China IP licensing

On August 23 and August 24, Law Seminars International will be putting on An Advanced Conference on Current Dealmaking Trends for IP and Technology Licensing: Tips for efficiently and effectively monetizing intellectual property. 

This event will be live at the Courtyard Marriott in Pioneer Square in Downtown Seattle and also via webinar wherever you are. Go here to get a pdf of the entire program. I will be speaking on the second day regarding “enforceable contracts as a starting point [for IP protection]: Classic pitfalls foreigners fall into when dealing with Chinese entities, like drafting in English, and other key considerations.”

Per the organizers:

Who Should Attend. Attorneys, business executives, licensing professionals, and others involved with complex licensing transactions.

Why You Should Attend.  Licenses are one way of bringing intellectual property to life. Without licenses, IP rights lay dormant until weaponized in court. Licenses allow IP to be commercialized, accessed and harmonized without resorting to aggressive enforcement. In today’s climate of constant change and tighter budgets, the ability to spot, craft, draft and negotiate license agreements efficiently and effectively is more important than ever for licensors and licensees.

This conference provides insights on developing issues arising from drafting and negotiating licenses, updates on case law, changes in technologies that impacts licensing, and the rise of new international players in IP licensing.

Join our distinguished faculty as they address the above and additional licensing issues from both outside counsel and in-house perspectives including a panel on problematic clauses and what to do about them.

What You Will Learn. 

  • ~ The anatomy of an effective license agreement
  • ~ NDAs as the courting phase of the licensing relationship
  • ~ Case law update: Recent cases impacting IP licensing values
  • ~ Assigning and licensing trademarks
  • ~ Biopharmaceutical trends including licensing for joint ventures and as a result of collaborative activities
  • ~ Compulsory licensing, Standard Setting Organizations, and FRAND
  • ~ Managing compliance
  • ~ International licensing with China
  • ~ Provisions for resolving licensing disputes
  • ~ Wrap-up: Mock negotiation of a hypothetical licensing agreement

The seminar will consist of the following:

DAY ONE

Introduction & Overview, 9:00 a.m.

Adam L.K. Philipp, Esq.
AEON Law / Seattle, WA

Ramsey M. Al-Salam, Esq.
Perkins Coie / Seattle, WA

 

The Anatomy of an Effective License Agreement, 9:15 a.m.

Core essential terms, including exclusivity, lump sum versus sales-based royalties, royalty bases and rates, exclusions, standard forms and provisions, warranties, indemnities, audit rights, keeping IP from competitors, “poison pill” provisions

Steve Tapia, Esq. , Distinguished Practitioner in Residence
Seattle University School of Law / Seattle, WA

 

NDAs as the Courting Phase of the Licensing Relationship, 10:30 a.m.

The structure and essential terms of non-disclosure agreements; the “new world” of NDAs and how they affect high tech joint ventures; lessons from the Waymo/Uber dispute about protecting trade secrets

Adam L.K. Philipp, Esq.

 

Case Law Update: Recent Cases Impacting IP Licensing Values, 11;15 a.m.

An update on how recent decisions affect the value of IP rights and the enforceability of licensing agreements

Ramsey M. Al-Salam, Esq. , Program Co-Chair
Perkins Coie / Seattle, WA

 

Assigning and Licensing Trademarks, 1:15 p.m.

The need to transfer good will and police the quality of goods sold under a license; the ability of bankrupt licensors to extinguish licensee rights and the impact on pre-bankruptcy negotiations when relations are strained; unique cannabis issues

Jerry A. Riedinger, Esq.
Perkins Coie / Seattle, WA

 

Biopharmaceutical Licensing, 2:00 p.m.

Transactional trends including licensing for joint ventures and as a result of collaborative activities

Gary M. Myles, Esq. , President & CEO
Myles Intellectual Property Law / Issaquah, WA

 

Managing IP Compliance, 3:00 p.m.

Structuring an effective process for counting royalties, tracking work product, regulatory compliance, patent marking, trademark quality control, audit rights, verifying “best efforts”, “most favored” clauses, and anticipating other issues

Neil Zoltowski , Principal
StoneTurn Group / San Francisco, CA

 

Compulsory Licensing, Standard Setting Organizations, and FRAND, 4:15 p.m.

