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Register Your Trademark In China, All Things Considered

Posted in Basics of China Business Law, Legal News
A Chinese court says that Qiaodan Sports' logo of a basketball player's silhouette does not infringe on Air Jordan's famous "jumpman." Greg Baker/AFP/Getty Images

Chinese court says Qiaodan Sports’ logo of a basketball player’s silhouette does not infringe on Air Jordan’s famous “jumpman.”
Greg Baker/AFP/Getty Images

I was interviewed yesterday on National Public Radio’s (NPR) All Things Considered regarding the trademark problems Michael Jordan has been having in China. The article and the radio story are entitled, The Trademark Woes Of Michael Jordan (And Many Others) In China and, as expected, I repeated many of the usual trademark tropes you can find elsewhere on this blog:

Attorney Dan Harris has dealt with this time and again. He says Michael Jordan ran into a problem that’s common among American companies.

“Most countries, including China, give trademarks to whomever files for it first,” he explains. “But [in] the United States, it’s whoever uses it first.”

His firm Harris Moure specializes in helping American companies wade the waters of Chinese law. His firm gets a call or two a month about this exact issue.

“They become very unhappy when we have to tell them that instead of hiring us to sue that company, they should hire us to negotiate with that company,” Harris says. “That is not what they want to hear.”

Many American companies have run into this problem, including Gucci, New Balance and Tesla. Apple had to pay $60 million to a Chinese screen maker called Proview for the trademark to the iPad. Some companies aren’t even planning to sell their product in China — but even manufacturing product there can result in issues if the company hasn’t secured the trademark.

Since 2001, China has had a law that protects international trademarks that are very well-known in China. Starbucks won a case this way, against a Chinese coffee shop chain called Xingbake (xing means “star” in Chinese, and “bake” sounds similar to “bucks”). But victories for American companies are still rare.

Jordan’s camp say they plan to appeal to China’s Supreme Court. Attorney Harris thinks the superstar has a long row to hoe.

But maybe that persistence shouldn’t be a surprise coming from the guy who’s famous for saying, “I can accept failure … but I can’t accept not trying.”

But what makes the story so interesting are the comments to it and how so many people:

1. Blame China for essentially just following its own “first to file” trademark laws, which are essentially no different from those in much of the world.

2. Have zero sympathy for Nike or Michael Jordan because they are so big and so wealthy.

3. Actually understand what happen and realize that Micheal Jordan’s failure to file various trademarks is at least a contributing cause to the problems he is having now.

Anyway, if you want to know more about what is happening to Michael Jordan in China and how you can best prevent something similar from happening to you, check out the following:

So You Want To Be An International/China Lawyer, Part VI

Posted in Basics of China Business Law, Good People, Legal News
The International Court of Justice at the Hague.

The International Court of Justice at the Hague.

This is our 3,645th blog post and, at least as far as I know, I have never pretty much just re-run a previous blog post, wholesale, without any changes. Sure we have “cribbed” from previous posts, but the subsequent posts are more updates or refinements than a mere copying. But today, I freely admit that the below is just a word-for-word re-hashing of a previous post, with an explanation as to why.

This last week — for some unknown reason — I got more than the usual number of emails from law (and even undergraduate students) asking me what it will take for them to become an international lawyer or a China lawyer. I was out of the country for much of July and my quick responses to their emails was to write me again when I return. Anyway, what I have realized in trying to respond to these sorts of emails is that I do not have any particularly brilliant insights to offer anyone and if I did, I long ago spewed out all of it in posts on here. So my usual answer is to tell these students to search “so you want to be an international lawyer” on this blog. But more often now they are responding by saying that they have already done that but they were thinking that I might have something new to add — mostly because those blog posts are getting so long in the tooth.

So this morning I was going to write a brand new blog post on what it takes to become an international lawyer/China lawyer. And the first thing I did as research was to search out my prior posts. The first post I came across was the one below, and that led me to realize that I certainly had nothing more to say about the attributes that one should develop to become a top lawyer — international or otherwise. I then briefly skimmed my prior posts and realized anew that it’s all already one here. Not saying (at all) that I have all of the answers, because I fully realize that I most certainly do not. But I am saying that I have nothing more in my head to help on this.

