China technology licensingAs we keep saying here on the blog, Chinese companies in the last year or so have taken to trying to buy U.S. technology via just about any means possible. And as that has been occurring, we have been detailing how risky this can be for foreign companies with the technology Chinese companies want. Our previous blog posts have mostly explained the legal issues and traps these foreign companies so often find or put themselves. See Manufacturing in China: Do Not Be “Assimilated”China and The Internet of Things and How to Destroy Your Own Company, and Selling Or Licensing Your Technology or Your Technology Business to China: Buckle Up For Some Seriously Tough Negotiating.

In response to our posts — both via comments and via emails –we have been getting requests that we explain how exactly foreign companies should respond to Chinese negotiating tactics. This post is part 1 of what will be a multi-part series on how to negotiate with Chinese companies on technology deals — or really, any sort of deal. This part 1 is not so much geared to provide strategies, but to change mindsets.

The first thing you need to realize if you are going to be negotiating with Chinese companies (technology or otherwise) is that you need to stop bargaining like a Westerner and to fully recognize that your Chinese counterpart sure as heck is not going to bargain in any way approaching what you view as fair. And if you can’t deal with that, you will pay the price.

Or as my friend Andrew Hupert likes to put it, you are the cow and no one “buys the cow when they can get the milk for free. In China, technology, IP and business methodology is the milk of profitable transactions. If you’re giving it away too early or too cheaply, then you are the expensive cow no one buys. Sorry.”

Many years ago, I had a very smart Westerner for a client who was very much into Zen Buddhism. With him we were negotiating a really tough deal with a Chinese company and every time the Chinese company would stall or push too hard or lie or agree to nine out of ten things one day and then three out of the same ten things the next day (all very common negotiating techniques of Chinese companies), my client’s response would be, “we will be the rabbit.”

According to this client, “being the rabbit” was a Zen concept of fighting back by not fighting at all, like a rabbit that goes limp when attacked by an eagle. So when the Chinese company would come back with massive changes from the day before, my client would send the Chinese company a really nice email saying something like, “I completely understand your new position and we will be reviewing it and responding when appropriate.” And then he would do nothing. Zero. Nada. Instead, he would just wait weeks and weeks until the Chinese company would come back and accuse him of having delayed this deal that needed to close so quickly. At that point, my client would say something like, I understand why you are in such a rush but we are not so if you can think of any way we might be able to speed this up, please let me know. The Chinese company would get so frustrated that it would start negotiating against itself and once it had reached the end of the line on that, my client would start negotiating again. I got the sense the Chinese company was simply not used to a Western company displaying Zen-like patience and it clearly was both irritating them and throwing them way off their game.

“Be the rabbit” is one tool among many that Western companies can employ when negotiating with Chinese companies. We will be providing more tools as this series continues.

 

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Photo of Dan Harris Dan Harris

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

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His 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.

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

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. 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 Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses 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.