When you have no choice: Where compulsory licensing comes into play including when it’s “necessary” to practice a standard

T. Andrew Culbert, Esq.
Perkins Coie / Seattle, WA

 

Continue the Exchange of Ideas: Reception for Faculty and Attendees, 5:00 p.m.

 

DAY TWO

International Licensing: Adapting to Recent Developments in China, 9:00 a.m.

An enforceable contract as a starting point: Classic pitfalls foreigners fall into when dealing with Chinese entities, like drafting in English, and other key considerations

Daniel P. Harris, Esq.
Harris Bricken / Seattle, WA

New rules on IP transfers; importing & exporting technology; potential impacts from recent trade negotiation; IP enforcement statutory changes, administrative enforcement, and increased damages awarded by courts

Ping Gu, Esq.
Zhong Lun Law Firm / Beijing, China

 

Provisions for Resolving Licensing Disputes, 10:30 a.m.

Choice of resolution technique in the license and choice of technique when enforcing the license: substantive and procedural considerations for choice of law; mediation and arbitration clauses; enforcement stage choice of forum

Mark Wittow, Esq.
K&L Gates / Seattle, WA

 

Wrap-Up: Mock Negotiation of a Hypothetical Licensing Agreement, 11:15 a.m.

Identifying what is most important to your opponent; provisions to tailor the agreement to the type of license and situation; anticipating potential problems from changes in control and adverse events; tips for working through problematic provisions

Steven B. Winters, Esq. , Moderator
Lane Powell / Seattle, WA

Licensee perspective

Jeff Harmes, Esq.
Karcher Harmes / Bainbridge Island, WA

Licensor perspective

Hillery L. Nye, Esq. , General Counsel
Zipwhip / Seattle, WA

I know or know of many of these attorneys and I am very much looking forward to hearing their talks and I urge anyone with an interest in IP go here and sign up. If you use HARRIS as your promo code, you will get a 50% discount.

China IP webinar

Today (June 26) at 1 p.m. Eastern, I will be putting on a 90 minute webinar on protecting your IP from China.

This webinar is with Commercial Law WebAdvisor and they describe it as follows.

Companies often cannot afford not to do business in China. Whether producing goods there or selling to the Chinese market, companies that engage in business with Chinese partners need up-to-date legal advice on how to protect their technology and other intellectual property (IP) interests from being counterfeited, pirated, or otherwise misappropriated. As IP theft is one of the top issues facing businesses operating in China, there are substantial risks companies must identify and address proactively to protect their valuable IP assets. Deals made in China can threaten IP rights not just in China, but in markets around the world. Understanding the Chinese IP landscape and how to manage the pertinent issues can go a long way to safeguarding your client’s valuable IP interests.

Please join Dan Harris as he explores the nuts and bolts of constructing a good business deal with a Chinese partner, what your agreements should include, and how to manage the Chinese IP rights framework to minimize your client’s IP-related risks.

WHAT YOU WILL LEARN

This webinar will cover:

  • How to choose a good Chinese partner
  • Identifying the IP assets that need protection
  • How to structure your deal
  • Drafting your deal papers
  • Drafting China employee contracts to protect your IP
  • IP registrations: What you should know about trademarks, patents, copyrights, and licensing agreements
  • AND MUCH MORE!

YOUR CONFERENCE LEADER

Your conference leader for “Doing Business in China: Structuring Your Deal and Protecting Intellectual Property” is Dan Harris. Dan is an attorney with Harris Bricken in Seattle. He is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes MagazineBusiness WeekFortune MagazineBBC NewsThe Wall Street JournalThe Washington PostThe EconomistCNBCThe New York Times, and many other major media players have looked to him for his perspective on international law issues.

Dan writes and speaks extensively on Chinese law with a focus on protecting foreign businesses and his China Law Blog is regarded as one of the best law blogs on the web today. The ABA Journal recently named the China Law Blog to its Blawg Hall of Fame (a designation given to the top 20 law blogs of all time).

Please go here to register and use promo code cwa18bc for a small discount.