Except one thing, somewhat related. Earlier this year, I spoke at a Legal Innovation Symposium at the University of Oregon Law School, and as a part of that, I also wrote an article for the University of Oregon Law Journal, entitled, Finding Your Legal Niche. This article seeks to explain how and why lawyers should find their legal niche, and what they should do to exploit that niche once they do so. I guess it should be considered a later in life add-on to what has previously been written on here.

And so with that, I simply re-post the last post I did on the whole international law career thing, which post includes links to the prior posts. If anyone has any additional tips for international lawyer wannabes or for international lawyers in training, please, please, please add them as comments below.

I have imaginatively titled this post “So You Want To Be An International/China Lawyer, Part VI.”

I wrote this post in April of last year and while going through draft posts just realized that I failed to post it back then, and so I’ve updated it and I am posting it now. That post is So You Want To Be An International/China Lawyer, Part V. Know The Fromm Six.

I get at least twenty emails every week from law students/young lawyers expressing interest in becoming an international lawyer (or a China lawyer) and asking essentially what courses they should take to achieve that goal. My response is always something like the following:

First, do what it takes to become an excellent lawyer, then focus on the international side. In the meantime though, get fluent in a language that matters to you and make yourself international by traveling and by reading.

In other words, get educated, get smart, and get international. Not terribly helpful, I know, but true.

Last April I read an article that really resonated for me. The article was written by William Henderson, a professor at the Indiana University Maurer School of Law and one of the most knowledgeable people alive on the legal profession. The article is entitled, The Fromm Six, and it sets out a “competency model for law students called the Fromm Six.

The article starts out with the following background:

One of the greatest people in legal education that you have never heard of is a man named Leonard Fromm. Fromm served as Dean of Students at Indiana University Maurer School of Law from 1982 to 2012. On February 2, 2013, Dean Fromm passed away after a relatively short battle with cancer.

I want to discuss an innovation that Dean Fromm contributed to legal education — a contribution that, I predict, will only grow over time. This innovation is a competency model for law students called the Fromm Six. But first, let me supply the essential background.

After several years in counseling and adult education, Dean Fromm joined the law school in 1982 to preside over matters of student affairs. Over the course of three decades he quietly became the heart and soul of the Maurer School of Law. Dean Fromm was typically the first person that new students met during orientation — the law school administrator who completed character and fitness applications for state bar authorities and the voice that called out their names at commencement (with an amazing, booming tenor). During the three years in between, Dean Fromm counseled students through virtually every human problem imaginable. His most difficult work was done in his office with his door closed and all his electronic devices turned off. It was private work that was not likely to produce much fanfare.

* * * *

One of the cumulative benefits of Dean Fromm’s job was the ability to track the full arc of lawyers’ careers, from the tentative awkwardness of the 1L year, to involvement in the school’s extracurricular events and social scene, to coping strategies for students not at the top of their class, and the myriad, unexpected turns in our graduates’ professional careers. During his tenure he interacted with nearly 6,000 students and stayed in contact with a staggering number of them after graduation. Invariably, he saw the connection between law school and a student’s subsequent success and happiness later in life (noting, in his wise way, that professional success and happiness are not necessarily the same thing).

In 2008, I started collaborating with Len on a project to construct a law school competency model. Our first iteration was a list of 23 success factors which we constructed with the help of industrial & organizational (IO) psychologists. Although valid as a matter of social science, the list was too long and complex to gain traction with students. In 2010, the faculty who taught Indiana Law’s 1L Legal Professions class got together and reduced the list of competencies to 15. Once again, we found it was too long and complex to execute in the classroom.

During the summer of 2011, as we were debriefing the challenges of another year in our competency-based 1L Legal Professions course, Dean Fromm said, “I have an idea.” A short time later, he circulated a list of six competencies that were appropriate to 1Ls and foundational to their future growth as professionals. Finally (or At last), we now had a working tool! Moreover, none of the professors teaching the Legal Professions course, including me, wanted to revise a single word — a veritable miracle in legal academia.

And thus the Fromm Six was born. This is that six:

Self-Awareness. Having a highly developed sense of self. Being self-aware means knowing your values, goals, likes, dislikes, needs, drives, strengths and weaknesses, and their effect on your behavior. Possessing this competence means knowing accurately which emotions you are feeling and how to manage them toward effective performance and a healthy balance in your life. If self-aware, you also will have a sense of perspective about yourself, seeking and learning from feedback and constructive criticism from others.

