Had no idea what I was going to write about this morning, but thanks to one of our China lawyers having cc’ed me on the following email exchange, I have a ready-made post.

The email exchange started with the following email (modified to hide any identifiers) from a U.S. Internet of Things company having problems with its China manufacturer:

Last year I ordered $450,000 worth of my own OEM product from a factory in China. Half of the products do not work (even though I was told that they were tested). They [the Chinese manufacturer] said in writing that they would replace them free of charge but they are now refusing to do that. What grounds do I have to stand on?

Our China attorney responded as follows:

The fact that you are writing us and not your regular attorney makes me think you have almost no grounds on which to stand. I say this because 99.9 percent of the time this is true of those who write us with a product quality problem.

If you check out this post, China Contracts that Work, you will see that your contract should, at minimum be in Chinese, call for disputes to be resolved in a Chinese court under Chinese law. A manufacturing contract should also contain a liquidated damages provision, a mold protection provision (so that the factory does not keep your molds if there is a dispute, see Product Molds And Tooling In China: Three Things You Must Do to Hang on to Yours), be properly chopped/sealed (see Signing And Chopping A China Contract. It’s Complicated). It is also critical that your contract be with the right Chinese company as Chinese companies are notorious for signing agreements with an essentially empty shell company, usually based in Hong Kong.

If all of the above are the case for you, we would love to take your case on a contingency fee basis. If the bulk of the above are not true, we would need to charge you by the hour to represent you against this manufacturer. The first thing we would do is to look at what you have to determine whether that makes any sense for you.

My even bigger worry/question for you is whether you have registered your trade names and logos in China. Have you? I ask this because many times when foreign companies start having problems with their Chinese manufacturer, their Chinese manufacturer goes off (using an apparently unrelated third party) and registers the trade names and the logos of the Western company with which it is having a dispute. Chinese manufacturers do this to gain leverage and this really works because your Chinese manufacturer can use “your” trademarks to stop you from having your products manufactured in China or shipped out of China with your own brands and logos on them. See When to Register your China Trademark. Ask Tesla and China: Do Just One Thing, Trademarks. So if you have not already registered your brand names and logos in China, you should do this IMMEDIATELY (you very well could already be too late) and you should do so before you complain any more to anyone there.

 

 

Print:
EmailTweetLikeLinkedIn
Dan Harris

I am a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds 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.

I was named as one of only three Washington State Amazing Lawyers in International Law, I am AV rated by Martindale-Hubbell Law Directory (its highest rating), I am rated 10.0 by AVVO.com (its highest rating), and I am a SuperLawyer.

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.