China employment lawyerOn May 16 (at 1 p.m. Eastern, 10 a.m. Pacific and 5:00 pm. Greenwich Mean Time) Grace Yang, our lead China employment lawyer, will be putting on a webinar with HRWebAdvisor. Grace’s talk will last about 90 minutes and will run the gamut on China’s employment laws, with a particular focus on what foreign companies with China employees need to do not to run afoul of the myriad and complicated national and local employment laws. HRWebAdvisor describes Grace’s talk as follows:

China’s employment laws are complicated and highly local. Foreign companies doing business in China face complex China labor and employment issues and questions every day – often without even realizing it. What works in the United States has very little in common with what works in China. Employment compliance has become one of the most important issues foreign companies face in China and it is the rare foreign company that gets it right. Employee disputes are becoming considerably more common and government enforcement is getting significantly more stringent. It virtually always costs less for your company to deal proactively with China employment law issues than to wait to address them only after they have come via a dispute. As such, it is imperative that you understand the framework of Chinese employment law and steps you can take to mitigate risk.

Please join Grace Yang as she helps you better understand the Chinese employment law landscape. She will focus on helping you recognize key China employment issues and give you guidance on how to solve real-life China employment law issues and problems.

WHAT YOU’LL LEARN

This webinar will cover the following:

  • The basics of China’s employment law rules
  • How to draft an employment agreement that works for your China locale
  • How to draft China employer rules and regulations (aka employee handbooks)
  • The other agreements you should consider for your China employees
  • Frequently contested issues, such as overtime, vacation days, commission payments, and leaves of absence
  • Employee terminations
  • HR audits AND MUCH MORE!

YOUR CONFERENCE LEADER

Your conference leader for “Chinese Employment Law Landscape: Key Issues and Staying Compliant in the Local Market” is Grace Yang. Grace heads Harris Bricken’s China employment law practice and contributes a weekly column about China employment law issues for the multi-award winning China Law Blog. Grace received her B.A. degree in law from Peking University and her J.D. degree from the University of Washington School of Law. She represents both China employers and employees in their China employment law matters. Grace published a book entitled The China Employment Law Guide.

Don’t miss it. To sign up for the live or recorded webinar, go here.

Doing Business in China EventI will be speaking at an international business event in Milwaukee, Wisconsin, on May 9, entitled, Unlocking Global Opportunities. For more information, go here.

Who should attend? Any business operating internationally or hoping to do so.

Why attend?

  • Grow your international sales
  • Develop a strategic global plan
  • Network with hundreds of people from manufacturing, service & logistics industries
  • Keep current on the latest international trade issues with industry experts
  • Hear high-caliber speakers discuss their experiences in international markets
  • Leave with new ideas.

What will go on there?

The agenda will include the following:

  • Governor’s Export Award Winners
  • Luncheon Keynote Speaker (invited)- Elizabeth Erin Walsh – Assistant Secretary for Global Markets and Director General of the U.S. & Foreign Commercial Service; U.S. Department of Commerce International Trade Administration
  • International Café – Roundtable discussions with peers & subject matter experts
  • 5 Breakout Sessions:
    –     Unlocking the Tax Code
    –     Global E-Commerce: The Great Equalizer
    –     Compliance
    –     Transportation: Enhancing Wisconsin’s Competitive Advantage
    –     International Growth Strategies
  • Networking Reception

More specifically, the event will consist of the following:

7:30 a.m. to 5:00 p.m.   Networking

8:00 a.m. to 9:15 a.m.  Breakfast

9:15 a.m. to 9:45 a.m.  Networking Break

9:45 a.m. to 11:15 a.m. International Cafe — Roundtable Sessions with International Experts.  This session to give business owners and managers an opportunity to discuss specific issues and challenges of selling internationally with subject matter experts. A total of 6 roundtables will focus on multiple functional areas of interest. During these 90-minute sessions, the roundtables will turn every 25 minutes, allowing individuals to participate in 3 discussions. The roundtable topics will be as follows:

9:45 to 11:15  Federal Tax Code Changes and Your International Business.  The following speakers will help you make sense of the recent tax code changes as they relate to your international business, including how the new federal tax code can spur economic growth for your company.

9:45 a.m. to 11:15 a.m.  Global E-Commerce: The Great Equalizer.  In this session, John Worthington and Samantha Soffici of IBT Online, will give you an opportunity to learn from E-Commerce experts and international company leaders who have built substantial business revenue through global E-Commerce sales, both B2B and B2C. Take away tactical tips and learn how to execute your E-commerce strategy, from global demand generation, to website localization, to the platforms best suited to your products and customer base.