Active listening. The ability to fully comprehend information presented by others through careful monitoring of words spoken, voice inflections, para-linguistic statements, and non-verbal cues. Although that seems obvious, the number of lawyers and law students who are poor listeners suggests the need for better development of this skill. It requires intense concentration and discipline. Smart technology devices have developed a very quick mode of “listening” to others. Preoccupation with those devices makes it very challenging to give proper weight and attention to face-to-face interactions. Exhibiting weak listening skills with your colleagues/classmates/clients might also mean that they will not get to the point of telling you what they really want to say. Thus, you miss the whole import of what the message was to be.

Questioning. The art and skill of knowing when and how to ask for information. Questions can be of various types, each type having different goals. Inquiries can be broad or narrow, non-leading to leading. They can follow a direct funnel or an inverted funnel approach. A questioner can probe to follow up primary questions and to remedy inadequate responses. Probes can range from encouraging more discussion, to asking for elaboration on a point, to even being silent. Developing this skill also requires controlling one’s own need to talk and control the conversation.

Empathy. Sensing and perceiving what others are feeling, being able to see their perspective, and cultivating a rapport and connection. To do the latter effectively, you must communicate that understanding back to the other person by articulating accurately their feelings. They then will know that you have listened accurately, that you understand, and that you care. Basic trust and respect can then ensue.

Communicating/Presenting. The ability to assertively present compelling arguments respectfully and sell one’s ideas to others. It also means knowing how to speak clearly and with a style that promotes accurate and complete listening. As a professional, communicating means persuading and influencing effectively in a situation without damaging the potential relationship. Being able to express strong feelings and emotions appropriately in a manner that does not derail the communication is also important.

Resilience. The ability to deal with difficult situations calmly and cope effectively with stress; to be capable of bouncing back from or adjusting to challenges and change; to be able to learn from your failures, rejections, feedback and criticism, as well as disappointments beyond your control. Being resilient and stress hardy also implies an optimistic and positive outlook, one that enables you to absorb the impact of the event, recover within a reasonable amount of time, and to incorporate relevant lessons from the event.

I knew Len Fromm, which is to mean I thought the world of him. And for that reason, I did not want to write this post back in April as I was worried that my sadness at Dean Fromm’s death was clouding my judgment and forcing me to go gaga over his six.

But in re-reading it I realize how great the list really is and how much it deserves further dissemination for reasons that have nothing to do with memorializing a truly decent man.

Dean Fromm’s list just works. Law students and young lawyers, go talk to older lawyers you respect and I am confident you will find that they would agree. And the list works for what it takes to succeed as an international lawyer as well, which should be no surprise, since international lawyering is really no different than any other kind of lawyering. If you want to succeed as a lawyer, work on the six. I particularly love the line about silence, as it took me years to realize how valuable silence can be in getting people to reveal things, even things they never intended to reveal.

The scary thing about the Fromm Six is that we lawyers tend not to be very good at many of the things on the list. Lawyers are trained (maybe even over-trained) to be rational, logical and unemotional and to focus on merit. But life, and thus lawyering, is not always so simple. Dean Fromm’s list thus tilts much more towards EQ than towards IQ, and rightfully so.

For more on what it takes to become a China lawyer/international lawyer, check out the following:

So You Want To Be An International (China Lawyer), Part IV. Do You Really? (2013)
So You Want To Be An International/China Lawyer? Part III (2008)
So You Want To Practice International Law/China Law? Part II (2007)
So You Want To Practice International (China) Law? (2006)

I am still gaga over Dean Fromm’s list and I am going to make it a part of my future email responses. What do you think?

 

Again, all you lawyers, please comment to add more or to tweak or to reinforce or to criticize. 

China’s Millennials: What’s A Western Company To Do?

Posted in China Business
China's Millennials: What's a Western Business to do?

China’s Millennials: What’s a Western Company to do?

When doing business in China, Western companies often struggle with the cultural differences between their home country and China. China’s millennials are in many ways the keys to reducing that cultural disconnect. I say this because China’s millennials are better traveled and more likely to speak a second language than any other generation in China. On top of this, China’s millennials are often the ones hired by foreign companies and the ones buying Western products.

