A few months ago, in China Trademarks: Too Good to be True, I wrote about an American Lawyer Magazine article (That Law Firm’s Website Might Not Be for a Real Law Firm) pointing out the “growing trend of fraudsters posing as attorneys or legal consultants online to exploit those seeking legal services.” I then used that article to point out how “when it comes to China and Southeast Asia, that growing trend’ has reached epidemic proportions. I noted our my firm’s international lawyers had seen “at least a five-fold increase in the number of instances in which American and European companies have been ripped off and greatly harmed by fraudsters who advertise their legal services on the internet, usually with Google paid ads. I distinguished these fraudsters from the sites that charge $99 (or whatever) for template contracts:
Just to be clear, I am not talking about the sites that charge $99 (or whatever) for template China contracts that are worth less than nothing. These companies provide a joke of a product but they at least provide what they say they are going to provide. For more on that, check out. China Contract Templates for $99 Each. As far as I know, these companies do not flat out steal your money but they oftentimes can be just as dangerous. These companies lead their clients to believe they are communicating with lawyers when in fact they are not. This means there is no attorney-client privilege and the odds of whoever does your legal work knowing your situation and your goals and having the capability to draft a cross-border document or file your trademark in the right category or form your company correctly are slim.
No, I am talking about flat-out criminals and fraudsters who will take your money and claim that they did what they were paid to do and then not provide you with any services whatsoever.
I also made clear that I was not aware of a single licensed lawyer (from China, Vietnam, Thailand, or wherever) that had charged for something and then not delivered it:
And again, just to be clear, I am not aware of a single instance where a legitimately licensed lawyer from any country has done this. No Chinese lawyers. No U.S. lawyers. No lawyers from any country. As far as I can tell those engaging in these schemes are not lawyers at all, though they often claim to be.
We first wrote about fake China lawyers more than a decade ago, in China: Where Even The “Law Firms” Are Fake. That post was on fake Chinese lawyers taking money for never-filed trademark registrations:
There are those who take money to file trademarks in China and then simply run away. A new client told me he had sent about $750 to what he thought was a legitimate China law firm to have his company’s brand name registered. As soon as the first $750 hit Shanghai, he was asked to send an additional $600 to “cover the filing fees,” which he did.
A week later the website was down and the Shanghai “firm” was gone.
It turns out this scam is actually pretty common and it also turns out that in every case of which I am aware the scammers were neither licensed Chinese lawyers nor licensed Chinese trademark agents. In other words, they are just people who run China trademark registration scams.
It has done pretty much nothing but gotten continually worse since then and as foreign companies move their production from China to other countries in Asia (Vietnam, the Philipines, Thailand, Cambodia, Malaysia, etc.) these scammers are moving their focus as well. We are hearing of many foreign companies that paid for company registrations, trademarks, copyrights, employment contracts, manufacturing contracts and various other things only to receive nothing in return and only to learn months (sometimes even years) later that the “law firm” or “lawyer” they paid for their legal work never even existed. How many foreign companies believe their trademarks are registered in China or in Thailand or wherever when in fact they never were? How many think they have registered companies in China or in Vietnam or wherever when they don’t? There is no way to know the numbers, but I do know that this sort of thing can be relatively easily prevented:
Do some due diligence before you pay/hire a lawyer, especially if you will be paying upfront for something like a China trademark or a China WFOE where it may take you years to realize you were scammed. There are fast and easy steps you can take to confirm that your lawyers actually have a law license. Every U.S. state lists its licensed practitioners online in its Bar Director and most countries have something similar. Check to see how long they claim to have been in business as compared to how long they have had their website. One fake China attorney claimed to have more than 20 years experience but his website appears to have been online for a total of only 5 months. Read as much as you can online about the lawyer or the law firm you will be hiring. If you are looking to hire an international lawyer or law firm and you have a local lawyer, enlist that lawyer to conduct the due diligence on your behalf. See China Partner Due Diligence for some of the most basic things you can and should be doing before entering into any transaction.