  • The Global E-Commerce Marketplace: Successfully penetrating E-Commerce in China and E-Commerce platform for SMEs
  • International Online Marketing & Website Localization: How do websites help exporters? A Look at selecting a web address, SEO, web hosting and localization and Informational vs. transactional websites.
  • E-Commerce: A WI Company Perspective Best practices for an International on-line strategy, Issues/obstacles vs. success/growth and Business Impact of E-commerce

11:15 a.m. to 11:45 a.m. Networking Break

11:45 a.m. to 1:30 p.m. Lunch — Growing and Protecting Wisconsin Companies Globally – Keynote Speaker: Elizabeth Erin Walsh – Assistant Secretary for Global Markets and Director General of the U.S. & Foreign Commercial Service; U.S. Department of Commerce International Trade Administration

1:30 p.m. to 1:45 p.m. Networking Break

1:45 p.m. to 3:15 p.m. Compliance.  In this session you will hear from both the legal and the manufacturer’s perspective regarding the staples of trade compliance, including the hottest and most current topics. Together with practical examples and time for Q&A, this session is relevant for new and experienced exporters. The speakers for this session will be the following:

1:45 p.m. to 3:15 p.m. Transportation: Enhancing Wisconsin’s Competitive Advantage. This session will examine strategies to improve the logistics of Wisconsin’s exports. Using case studies, panelists will discuss alternatives and best practices in food, beverage and agricultural transportation. Attendees will gain an understanding of how food companies can better transport product to market – whether through cold chain, leveraging rail, and/or maximizing value. The speakers will be the following:

1:45 p.m. to 3:15 p.m. Creative Growth Strategies. Whether you rely on distributors, manufacturers reps, licensing agreements, franchise agreements, or you do it all yourself, doing business internationally requires due diligence, formal agreements, and IP protections. I will be speaking at this session, along with the following people who will discuss their specific strategies to enter new international markets.

3:15 p.m. to 5:00 p.m. Networking Reception.  


Sounds great, what do I need to do to go? 
Go here for full details and to sign up.

See you in Milwaukee on May 9!

China trademarks and IP protections I will be speaking today (April 25) in Barcelona at a Red Points event on international and China IP protection. The event will be on the eve of World International IP Day and it will be to celebrate Red Points’ launching of its online brand and trademark platform that will offer free lessons on detecting, validating and enforcing intellectual property rights across the internet.

This event will be live-streamed on April 25th as well, at 9:00 AM PST, 12:00 PM EST, 6:00 PM CEST. For more information, go here and to register go here.

It’s all FREE and there will be an hour or so of networking after the talks, which will include substantial time for questions. I will be focusing on how education is so important in this space, mostly by highlighting real life worse case scenarios that have been created because companies simply did not know what they needed to do to protect their intellectual property from China. The key point: Many (most?) Chinese manufacturers are no longer content just making products for foreign companies. They now want to make AND sell their own products. This means you need to do various things to prevent Chinese manufacturers — especially your own Chinese manufacturer — from registering “your” trademark in China and then copying and selling your product worldwide.

To avoid your company being part of my next China trademark mistakes speech you should both attend this event (either live or via live streaming) and you should check out the following:

I hope to see you there.

 

 

China IP protectionsOn the evening of April 25, I will be speaking live in Barcelona at a Red Points event on international and China IP protection. The event will be on the eve of World International IP Day and it will be to celebrate Red Points’ launching its online brand and trademark platform offering free lessons on detecting, validating and enforcing intellectual property rights across the internet.

This event will be live-streamed on April 25th as well, at 9:00 AM PST, 12:00 PM EST, 6:00 PM CEST. For more information, go here and to register (it’s all FREE), go here to register.

 

China employment lawyerOn April 18, Grace Yang, our lead China employment lawyer, will be putting on a webinar on “Employment Laws for Female Workers in China.” To call this webinar timely would be an understatement, as the issues involving female employees in China could not be more relevant/topical/important.

The live webcast will be this Wednesday, April 18, 1:00-3:15pm PST / 2:00-4:15pm MST / 3:00-5:15pm CST / 4:00-6:15pm EST.

LawProCLE, who is putting on this webinar, describes it as follows:

Foreign companies doing business in China face complex China labor and employment issues every day and issues related to female workers require additional attention. The Chinese government has high expectations regarding how employers must treat female employees, especially those who are pregnant, nursing or on maternity leave. Employers need to know and follow the national, provincial and municipal laws and regulations regarding protection of female employees. Female employee disputes are increasingly common in China and both the government and the courts are getting increasingly tougher against employers that fail to treat their female employees appropriately.