It obviously behooves Western companies to increase their understanding of China’s millennials and many (most?) are trying. I was thinking about this today as I reach about the halfway point in the book, China’s Millennials: The Want Generation, by Eric Fish. Though intended far more as a de Tocqueville-like report on China’s youth, this well-written book actually makes for an excellent starting point for any company seeking to market to or employ China’s millennials. Through first-hand reporting on the stories of China’s young from all over the country, Fish provides a fascinating road-map on how China’s millennials think.

If you are looking to better understand China’s youth, I highly recommend you read this book. For more on how businesses should market and relate to China’s millennials, check out the following:

How To Register Your China Trademark With China Customs.

Posted in Legal News
How to register your trademark with China customs

How to register your trademark with China customs

Protecting your trademark in China requires first and foremost that you register your trademark in China. But if you want to provide additional valuable protection for your trademark, in many cases you also should register your China trademark again with Chinese Customs. This additional registration is especially important for those exporting goods from China at risk of counterfeiting. Although there’s no legal requirement that you register with China Customs, for practical purposes, it’s the only way they’ll lift a finger to seize infringing goods.

Registering your trademark with China customs is neither difficult nor expensive, but to do so you MUST act through a PRC agent registered with China customs. Most law firms that do a substantial amount of China IP work have such an agent (we use our China entity).

When we register our clients’ China trademarks with China customs, we provide China customs with the following information:

  • Full name and registered address of the client (the IP owner)
  • Contact information, including name, department, address, cell phone number, landline number, fax number, and email address. If customs ever has a question regarding a product it sees, we want them to be able to reach the right person as quickly as possible.
  • Our client’s “business license,” proving to China customs that our client exists and is a legitimate business. This is usually a Certificate of Incorporation or a Certificate of Good Standing, but it can vary with the country and sometimes even with the state within the United States. We also provide China customs with translations of these documents. China Customs sometimes sometimes does not accept black and white pdf versions of these documents but usually our explanations of how they are indeed the original version suffices. When that does not work, we then secure a certified copy of the document bearing the seal of the state or country. What we provide initially typically depends on our client’s timing and cost issues.

We also provide China customs with our own China address and a copy of our own China business license, along with gobs of contact information for our China lawyers as an additional designated point of contact. We also must provide China customs with a power of attorney signed by the IP owner (Customs requires we use a particular form), authorizing us to handle filings on its behalf. The POA requires the name of the person executing the POA, his/her title, phone number, email address, and the date the POA is executed.

We next submit the relevant IP information, which typically consists of the following:

  • The name of the IP owner
  • The trademark registration number, class, list of goods, and the time period during which the IP registration is effective.
  • A certificate of trademark registration and a photo of the client’s mark. For word marks, a typed copy of the words is not sufficient; China customs requires a photograph of the word mark.
  • For each trademark, a list of products covered by the trademark and a list of those for which the client would like “heightened protection” from Customs. China customs allows us to provide up to 30 items per trademark.
  • For each product, the name of the product, a brief description of the product (in Chinese, of course), and a photo clearly showing the product.

Going forward, we are able to modify product information to correspond to the IP owner’s updated product line.

For each trademark, we also provide a list of the names of any entity authorized to use the trademark other than the actual trademark owner. For each such entity, we provide the name of the entity, the name of the product(s) the entity is authorized to use, the type of entity (e.g., manufacturer, exporter, importer), and a time period (a start date and an end date) for when the entity is authorized to use the trademark.

China customs makes a determination on the submittal within 30 days after a completed application is submitted to it. Once approved, we must pay an 800 RMB fee to China customs for each registration. The registration will be valid for ten years (or as long as the relevant IP right is valid but no longer than 10 years), but may be renewed for additional ten-year periods.

China customs also allows for the registration of copyrights, and it’s often advisable to do so as part of a comprehensive China IP strategy.

Simple, right?

 

Beijing v. Shanghai

Posted in China Business, Good People
Picture from City Weekend. http://bit.ly/1DurMdU

Picture from City Weekend. http://bit.ly/1DurMdU

Way back in 2010, we did a post comparing Beijing and Shanghai. That post took the rivalry pretty seriously:

The Beijing-Shanghai rivalry fascinates me. Not because it is so unusual, but because it is so pronounced and because it matters.

