity. Discretion is the key, both in your preparations for entry and once you are there. Avoid fanfare. The same generally holds true for China and for pretty much every country. See How To Keep Your China Manufacturer Motivated And Why That Matters

Now for the myths:

Myth #1:There are no traffic lights or traffic jams in the DPRK. There are plenty of traffic lights and even more traffic jams in China. 

Myth #2: All those huge high-rise buildings you see on documentaries are ‘uninhabited’, and empty shells, put up for show. Total myth. There are plenty of huge high-rise buildings in China that are uninhabited or are empty shells, but they were not put up for show; they were mostly put up either to generate jobs or profits. 

Myth #3: Americans cannot under any circumstances whatsoever travel to the DPR. Americans can freely travel to China. See China 72 Hour Visa Rules for a fast, easy and cheap way to get into and out of China without having to get a visa in advance.  

Myth #4: A foreign company cannot win in the courts or arbitral tribunals of the DPRK in a business dispute with a DPRK entity. Myth. Hays, Kalb & Associates speaks from direct experience. All true for China as well. See Arbitration in China. Different, Yes; Biased, Probably Not. See also Litigating in China and the four part series of China litigation posts mentioned there. 

And lastly, the facts:

Fact #1: Pyongyang is perhaps the safest capital city in the world, in terms of crime, for both adults and children, locals and foreigners. Beijing is generally quite safe as well.  

Fact #2: Air Koryo is the national carrier. It offers business and economy class. A common route, for several reasons, is the Beijing–Pyongyang route, with the flight time around 1 hour and 40 minutes. China has plenty of airlines that offer both business and economy class. Flights in China are, however, often delayed. See China’s Horrible Flight Delays. Makes Doing Business In China Even Tougher.

Fact #3: The DPRK has a surprisingly sophisticated framework of foreign investment and related legislation in place, with dozens of laws and regulations covering numerous aspects of foreign business activity, including a revised dispute resolution law. Same for China. Heck if it didn’t our China lawyers would have little to nothing to do. Just as a for instance, check out this recent long-form post on China NNN Agreements, where we lay out how we write our NNN Agreements to make them work for China’s complicated business and legal realities.  

Thanks Michael.

 

Since we took down our blogroll last year, I feel it is more incumbent upon us than ever to highlight other blogs and other sites and other writings we see as being helpful to our readers. Towards that end I emphatically recommend the US-China Trade War Blog.

Though nominally written by a BigLaw firm, this blog is really is the brainchild and the baby of William Perry (a partner at Dorsey), a leading trade law and customs lawyer. Bill has the nearly unique distinction of having been both an attorney with the Office of General Counsel, U.S. International Trade Commission (“ITC”) and with the Office of Chief Counsel and Office of Antidumping Investigations, U.S. Department of Commerce. I am not aware of a single other attorney in private practice who has been an attorney with both of these key international trade agencies and this dual background/knowledge infuses his practice. Full Disclosure: Bill is based in Seattle and I know and greatly respect him and he is my firm’s go-to lawyer for trade and customs matters.

Anyway, about Bill’s blog, which describes itself as follows:

This blog is the outgrowth of a newsletter that I have created to monitor US trade and other litigation against US and Chinese companies. I am an international trade lawyer. Before representing US and Chinese companies in international trade cases for more than 20 years, I used to work at the US International Trade Commission (“ITC”) and Commerce Department on various trade cases in Washington DC.

Based on my experience, I can categorically state that there is now an ongoing trade war between the United States and China. This Trade War became evident in the recent Solar Cells antidumping and countervailing cases against China, which target approximately $4 billion in US imports of solar cells from China. In retaliation for this trade case, the Chinese government has initiated a countervailing duty and antidumping case against $2 billion of US exports of polysilicon, which go into the solar cells being imported from China.

Upon investigation, this trade war has now expanded into a number of other litigation areas against Chinese companies, including intellectual property/section 337 cases, false claims act/customs fraud, antitrust, securities and products liability litigation.

The best kept secret, however, is that the real targets of these US cases are not Chinese companies, but US companies that import products into the United States. US importers are the companies liable for antidumping and countervailing duties in cases against China. US import companies are also liable in intellectual property/337 cases, False Claims Act/Customs Fraud and Products Liability cases. The primary target of this trade war is the US companies involved in trade with China, not the Chinese companies. This is truly a brave new world.