This webinar will give you the information you need to spot employment law issues relating to your female employees and arm you with ways to avoid and mitigate problems.

Grace’s talk will focus on the following:

  1. The key China employment laws on protection of female workers
  2. The employer rules, regulations and policies you need for your China employees
  3. What you need in your employment toolkit to reduce your risk of sexual harassment claims
  4. Female employee special leaves
  5. Female employee terminations
  6. China employer audits

LawProCLE describes Grace as follows:

Grace focuses on international business and China law. She is Harris Bricken’s lead attorney on China labor and employment law and recently authored a book entitled the China Employment Law Guide. Grace is admitted to practice law in the States of New York and Washington. Grace received her bachelor’s degree from Peking University School of Law (“Beida”) and her J.D. from the University of Washington School of Law. During law school, Grace won “Best Written Contract” in the University of Washington Contract Drafting & Negotiation Competition and the Pro Bono Student of the Year Award for her involvement in several community-based volunteer legal service projects.

Grace has spoken at a ton of seminars and webinars on various different aspects of China employment law and always to rave reviews and you do not want to miss this one.  For more information and to sign up, click here.

 

China automotive IP Intellectual Property

I did an audio interview the other day with GlobalAutoIndustry.com a very international site dedicated to the auto industry. The topic was China IP Challenges for Automotive Suppliers, but it dealt mostly with automotive high-tech. I urge you to go here to listen to the entire interview as the below is just a hastily put together transcript of it and it does not include all of it.

For anyone who has been living in a cave, the auto industry has changed, is changing, and is very much on the cusp of more change, much of this stemming from cutting edge and rapidly advancing technologies. Or to borrow from a mega-famous car ad, this is not your father’s auto industry.

And with these technological advances comes massive IP needing protection. Our China lawyers have mostly represented American (and a smattering of European) auto tech companies that have been approached by Chinese companies interested in our client’s intellectual property. Just as is true of the United States, some of China’s largest tech companies are interested in developing and commercializing automobile technologies (autonomous driving, artificial intelligence, internet of things, connectivity, battery charging, etc.) and they are searching the world to find such technologies. These massive Chinese companies (and some not so massive ones as well) are reaching out in droves to foreign companies to try to supplement their automobile technologies. Our job as their China IP attorneys is to help them protect their IP. My interview discusses some of the IP issues these foreign tech companies face and some of the things they can and should do to protect their IP. I urge you to give it a listen because it includes a few things not covered below (including church bells going off in Madrid — that’s a long story). Anyway, please enjoy.

Ron: Welcome to the Global Business Professor Audio Interview Series. I’m Ron Hesse, and today I’m interviewing Dan Harris. Dan is an international lawyer who helps Western companies navigate Asia’s laws. Dan is founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, Beijing, and Barcelona. Today’s topic is IP challenges for automotive suppliers in China. How are you, Dan?

Dan: I’m good and I’m looking forward to talking with you today, Ron.

 

Ron: Excellent. Well let’s get started! Let me start with this, Dan: what are the big issues you are seeing with China and the automotive world?

Dan: The auto industry is changing, and fast, and a large part of the rapid changes are happening with technology. What I am seeing is many Chinese companies want access to auto technology being developed outside China. Ten years ago, we were talking about things like transmission mechanics and technology, but today, we’re seeing this in all sorts of cutting edge technologies: driverless cars, battery-charging sensors, always-on cameras, artificial intelligence, composite materials technology, adaptive headlights, Internet of things, connectivity. It’s just endless, and so many of these technologies have direct applications to the auto industry.

 

Ron: Dan, what sort of companies want these technologies, and from whom?

Dan: A lot of companies in China want these technologies, but it is mostly just the big and powerful Chinese and auto tech companies that have the wherewithal to seriously go out and try to get access to these new technologies. On the foreign side, the side outside China, all sorts of companies are being contacted for their technology, ranging from one-product start-ups to mid-size companies. With some of these companies — in fact most of them — their technology has been developed specifically for the auto industry, but many of these companies are pure technology companies. What so many of these foreign companies have in common is that they have no experience dealing with China.

 

Ron: What sort of deals do the Chinese companies usually propose, and what should the foreign companies do in response?