Beijing is the seat of government, yet it is also China’s art, media and tech city. Shanghai is the city of business and finance, yet it is both historically, and today, generally the most open to foreigners. Food-wise, most would give Beijing the nod, but I love Shanghai food and consider it a very sophisticated, subtle, and underrated cuisine. One of the biggest differences between Beijing and Shanghai is language. “Shanghai people” have their own dialect that is pretty much incomprehensible to outsiders and they do seem to love using it for that very reason. Shanghai is considered snobbier.

The Los Angeles Times has a fun and interesting story on this long-time rivalry. The article is entitled, A tale of China’s two great cities: The rivalry between Beijing, the national capital, and Shanghai, the financial capital, has been going on for decades. The dynamic is a powerful undercurrent in Chinese politics and culture. It deems Shanghai more fashionable, more for women and more cosmopolitan than Beijing. But Beijing holds the power. These paragraphs sum up the stereotypes I must often hear from the Chinese themselves:

Shanghai men are reputed to be vicious in business — hence the term shanghaied — but wimps at home. “At home, they do the dishes, take out the trash and give their wife/mistress a neck rub after the hard day she put in shopping,” wrote one blogger on a site called China Forum.

To the Shanghainese, the Beijingers — and all northerners, for that matter — are peasants.

“They smell like garlic,” said restaurateur Xu, voicing a popular refrain. “We Shanghai people keep ourselves and our homes very clean. We are more refined. We drink coffee. They only drink tea.”

In the legal arena, Shanghai stands somewhat alone in that Shanghai lawyers generally do not play well outside Shanghai, and vice-versa. This is less true of Beijing.

Back then, it seemed that anyone who was anyone was either in one or the other city or at least contemplating moving to one or the other. That was right at the height of when so many foreign companies believed that they had to “get into China” or at the bare minimum, “start doing business with China,” even if they knew little to nothing about how to navigate China.

I thought back to this old post today when I reading an article from the Nanfang on how expats like living in Shanghai best. The article, Despite Shallow Reputation, Expats Love Shanghai More Than Beijing, has this to say about Shanghai:

Yes it’s shallow, the expats don’t speak Chinese, and it’s not the “real China”, but expats in a new poll say it’s the best place in the country to live.

Nearly nine out of every 10 expats already there say they like the city, which is the highest satisfaction rating pollsters found. Eighty-six percent of the 237 expats interviewed said they liked the city, with 46 percent saying they’d even like to settle down there.

So what makes Shanghai so special? Expats say job availability and the “diverse cultural environment” are the main attractions. On the other hand, the respondents said traffic congestion and bad-mannered locals were the things they had problems with.

So which do you prefer to visit? Which is better for business? For Tech? For Media? What about the people makes them different? For whatever? Most importantly, where would you rather live and why? Someone who lives in Shanghai and frequently travels to Beijing told me the other day that “way more” expats are leaving Beijing than are leaving Shanghai. Is that true?

Six Reasons Why Western Companies Fail in China

Posted in China Business, Recommended Reading
Photo by www.stockmonkeys.com

Photo by www.stockmonkeys.com

Interesting Linkedin article by Anton Shvydkyi, who owns a Guangzhou tech company, The article is Top Chinese IT People Answer Why Western Companies Fail in China and it consists of a number of Chinese tech company founders and high level Chinese tech company executives explaining what they see as the reasons why Western companies fail in China. What are they doing wrong?

This article provides insight as to why Western companies fail in China, not just tech companies. Some of the highlights from the article are as follows:

1. Insufficient localization. Failure to give enough authority to locals.

2. Lack of Employee stock ownership plans.

3. Failure to understand how Chinese view the internet.

4. Failure to understand cultural differences.

5. Too afraid of being copied. I wrote about this in How to Protect Your IP from China.

6. Inability to market and communicate with Chinese consumers.

I recommend anyone doing business in China read this article.

China Business Dexterity And How To Achieve It

Posted in China Business, China Travel
How to achieve Global (and China) dexterity.

How to achieve global (and China) business dexterity.

Clients doing business in China often ask our China lawyers what they should read “to prepare for China” and our answers to that question usually vary with the client and the circumstances. How is that for a lawyer answer?