As you can tell just from the above, Bill does not pull punches and his blog doesn’t either. The blog focuses on the various trade disputes swirling between the United States and China, with a dollop of ominous warnings about how China-US trade disputes just keep on escalating to the detriment of both countries. I had lunch with Bill not that long ago and he was even more ominous in person, pointing out how anti-trade rhetoric in the U.S. presidential election scares other countries around the world and could foretell a new period of beggar thy neighbor policies that will further escalate trade tensions between the United States and China. Bill’s big issue is how US companies that import products are getting hit with massive fines for having imported products from that are subsequently determined to warrant anti-dumping duties. Bill is the person who taught me that the United States is the only country in the world that applies such sanctions against importers retroactively. Did you know that you as a US company can import a product from China and then years later be hit with a massive fine for having imported that product? Based on the phone calls we get from companies to which this has happened, my strong sense is that too few U.S. companies are aware of this.

If you import anything into the United States or you are contemplating doing so (especially if your imports come from China), I recommend you add the US-China Trade War Blog to your reading list. If you are merely interested in international trade, I make the same recommendation. I warn you in advance though that it is not for the faint of heart or of intellect.

On being a China lawyer and on doing business in China
On being a China lawyer and on doing business in China

I was interviewed last year by Jason Aquino of Scouts Consulting as part of an ongoing interview series on strategy and innovation in business, sports, and national security. Jason will be releasing this series of interviews in the future, but in the meantime he is allowing me to publish mine here, mostly after I begged him to be able to do so because I liked it so much.

The first part of my interview dealt mostly with the legal industry and the second part dealt mostly with being a China lawyer. I flipped the two around and provided the China portion the day before yesterday and the legal industry portion today.

 

Dan Harris is the founder of Harris Bricken, an international law firm with offices in Seattle, Portland, and Beijing. He represents and seeks to protect companies doing business in China and other emerging economies in Asia. His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, overseeing dozens of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

Dan and colleague Steve Dickinson co-author the China Law Blog, which discusses the practical aspects of Chinese law and how it impacts foreign companies doing business there. China Law Blog has been a mainstay of ABA Journal’s Blawg top 100 law blogs, and in 2013 was named to the Blawg 100 Hall of Fame. It is an indispensable resource for lawyers and companies seeking to do business in or around China. Dan’s perspectives on international legal issues have appeared in such publications and media outlets as The Wall Street Journal, Forbes, Fortune, Business Week, The Economist, The New York Times, The Washington Post, CNBC, and BBC News.  

Last April Dan was a keynote speaker at the Oregon Law Review Symposium on Disruptive Innovation in Law and Technology, where he discussed how lawyers could better position themselves in the evolving legal marketplace. He talked about the aversion many lawyers have to marketing, as well as the need for lawyers to become more business-minded, which legal training traditionally hasn’t encouraged. You can find Dan’s paper from the symposium here (p. 881).

 

What are some of the barriers to innovation in the legal industry that you see today? 

One of the common barriers is that most lawyers charge by the hour, which takes away incentives to innovate and become more efficient. Another barrier is the fact that so many law firms are run by 60-year olds.

Not that I have anything against 60-year-olds, but innovation oftentimes comes from people who look at industries in a new way. And young lawyers generally do not have much power in the legal industry.

But don’t law schools recruit students from a diversity of backgrounds? Doesn’t that help bring in new ways of looking at the profession?

That’s actually another problem with the legal industry. You can have a diversity of backgrounds, but law school pounds that out of its students, training all of its students to be incredibly conservative and risk averse.

And it makes sense: a lawyer’s job is to point out risks and help ameliorate them. But what that also creates is a personality that is afraid. Too many lawyers are naysayers.

I can give any business starting out 20 reasons why it is going to fail. But the trick to what I see as the good lawyers’s job is not discourage the client by doing nothing but pointing out the risks, but to help the client surmount potential problems. So many lawyers come up with the 20 reasons for themselves (or for their firm) and view them as reasons not to push forward, not to take risks, not to innovate, not to risk failure.

Is it fair to say that clients moving legal work in-house is a big problem facing law firms today?

There are a lot of reasons why so many law firms are struggling today. That is just one of them. Another is that they’re not really in sync with their clients. Their clients are focusing on business issues. Too many lawyers don’t think the same way as their clients, and that frustrates clients.