 

Dan: What’s so funny here is that the Chinese companies oftentimes do not propose anything at all. They simply tell the foreign companies about the massive opportunities in China and ask to be able to test out the foreign company’s technology. Fortunately, at least some of these foreign companies reach out to lawyers experienced in dealing with China for help on what they should be doing at this point before they turn over any of their technology to China.

 

Ron: And what should they be doing at this point?

Dan: Not handing over their technology right away, that’s for sure. At this stage, we usually advocate our clients do two things right away. One, register whatever IP they have in China. This IP typically consists of patents and trademarks and sometimes even copyrights. And we explain how US Trademarks and Patents do not provide protections in China and how it is necessary to register these in China to protect them in China from Chinese companies. Then we explain how they need an NDA agreement for China (a Non-Disclosure Agreement) that is very different from the NDA agreements they use in the United States or in Europe—so different, in fact, that their home NDAs almost never provide any protection in China. And in fact, sometimes, these NDAs that are American or Western European style are actually worse than having nothing at all. [See Why Your NDA is WORSE Than Nothing for China]

What these companies almost always need is a China-centric NNN agreement, an agreement that prevents the Chinese company from competing, from disclosing, and from circumventing the American or the European company. And this agreement should be in Chinese, and it should be drafted for China. Once the American or European company has done its IP filings and has an NNN in place that’s been signed by the Chinese company they are thinking of showing their technology to, they are then in a much better position to provide their technology to the Chinese auto or technology company. And really, I probably should have been a little bit more specific earlier, it’s not just auto companies in China looking for this technology. Many of China’s biggest technology companies are looking for this also — companies like Alibaba and Tencent, etc., are looking for technology for the auto industry as well.

 

Ron: Are the IP registrations in place and a signed NNN agreement enough to make it safe to turn over the IP?

Dan: Well, it depends how you define the word safe. How’s that for a lawyer answer for you? It definitely makes it safer and in  most cases, it’s about all you can do at this point. But the reality is, the more companies to which any company turns over its IP and the more Chinese companies to which any company turns over its IP, the greater the risk of losing the IP. So we always advocate that our clients first make sure the company to which our client is looking to turn over its IP is a legitimate company. And we usually determine that after some level of due diligence on that company. And you’re probably thinking well, what do you mean by a legitimate company? Well, what we see a lot of times with China is that there are companies that are not really companies, and those are basically just scammers, and that’s actually fairly rare in the technology field because it’s a pretty sophisticated field. But what we also see are companies that want to get into the high technology automotive field and they’re not licensed to be in that field yet. So not kidding, we’ve had situations where a big Chinese sock (as in, what you put on your feet) a big Chinese sock company came to one of our clients wanting high-end auto technology and we looked up this Chinese company and they weren’t licensed to do anything even close to what they wanted to look at. And we explained to our client how in China, unlike in the United States or in Europe, if you’re licensed to make socks in China, you really cannot do anything other than make socks unless you go through what can sometimes be a difficult procedure to get licensed to do something else. So although this company might be a very legitimate sock manufacturer, the odds of it ever really going anywhere with high-end automotive technology is pretty slim. And so it’s not a company you want to turn over your technology to, unless you’re paid a lot of money in advance. And so that’s one of the other things that we also do.

And most importantly, and this goes back to one of the reasons we do due diligence on the potential Chinese partner, is we want there to be at least some chance of a deal happening before the technology is revealed. So for instance, if the Chinese company wants to buy the technology for $1 million, and our client would never sell it for less than $10 million, then it might as well just walk away without ever revealing its technology. And I would estimate that probably 25% of the time, a few forthright conversations with the Chinese company will tease out that there will never be a deal and our client walks away without a deal but it also walks without having put its technology at risk of being lost to China. Although, now that I say that, I have to laugh a little because even without sending your technology over to China, there’s always a risk of losing it to China because Chinese companies can maybe buy it on the market and/or reverse engineer it or whatever, but that’s still no reason to easily turn over your technology to everybody. And what usually happens once the parties start talking is that the Chinese company wants to form some sort of joint venture with our client. And in that joint venture deal, our client would put its technology into the joint venture entity that will be formed in China, and the Chinese company will tell our client, “and then if the joint venture entity does well, you’re going to do really well.” And our client starts thinking, “wow, this is great, I’m going to have a company in China and that company’s going to sell my technology to 1.4 billion Chinese consumers.” Well, as lawyers, we don’t like it because once IP or technology goes into a joint venture, it virtually never comes back and it is the rare foreign company that takes home profits from a China joint venture.