But for clients with little to no experienced with conducting business overseas, I have of late been recommending the book, Global Dexterity: How to Adopt Your Behavior Across Cultures without Losing Yourself in the Process, by Andy Molinsky, a professor of organizational behavior at Brandeis International Business School. I was reminded of that today when a friend sent me a link to a Fast Company Magazine article by Molinsky, entitled, Master the Art of Adapting to a Foreign Office Culture.

This article starts out with a situation in which pretty much all of us who do business overseas have encountered:

If you have ever lived or worked in a foreign culture, you have likely confronted situations in which the natural, comfortable “default” behavior from your native culture turns out to be ineffective for a situation you find yourself in within a new cultural environment.

In each of these situations, you don’t just struggle with understanding cultural differences. Rather, you struggle with the far more challenging task of actually changing your culturally ingrained behavior. I call this ability global dexterity—the capacity to adapt your behavior, when necessary, in a foreign cultural environment to accommodate new and different expectations that vary from those of your native cultural setting.

Molinsky then discusses the tension between changing so as to conform to your foreign surroundings so as to end the discomfort, but not changing so much as to become “inauthentic.” I personally can relate to this tension and I often hear others expressing similar concerns. You want to adapt but at the same time retain your “core.” And it is not just people that face this tension; companies do as well. See Explanations For Apple’s China Success, where way back in 2010 I talk about how Apple’s China success is due in large measure to its having “stuck to its knitting.”

Molinsky’s prescription for resolving the tension is to first learn the cultural rules, or what he calls the cultural code. He defines the cultural code as each “situation you face—whether it’s learning to give constructive criticism, make small talk, negotiate, participate at a meeting, or ask a favor of your boss—has certain rules for appropriate behavior in a given cultural setting.” He then portrays them in terms of six dimensions that capture the expectations that others have for our behavior in a foreign setting”:

These six dimensions represent key aspects of communication that differ across cultures, and that previous researchers in psychology and cross-cultural communication have shown to predict important personal and professional outcomes. Of course, there are many potential dimensions of communication style, and these six features are not the only dimensions that exist, or that differ across cultures. However, in my experience, this particular set does an excellent job at capturing cultural differences in a succinct, but comprehensive manner:

Directness: How straightforwardly you’re expected to communicate in a particular situation. Are you expected to say exactly what you want to say, or to “hint” at something in a more indirect manner?

Enthusiasm: How much emotion and energy you are expected to show when communicating. Can you express how you feel, or is it more appropriate to hide your positive feelings?

Formality: The amount of deference and respect you are expected to display with your communication style. Are you expected to show a high level of respect when communicating with someone in a particular situation, or can you be more informal?

Assertiveness: How strongly you are expected or allowed to voice your opinion and advocate your point of view in a particular culture and in a particular situation in that culture. Should you be forthright in expressing yourself, or work at hiding or sublimating your point of view?

Self-promotion: The extent to which you can speak positively about yourself in a given cultural situation. Should you actively promote your positive qualifications or be more self-effacing?

Personal disclosure: The extent to which it is appropriate to reveal personal information about yourself to others. Should you be open and forward in expressing details about your life, or is it more appropriate to hide these personal details?
Each situation you encounter in a foreign setting will have a specific cultural code for behavior along each of these dimensions. When motivating workers in India, there is a certain level or amount of assertiveness that you will be expected to show as a leader. When bonding with work colleagues after hours at a restaurant or bar in Japan, a certain level of enthusiasm is expected, which is quite different from how enthusiastically you are expected to behave in other situations that you might encounter in Japan.

I know the above sounds complicated, but I do think that just reflecting upon these sorts of issues can help one to better navigate business in foreign countries like China. And hey, even if it doesn’t, it certainly can make for interesting discussions.

Do you agree?

China Bankruptcies, Donald Trump, and Meaningless Numbers

Posted in China Business, Legal News
What does Donald Trump know about China bankruptcies. Photo by methodshop.com at http://bit.ly/1N0CTyw.

Donald Trump and China bankruptcies? Photo by methodshop.com at http://bit.ly/1N0CTyw.

Just read an interesting article by Reuters reporter John Foley. The article is entitled, You’ve Got Fail and it is a riff on something Donald Trump’s view on how China businesses are unwilling to fail:

Presidential hopeful Donald Trump says that bankruptcy in the United States is nothing to be ashamed of. In China, where high debt levels are also a concern, it’s the opposite: failure is to be avoided vigorously. These opposing views end in the same place. When going bust brings too much pain or too little, disaster can follow.