You would be shocked (or maybe you wouldn’t) at how many times companies choose our firm over two or three others simply because we were the only one willing to quote them a fixed fee rate on a project. These companies tell me that the other firms insisted that they had no way to know what the project would cost. If a law firm drafts a China manufacturing contract 3-5 times a month (as mine does), how can it not know how long it will take? In the early days when my firm was offering flat fees, some of the lawyers in my firm would try to make the same excuse for being unwilling to come up with a flat fee amount. My response to them was to “get over it and start thinking of yourself as a plumber and now imagine how pissed off you would be if your plumber told you he or she had “no idea” how long a relatively simple project was going to take.

And here’s the thing: take something like writing a manufacturing contract. Ninety percent of those that we take on come within a two to three hour range of each other, with maybe ten percent taking a bit more or less time. It is not as though one will take five hours and another will take twenty hours. And why can’t a law firm doing 50+ China manufacturing contracts a year take on the risk that it might be underpaid just a bit on a few of them? There are two answers to this. The law firm is actually not very experienced with such contracts or it is way too risk-averse.

Then there is the reputation lawyers have for being deal killers. The old saying among businesses is that lawyers always say no. There’s some validity to that. Lawyers must change in the same ways their clients are changing.

I’ve become obsessed with certain companies to see how we can apply what they’re doing to our law firm. For example, I’m fascinated with how a company like Uber has disrupted the transportation industry. What can my firm do on the legal side to disrupt? Our willingness to do so much work on a flat fee basis is somewhat disruptive in that I have actually had lawyers complain to me about our doing that.

In your article for the Oregon Law Review, you talk about the aversion lawyers have to marketing. Why do you think that aversion exists?

One thing that propels lawyers is this idea that the world is a meritocracy. The typical lawyer goes to high school, works hard, does well; goes to undergrad, works hard, does well; and goes to law school, fights to be in the top 10% of the class. Your first job is determined in large part by how you did in law school. Lawyers’ formative lives are based on reaching an attainable, pretty much numerical goal and then being rewarded for it.

Then they get in the real world, and all of a sudden the clients don’t care that they graduated from law school magna cum laude. They care about what you can do for their companies. Lawyers get thrown for a loop by that.

Lawyers don’t like the idea of having to compete. They had to compete in law school, but it was for a very clear goal. Now all of a sudden, they have to meet with 10 people in the hopes of getting two clients, and the carrot at the end is just not as clear cut.

And again, there’s the whole idea of uncertainty and risk. Lawyers will often talk about how this doesn’t work or that doesn’t work, and they do it with marketing, too. So many are unwilling even to try because they cannot get past the idea of failing.

When we first started marketing via our website and our blog, almost all lawyers would say, “I’ve heard you can never get a good clients off the internet.” They would state it like it was a fact, even though they had no evidence to support it.

Lawyers don’t like experimentation, the idea of “let’s try this and see if it works.” That’s too risky. And marketing is that: sometimes you think something’s going to work and it doesn’t, sometimes you think it’s not going to work and it does. The uncertainty kills lawyers.

Looking to the future, what kinds of firms are going to survive?

The first-tier big firms are absolutely necessary and will continue to thrive, as will some regional firms. But then there are the second-tier big firms that don’t have a niche, that aren’t as good as the Skadden Arpses, the Kirkland & Ellises, and the Latham & Watkinses of the world. These second-tier big firms are slowly getting edged out by both big and small firms.

Whenever our firm competes with a second-tier big firm for a matter, I love it because we offer so many advantages over them and yet they charge so much more than us.

The typical client that comes to us is not going to Skadden, Arps. You go to Skadden, Arps for the really big international deals, the really big international litigation. We get smaller international deals and smaller international litigation. Oftentimes we’ll compete for that work with a 250-lawyer law firm not nearly as well focused as us and yet it has a much higher cost structure. They might put five lawyers on a matter on which we would put two lawyers, or three lawyers on a matter on which we would put one lawyer and a paralegal or an international business specialist.

These second-tier big firms like to think of themselves as a Skadden Arps and they are trying to emulate Skadden. But they’re not Skadden.

Have you noticed differences in how the Millennial generation of lawyers thinks and works compared to its predecessors?