But with the recent decline in China’s economy we have in the last few months been seeing a precipitous increase in a new sort of “China lawyer” problem: Chinese law firms that seem to know nothing about international law representing foreign companies shockingly badly at shockingly law prices. Let me explain with the following three examples, necessarily a bit vague to camouflage all parties:
1. Three different companies write ask us to challenge the rejection of their China trademark applications. A quick perusal tells us that they have zero or virtually no chance of prevailing because someone else clearly beat them to the trademark for which they filed. Our response to them is something like the following:
There is virtually no chance of our being able to prevail on an appeal of your trademark rejection. In fact, in our view, it never made sense for you to file for this trademark at all. I am sorry that your company wasted time and money on this application and we suggest you not waste more time and money appealing the rejection. Instead, we propose that you retain us on an hourly basis to work with you in figuring out your other options.
We then hear enough back from these companies to enable us to piece together the following scenario:
These are all small companies with not much money. They chose ultra-low cost Chinese law firms (at least I think these are Chinese law firms) online. The law firms they chose are not on any map of leading Chinese law firms and their pricing reflects this. These law firms were contracted to try to register XYZ as a trademark and that is exactly what they did, but NOTHING else. These law firms provided no legal counsel regarding whether it made sense for these companies to register XYZ as a trademark in China. These law firms provided no legal counsel to these companies regarding the class and subclasses in which XYZ should be registered. And perhaps most importantly, these law firms appear not to have conducted any trademark search before filing for these trademarks, which trademark search would have told an experienced and legitimate law firm with information that would have sent them back to these companies to discuss alternative approaches. Two of these companies told us that they trusted their law firms because they touted their “direct connections” to China’s trademark office. I explained to them that every Chinese law firm can make that same claim and that a good Chinese law firm would probably never make that claim.
2. Companies pay a Chinese law firm (at least I think it’s a Chinese law firm) a ridiculously low fee for a WFOE registration and get ridiculously little help with that. Let me explain. Foreign company pays Chinese law firm to help them with their WFOE registration. Chinese law firm sends foreign company an incredibly bad translation and tells the foreign company to fill it out. The foreign company has no idea how to fill it out and asks for help from the Chinese law firm. The Chinese law firm provides no help either because it essentially refuses to do so or because it has no ability to do so. Foreign company then comes to us and in about five minutes we suggest that they not even bother with a WFOE registration either because they (1) do not need a Chinese WFOE at all or (2) cannot afford to pay the real costs of a real WFOE registration (which involves about 100 times more than just filling out and submitting an application. See How to Form a China WFOE: A Roadmap) or pay the real costs of operating a WFOE in China or (3) cannot legally form a WFOE in China for what they are seeking to do in China. See Forming a China WFOE: Needed or Not.
3. Companies that pay a Chinese law firm (at least I think it’s a Chinese law firm) or an online template mill an absurdly low price for a China manufacturing agreement (such as a China NNN Agreement, China Manufacturing Agreement, China Product Development Contract, China Mold Ownership Agreement) or China Employment Contract or China Distribution Contract or various other agreement and then come to my firm asking us “to review it.” When they attach the contract they want us to review (which they do most of the time) we super quickly review it and tell them that it is not a good contract and that if they need a good contract they will need to pay us to start completely over, if that is even possible — usually it isn’t because they and their Chinese counter-party just signed it! If the contract is not attached, I send them an email that says something like the following:
That you are asking us to review a contract that you just paid for tells us you have serious doubts about the quality of your contract. If you have serious doubts, we have serious doubts, largely because I cannot remember a situation like yours where once we reviewed the contract our advice was anything but that we would need to start over and charge a lot more than paid for the unworkable contract to draft a brand new contract that actually works for China. Please check out China Contracts: Make Them Enforceable Or Don’t Bother and compare what we describe in that article as necessary for your China contract to work with your contract. If your contract does not tick all (or at least most) of the things we mention in that article, you will need a new contract.
I then tell them what we usually charge for whatever contract is at issue (hint, no matter what the contract it will be a lot more than $99).
How do you avoid the above three sorts of situations? Two ways. One, do your due diligence on the law firms you are considering. Two, heed the old maxim that “If it [the Price] Sounds Too Good to Be True, it Probably Is.”
What are you seeing out there?