Trump, in a debate among Republican candidates for November 2016’s presidential race televised on Aug. 6, argued that four bankruptcies among his companies don’t disqualify him from looking after U.S. businesses. His thinking: laws are there to be used, and most entrepreneurs do. A look at the U.S. courts, which had 1.3 million bankruptcy cases pending at the end of June, suggests he has a point.

I generally agree. One of the great things about the U.S. is how many entrepreneurs there are who essentially look potential failures in the eye and don’t blink. Many years ago, I sat next to the founder of a very well known consumer company. This person told me of how this well known company was actually the fourth company of its type that he had founded and of how he didn’t really succeed until his forties. His first three companies had gone bankrupt and it was his persistence and his learning from his three failures that got him to where he is today. Well just as soon as I got home, I lectured my two daughters on how failure is not something to be avoided: doing nothing is what is to be avoided. That in many ways is the spirit of the United States.

I have heard (but do not know enough to back it up) that in Europe failure and bankruptcies are to be assiduously avoided. Way more so than in the United States. I have also heard (and have some daily life experiences to back it up) that filing for bankruptcy is generally much more difficult in most European countries than in the United States.

Now just to be clear. I have no idea how much culture influences a willingness to take risks and to file for bankruptcy (those are two different things, I realize) and how much bankruptcy laws influences that. But I can tell you that a country’s bankruptcy laws must have some impact on the culture of risk and of bankruptcy within the country and I can most emphatically tell you that a country’s bankruptcy laws influence the number of bankruptcies that get filed in any given country.

Which brings us back to Donald Trump and to China and to China bankruptcies.

Based on my decades of experience with China as a China lawyer, I would NOT describe Chinese businesspeople as risk averse. In fact, nearly all of the time when my law firm is representing an American company doing a deal with a Chinese company, we are the ones encouraging caution and taking time, in large part as a counter to the Chinese side which can too often seem oblivious to the risks and just want to go go go.

But this article paints China with a very different brush

Ease of going broke brings risks. While several Wall Street institutions were spared bankruptcy in 2008 on the grounds they were too big to fail, most are too small to matter. A study by the Chicago Booth School of Business suggested that for households with few assets, declaring bankruptcy can be a cheaper way of meeting healthcare costs than buying insurance. The ease of getting into debt, and getting out of it, may help explain U.S. public and private borrowings that McKinsey calculates at 269 percent of GDP.

In China, the opposite feeling has created a similar result. Bankruptcy cases are rare. Credit insurer Euler Hermes estimated in January that there might be fewer than 3,000 this year, but it’s not for want of overstretched borrowers. Debt is now 282 percent of GDP according to McKinsey. Solar panel makers, coal miners and real estate companies have been saved by governments, or just borrowed more through deceptively safe-seeming products sold in the mass market. A borrower knows that even if politicians won’t save the company, they will definitely save retail investors.

For countries with high debts and inflated asset prices, getting failure right matters a lot. The best path is somewhere in the middle: make bankruptcy painful, but not so much that it has to be prevented at all costs. It’s a challenge that neither country looks close to mastering.

First off, I am not so sure that filing for bankruptcy is too easy in the United States, but I will have to leave that discussion to those more knowledgeable on this issue than me. But I can say that the number of bankruptcies in China is not a terribly good indicator of the willingness of its businesspeople to take risks and that may in large part be due to the fact that it is not even a terribly good indicator of the number of company’s that “go bankrupt,” in the layman’s sense of the word. What the writer of this story does not account for is that filing bankruptcy in China is so convoluted and difficult and being granted bankruptcy relief so rare, that virtually nobody files for it. Instead, Chinese businesspeople just walk away from their failing businesses, leaving a trail of debt (employee and vendor and government) behind them. Again, all I can do here is draw on the collective real world experience of the China attorneys in my law firm, but in our existence we have been involved with one true China bankruptcy and yet we have seen dozens of companies in China just “disappear” over the years. In particular, during the recession we were constantly dealing with situations where our American clients had been stiffed by Chinese companies that had disappeared, usually right after receiving a payment to manufacture a product.