 

Ron: Those are interesting points, Dan. What sort of deals do you prefer?

Dan: Again I’m gonna give you a lawyer’s answer and say that it depends, but usually something more along the lines of straight licensing deals are safer for our clients—something where our client keeps all its IP in its name and retains ownership over all its intellectual property, and simply licenses it out to the Chinese company for $10 million a year, or failing that, for $2 per widget into which its technology goes. And it’s a lot easier to pull the plug on that sort of deal and keep your technology than it is on a joint venture deal. Now, do Chinese companies go for these licensing deals? Yes, they do, but usually only after our clients have held out long enough to convince the Chinese company that this is the only way it will get any access to the IP or the technology. Unfortunately, there are many American and European companies that don’t hold out, and that makes it tough for everybody else, and a lot of times those American and European companies end up calling law firms like us four or five years down the road when they’ve not made a penny off the joint venture and they’re now trying to get their intellectual property back out. And a lot of times, they’ll call us after the Chinese joint venture has gone out using the foreign company’s technology to compete with the foreign company internationally.

 

Ron: Dan, how do you ensure your clients will get paid the $10 million on a licensing deal? Because I’ve heard getting money from Chinese companies can be difficult.

Dan: You’ve heard right, and there are many reasons for this, ranging from government capital controls — the Chinese government does not like hard currency leaving China without its approval — to Chinese companies simply wanting to get technology by paying as little as possible for it. There are though all sorts of solutions that can increase the likelihood of foreign companies getting paid, with the best solution being to require some or all payments be made before some or all of the technology is revealed. Of course, the best situation is where our client gets the $10 million first and then reveals the technology. Chinese companies rarely go for that, so then the second best situation is one where the Chinese company pays, let’s say, $5 million, and then our client reveals half of the technology, and then the Chinese company pays another $5 million, and then our clients reveals the rest of the technology. Now, that’s an over-simplification — we’ve done deals where there have been ten stages — but what’s always so interesting about these multi-stage licensing deals is how the Chinese side will often try to circumvent those deals. So for instance,  it’s not uncommon for the Chinese side, after making three payments and getting three levels of the technology, to then say, “look, we can’t make this fourth payment because the Chinese government is not gonna let us do it for another six months, but we need you to send the technology to us now” and we have to sometimes fight hard with our own clients to get them not to send over the technology. Because a lot of times, they’ll tell us, “well, you know, if we just send the technology, it won’t matter because there’s nothing the Chinese company can do with our technology until they hit level 7, and this is just going to get them, you know, a little bit closer to that, but it’s not going to get them all the way there.” And we tell them, “look, I don’t think you really understand how a lot of these Chinese companies operate. They will be happy to get to maybe to level 4 or level 5 using your technology and not paying for all of it, and then they’ll hire their own people in China to get from level 5 to let’s say level 7 or level 8.” And a lot of times American companies will say, “well, if they get to level 8, it’s not that big a deal because it’s really not that great a technology until they get to level 10.” And we tell them, “look, it may not be that great a technology in the United States, but in Pakistan, or in Ethiopia or Nigeria, it might be a pretty valuable technology, and maybe those are the companies this Chinese company wants to sell to, so you’ve got to really get away from an American/Western European way of thinking when you’re doing these deals.

 

Ron: Very interesting. Thank you for your great insight, Dan. And that concludes today’s audio interview. Everyone, have a wonderful day!

Doing business with ChinaPresident Trump’s presidency has changed the trade relationship between China and the United States, of that there can be no doubt. But how and what other changes are in store? For answers to these questions and a whole lot more, I urge you to go to One Year In: The Trump Administration’s Impact on Key International Business Regulatory Areas. This event is being put on by the International Practice Section of the Washington State Bar Association and will take place in Seattle AND online exactly one week from today (Thursday, March 8) starting at noon and going until 1:30 p.m. This event is described as follows:

During its first year, the Trump Administration has made critical regulatory and policy changes impacting key international business regulatory areas including international trade (customs laws, import laws), immigration, and national security (export controls, economic sanctions, foreign direct investment).  Join our panel of experts as they describe what has changed officially in the last year in each of these areas and how presidential tweets and speeches have left some areas of uncertainty.  Our panelists will also prognosticate as to where the Trump Administration is headed in each of these key regulatory areas in 2018.