Absolutely. The Millennials are more in tune with business. They’re more comfortable with technology, they’re more comfortable operating anywhere, and they’re more comfortable appearing more “normal” and less lawyer-like, not using lawyer-type words. I think they understand better what clients want. Too many older lawyers feel compelled to tell potential clients everything about their own backgrounds and the work that they’ve done, rather than listen to the client and respond directly to that.

There are Millennials who have formed their own law firms, and they use newer technology. Within my firm, I oftentimes have to fight the older lawyers (of which I am one) on certain things. For instance, we set up Yammer – which is really nothing more than an internal Facebook – and some of our lawyers complained. They were worried about security, saying we shouldn’t be discussing firm matters “in the open.” But the security on Yammer is the same as for our emails. Both Yammer and our email are on Microsoft Office 365, and so both are equally unlikely to be compromised.

Then there are various groups in the firm that really use Yammer. One is our Regulated Substances Group, which Hilary Bricken has headed since she was 28 years old. There will be five to ten discussions every day on that group’s Yammer page. Someone will say, “Hey, I read this article about what they’re doing in Oregon. Does this make sense to you?” Or “You know, I just saw that in California, they’re going to do this. Maybe we should be doing that.” Then five or six people will respond to it.

In other groups, somebody will send an email saying, “I’m going to this event, does anyone know anyone who will be there?” They will carbon-copy eight people, including me, and then my inbox will get slammed with twenty emails from three people discussing some person I don’t know who might be at some event I won’t be attending. I don’t care, yet I’ve got twenty emails on it. I am constantly pushing people to stay out of my inbox. Put it on Yammer. Older lawyers often have trouble with that.

Have you seen Millennials struggle with certain imperatives of the profession, like having to actually call people on the phone instead of emailing or texting?

Yes, but I don’t view that as a negative.

One of the things I always talk about in terms of marketing is that anybody can be a good marketer. I used to help coach my daughter’s high school basketball team in the offseason. They had a player who was 6’4” and heading to the University of Washington with a full ride. She was a terrific player, and was going to get 12 rebounds a game. But for us to win, every single starter needed to get four or five rebounds. We couldn’t just rely on her. It’s the same with marketing; everyone needs to contribute in their own way.

There’s this idea among lawyers and probably others that the best marketer is the car salesman or the quarterback type . The reality is that’s just not true. There are many different types of potential clients out there. Millennials can be extremely effective with other Millennials. They can be extremely effective by being who they are, and dealing with people like them. That means texting and emailing instead of calling.

Millennials tend to be very morally centered. They really dislike working on matters when they don’t like the client, and there have been times when they have refused to do so and so we sent the client walking. There’s something to be said for that. They really like working on matters when they believe in the client. We typically discount our fees for not-for-profits. They like that.

This idea that Millennials are lazy, I don’t buy that. I’ve not seen that. They want freedom, and we give it to them. We’re a law firm that doesn’t care when or where our people do their work. We just care about the quality and the timeliness of the work. Our attitude on this jibes with what they are seeking and in that way we are a good fit.

One thing I’ve noticed – and I don’t think this is necessarily peculiar to Millennials, but a factor of being a new lawyer – is that I’m more confident in them than they are in themselves. They’ll look at their workload and see that in three weeks, five things might happen, so they’re reluctant to take on anything new. I see it as my job to convince them to go ahead and take on something new. Of those five things, probably only two or three are actually going to happen. I encourage them to take on a little more risk.

How has technology affected the way you practice law?

I generally dislike most legal technology because it’s lousy. But there is a lot more VC money starting to go into it, so I’m hopeful.

We use a program called Clio. It’s a cloud-based software program geared to law firms, and way better than anything was five years ago. There’s another one called RocketMatter. RocketMatter and Clio very much compete. Both are dubbed “comprehensive legal software.” I would describe them as pretty good – the competition is definitely helping – but every once in a while, we come up with something that’s not that unusual that is just not possible to do in the software.

When it comes to software for our firm, the best software we use is non-legal. One program I always rave about is called DocuSign. It’s very simple, and it just works. I think all programs should be like it. We love it because we can get off the phone and send clients a fee agreement in five minutes. The client doesn’t have to print it out, sign it, scan it, and email it back, which is the way most law firms operate. Everybody in the firm has a record of what’s going on with the fee agreement because it’ll show when it went out and when it was signed, and it’ll stay up in the cloud. It’s really a good program, and there are very few of those that work well for law firms. The proof is that all of our lawyers use it. Here’s a contrast. Our firm is a member of an international legal and accounting association based in Spain. When we joined this association last year we had to sign a document and then overnight the original to Spain. The association would not even accept a pdf!