So what I am saying is that if you are going to analyze China’s culture for risk, using the numbers of bankruptcies actually filed there is not a good way to do so.

What do you-all think?

Don’t Be Like Mike: Register Trademarks In CHINESE

Posted in Basics of China Business Law, China Business, Legal News
Is it the shoes?

Is it the shoes?

As we noted last week, Michael Jordan has lost – again – in his ongoing effort to combat alleged trademark infringement in China.

Our first post on this topic reiterated a point that must be familiar to even the most casual reader of this blog: register your trademark now, before someone else does it for you.

But the Jordan decision also contains a more subtle lesson: protect your Chinese brand, even if you don’t even have one yet. Because the minute your English-language brand gets attention in China, it will be given a Chinese name by the local media and consumers. Without exception. And the minute that happens, someone will register the Chinese name as a trademark, and you’ll have lost all control of your brand in China.

A primary focus of the Jordan litigation was over Michael Jordan’s Chinese name (乔丹, or “Qiaodan” in pinyin), the Chinese transliteration of “Jordan.” This is the name by which Michael Jordan is known in China, but he had not picked this name himself, and it only refers to his last name. And as the recent Chinese court decision noted, the乔丹/Qiaodan transliteration is shared by everyone in the world with the surname Jordan. (It’s true that Michael Jordan retains extremely high name recognition in China, but it bears mentioning that another NBA player named Jordan was dominating the sports headlines in July.)

How do you control a name that you don’t come up with yourself? In China, it’s not even a rhetorical question: you can’t, unless you’re also the first to file a trademark application. And so someone else registered the Chinese version of Michael Jordan’s name as their company name and a trademark, and Jordan has been playing catch-up ever since. And losing.

This is also exactly what happened to Pfizer, which released the drug Viagra in America before they had chosen a Chinese name for it, only to find that a Chinese name had been selected for it, popularized, and registered by a third party. Pfizer’s subsequent attempt to re-brand Viagra from the name it was already called in China (伟哥, or “Weige”) to its preferred choice (万艾可, or “Wan’aike”) was doomed from the start, as evidenced by a series of expensive court cases that Pfizer kept losing. For a more scholarly analysis of the Viagra trademark battle, read Professor Daniel Chow’s article Lessons from Pfizer’s Disputes Over its Viagra Trademark in China.

And – stop me if you’ve heard this before – the same thing happened (and keeps happening) with French winemaking giant Castel Frères, which saw someone else register the popularized Chinese version of its name (卡斯特, or “Kasite”) and has been losing court battles ever since in an attempt to regain “its” trademark. And again with Australian winemaker Penfolds and the Chinese version of its name (奔福, or “Benfu”).

So don’t be like Mike. If you care about your brand in China, it’s not enough just to register your English-language brand. You also need to select a Chinese name and register that as a trademark in China. Otherwise, you’ll forfeit not only the right to use your Chinese brand name, but the ability to choose it in the first place.

Quick Question Friday, China Law Answers, Part VI

Posted in China Business, Legal News
What language for your China contract? It depends.              Photo by Steven Snodgrass.http://bit.ly/1CPPrkp

What language for your China contract? It depends.       Photo by Steven Snodgrass.http://bit.ly/1CPPrkp

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 as well. If we were to conduct research on all these questions and then comprehensively answer them, that would soon become all that we do and we would soon be out of business. And that would be a bad thing for us and for this blog. 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 may provide some additional guidance. We figure we might as well post some of these on here.

One of the questions we are always getting asked is what language to use in a contract with a Chinese company and, if the language is Chinese, whether just translating an existing American contract into Chinese is sufficient.

The first part of the question is actually far more complicated than many realize and the second part is probably simpler.

The language of the contract usually depends on where it is going to be enforced/litigated. If your disputes are going to be in a Chinese court, your contract should probably be in Chinese. If your disputes are going to be in a U.S. court, it should probably be in English. This means that the tough question then is where you will want your disputes resolved and we leave that for another post.

What we are talking about here is the official language of the contract. It is usually a good idea to have your contracts with Chinese companies be be in both English and Chinese, but with only one language as the official language. For more on this, check out the following:

As for whether you can or should just translate an American contract into Chinese and then use that as your contract between your U.S. company and your China counter-party, the answer is a resounding no.