It will have the following three speakers:

Emily Lawson – Harris Bricken, LLP, Seattle
Michelle Salter – Davis Wright Tremaine, LLP, Seattle
Larry Ward – Dorsey & Whitney LLP, Seattle

Emily is a key part of our firm’s International Trade Group where she helps our clients achieve import and trade compliance and defends their interests before government trade agencies and courts, on matters involving Customs compliance, antidumping, countervailing duties (AD/CVD), economic sanctions and U.S. export controls compliance.

Go HERE to register to attend live and HERE to register for the Webinar portion of this event. CLE credits are available for both live and webinar attendance.

Do not miss this!

China employment law seminar
Please come to Grace’s talk on Thursday

Our lead China employment lawyer, Grace Yang, will be speaking at a Washington State Bar Association (WSBA) seminar in Seattle this Thursday, December 7. If you are in Seattle and doing business in China or even just thinking about doing business in China, I cannot urge you strongly enough to attend.

The full name of the talk is China’s Employment Law Landscape: What You Need to Know. And trust me when I say there is probably a lot you need to know. I say this because foreign companies doing business in China seem to get employment and labor law issues wrong maybe more than anything else. And, frankly, I don’t blame them. Until Grace joined our law firm, none of our China lawyers would touch most China employment law matters because none believed themselves qualified to do so. We were of the view that only lawyers who focus their practices on China employment and labor law should be touching such matters. The reason for this is simply because China’s employment rules and laws are highly localized and always changing and, most importantly, oftentimes unwritten. The unwritten part means that having a good relationship with the local labor and employment bureaus is absolutely key. See China Employment Law: Local and Not So Simple.

Grace has become our go-to person on everything related to China employment law. She splits her time between Beijing where she grew up and attended Beijing University Law School and Seattle — Grace has her J.D. law degree from the University of Washington. Grace recently wrote and had published (just a couple of months ago) what would best be described as a handbook on China employment law. The book is titled, The China Employment Law Guide: What You Need to Know to Protect Your Company and you can get it in either paperback or in a digital format. I always recommend you get the paperback version because it is the sort of book you want on your shelf for quick access whenever you have a China employment law issue and so you can easily share it among your HR team and your managers. Go here to Amazon to get your own. 

Grace’s talk will go from noon on Thursday until 1:30 p.m. and it will be at 600 Stewart Street, Suite 205 in downtown Seattle. To register in advance, go here, or show up at the event starting at 11:30 a.m. You will get 1.5 hours CLE credit for attending. The WSBA describes Grace’s talk as follows:

China’s employment laws are complicated and highly local. Foreign companies doing business in China face complex China labor and employment issues and questions every day – often without even realizing it. What works in the United States has very little in common with what works in China. Employment compliance has become one of the most important issues foreign companies face in China and it is the rare foreign company that gets it right. Employee disputes are becoming considerably more common and government enforcement is getting significantly more stringent. It virtually always costs less for your company to deal proactively with China employment law issues than to wait to address them only after they have come a dispute. As such, it is imperative that you understand the framework of Chinese employment law and steps you can take to mitigate risk.

At the beginning of this post, I said that if you are doing business in China or thinking of doing business in China you should attend this talk. I am sure this caused at least some of you to think that your attendance is not necessary unless you actually have employees in China. Wrong. As is mentioned in the seminar description in the proceeding paragraph, “foreign companies doing business in China face complex China labor and employment issues….every day — often without realizing it. Pretty much every month for the past five years some foreign company has called one of our China lawyers with an employment problem that arose because they did not realize they had an employee in  China. See Doing Business in China with Deportation or Worse Hanging Over Your Head to see what I am talking about.

More importantly, there has not been a single month in the last five years when some company has not come to us after having made a China employment law mistake. Because there are so many laws and rules (both national and local) and because China so heavily favors employees over foreign employers, the smallest and most technical mistakes can be game changers. Put simply: you have to get China’s employment laws exactly right but very few do.

I recently heard Grace give a similar talk as part of a webinar and it was fantastic (and the reviews from listeners supports me on this) and essential. If you practice labor or employment law, if you are interested in labor or employment law, if you have any interest in China or anything at all to do with China, I urge you to attend. And if you will not be in town — heck, even if you will be in town), I  also urge you to buy the book.

So just sign up here and go. We’ll see you there.