There’s another software program we love called LawPay. One of the problems law firms have with alternative payments (forms other than check) is that when money goes into a trust account, it cannot touch the hands of a third person. So law firms cannot use PayPal or credit cards for trust account payments. If you have a big case and you’re charging by the hour or by the month, or if you want an advance fee payment, you have to use something like LawPay. LawPay may be the only company that does this and somehow it’s set up so that it complies with the bar rules.

Now we can get off the phone with people – it happens two or three times a month – they’ll sign the fee agreement, and we’ll be paid within 10 minutes. It’s just amazing. This is unbelievably efficient for everyone involved and our clients will often compliment us on it and I have no doubt it makes them feel even better about having chosen my firm for their legal work.

What would you like technology to do for you that it presently can’t?

We’re an all-Mac law firm, and as far as I know there is no good document generation software for Mac that’s dual language. We do five or six manufacturing agreements a month with Chinese manufacturers. These agreements are fairly complicated agreements and vary with each client, each product, and each manufacturer.

A manufacturing agreement for having your candy made in China is going to be very different from a manufacturing agreement to have golf carts made in China – the time periods, the standards, etc. But there are always going to be similarities. What I would like is a document system that would allow us to easily pull and re-use provisions in both the English (or the Spanish or the German or the Japanese) and the Chinese. For instance, if we know that there is going to be a 1% penalty for every day beyond a week that the product delivery is delayed, it would be nice to be able to review our ten best delivery delay provisions and just click the one that best fits, in both languages.

Like in a dropdown menu in the software? So you don’t have to copy-paste from past agreements? 

Exactly. That’s not out there yet. We charge a flat fee for these manufacturing agreements, so any inefficiency is on us. If we could save even 30 minutes on each one, that’s real money. We would be willing to pay a lot for a Mac program that could do that in both our client’s first language and in Chinese.

Have you ever applied an idea from another field to help you do your job better?

All the time. Henry Ford. I want everybody to have the exact same computer in our firm, we buy our desks from the same company, and everybody has the same chairs. I want the small things to be systematized, so that we are freed up to deal with the bigger things. If somebody has a problem with his or her computer, I don’t want a staff person to have to spend three hours researching the best computer to buy. He or she can just replace it right away with a MacBook Air. It takes three minutes. The same is true if we need a new chair or a new desk.

We have loyalty with our vendors because it allows for smoothness. Could we maybe get a better deal somewhere else? Yes, but then we are taking a risk that it will be a disaster and five hours will be wasted. I borrowed that from Henry Ford. I want our firm on the low-level things to be an assembly line, to be routinized.

 

The future wil be confusing and we will be a part of it
The future will be confusing and we will be a part of it

In just the last week, I have received around ten emails and a comment or two on the blog bemoaning the death of our China Law Blog. The below are two of the favorable ones:

I have heard about the end of China Law Blog. But I am not alone in saying that this was one of the premier blogs on China for many years. I am sorry to hear of its passing. Have you thought about taking some of the pertinent issues and repackaging them into a book? Or has that been done to death? In your case, you would have a lot of material that might work in a book format.

It has been a great pleasure to follow your China law blog. I understand that all good things have to come to an end but I will miss it. I read your blog every chance I got and I want to thank you for all that you did.

This one is far less favorable, and I think I know from whence it comes:

Your shutting down your stupid blog so close to your tenth year just confirms what so many of us knew all along. You are a fraud and nobody has read your blog for many years. We are laughing at you now, you f—-king loser.

But guess what. We have no plans to end our blogging.

A few weeks ago, I wrote of how we would be pulling the switch on our blogroll (our list of the recommended blogs) and then about a week ago we did. But pulling the plug on our own plug? No way, no how. And why should we? Our readership remains as high ever (probably higher) and our social media engagement with our readers (via Facebook and Twitter and LinkedIn) has really just begun. But I think those posts caused the rumors to spread. They are just so false.

So to those who worry about our shutting down, worry not. And to those (one person actually) who thought you were dancing on our grave, you were not. So there.

We fully expect to be here for another ten years, like us or not.