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The large-scale shift to telework brought on by the COVID-19 pandemic is prompting businesses around the world to explore new avenues to engage with clients and friends. Harris Bricken is no exception, and we are proud to announce our new podcast series: Global Law and Business, hosted by international attorneys Fred Rocafort and Jonathan Bench.

In Episode #11, we discuss Chile with attorneys Juan Cristóbal Palma Orellana and Mario Tapia Echeverría. We cover:

If you have comments on this episode or if you’d like to suggest topics for future episodes, please email globallawbiz@harrisbricken.com.

And please follow Fred and Jonathan on social media to stay informed on upcoming guests and topics:

We’ll see you next Thursday for another discussion on the global business environment, this time discussing Iran with guest Miles Hansen.

Free Product from China

Every day for the last week I have gotten at least one email from a foreign companies that paid money to a company in China and got literally nothing in return. The term for this is theft.

This sort of thing is a given by Chinese companies and for why this is so prevalent lately and what you can do to protect against this, check out  China Manufacturing Risks are Sky-High Right Now. Act Accordingly. We write about these risks often on here but that is not the topic of today’s post.

Today’s post is about the flip side. Today’s post is about foreign companies that get product from China and do not pay for it. How do these companies accomplish this and how common is this?

My law firm’s manufacturing and litigation lawyers actually see the flip side of this quite often as well, but more like once or twice a month, though these numbers seem to be rapidly increasing as well. And virtually all of what we see has not been planned. It is something that happens when the foreign company encounters financial difficulties that make paying its Chinese counter-party difficult or impossible or when there is a dispute regarding the quality of what the Chinese counter-party was to have provided — usually a manufactured product. What happens in these situations?

Not paying Chinese companies and getting away with it is incredibly easy. And when I say incredibly easy, I mean that of the 25+ times the international litigators at my law firm have represented foreign companies on such matters against Chinese companies or against Sinosure (China’s government-owned export insurance company), not one single time has the Chinese company or Sinosure ever actually sued our client. Not once.

Why are Chinese companies so reluctant to sue? There are a ton of reasons, including the following:

1. Chinese companies tend not to like or trust foreign countries.

2. Chinese companies tend to be fearful of foreign courts. Who isn’t?

3. Chinese companies and the Chinese government often have a lot to hide. They understand that lawsuits in most Western countries (this is doubly true for the United States) will require they reveal a lot of information they do not want to reveal.

4. Foreign courts conduct their business in a foreign language. This makes things difficult on Chinese companies.

5. Foreign courts typically require companies use locally licensed lawyers. Chinese companies tend not to know or trust lawyers outside China.

6. Locally licensed lawyers in countries like the United States or Spain are not cheap and litigation is also not cheap and Chinese companies tend to be very reluctant to spend money on services. Chinese companies tend not to be willing to pay — not hourly, not flat fee, not mixed fee, and not on a contingency fee basis — what it takes to hire competent counsel to pursue an international debt collection matter.

7. Lawsuits in most countries are public affairs. Chinese companies tend to prefer operating in secret.

8. It is the rare Chinese company that uses high end international lawyers for their contracts. This means their contracts tend to be very weak outside China and this can turn what should have been a fast and easy and cheap case into a time-consuming and difficult and expensive case.

9. Chinese companies tend to view not getting paid as embarrassing. This is particularly true if the reason the Chinese company did not get paid might involve claims against the Chinese company for acting dishonestly or incompetently.

10. Because it is difficult to collect on sorts of debts in China, Chinese companies tend to assume the same is true elsewhere as well.

11. Bankruptcy in China virtually always means creditors get nothing. Chinese companies tend to assume the same is true elsewhere.

12. Companies in China that are going out of business will often take payments from foreign buyers and then provide nothing in return (see above and see China Business Scam Week, Part 2: Bricks for Products). Chinese companies tend to assume the same is true elsewhere. Why pursue a company overseas that no longer exists?

My law firm has many times represented both Chinese companies on litigation matters outside China and companies sued by Chinese companies outside China. Our conclusion from these cases is that Chinese companies generally do not understand litigation, do not understand the costs of litigation, do not understand what it takes to prevail in litigation, and — most importantly — do not have the “staying power” to pursue litigation or arbitration for the length of time it takes to prevail. We are not the only foreign lawyers who believe these things and I say this because many lawyers sued by Chinese companies know to basically just stall them until they quit.

Then there is the whole State Owned Entity (SOE) “thing.” When a Chinese state-owned company has turnover in its senior management (which is common for SOEs that are doing badly due to not getting paid), the successor management often does not want to bother going after unpaid debts for fear they will be tarnished with that debt. I can tell you story after story about Chinese company’s falling asleep on their debt collection, but here are just a few:

1. Many years ago, a large China SOE reached out to my law firm about collecting on a $15 million unpaid debt owed them by a U.S. buyer. The Chinese company told us it had a written contract and the American company admitted it owed the debt. Our international litigators were salivating about taking on the case and asked the Chinese company for all relevant documents. Turned out to be a terrible case because the debt had been owed for eleven years (yes, 11 years) and this was the first time the Chinese company had made any effort to collect on it. The statutes of limitations had all run and the Chinese company had no case.

2. Many years ago a large Chinese SOE reached out to my law firm regarding a large debt owed it by an American company. To make a long story short, it eventually came out that the American company had sent an executive of the Chinese company about 10% of the total owed and the executive had in return signed an agreement on behalf of the Chinese company absolving the American company of the debt. When we told the Chinese company of how these complications would increase its attorneys fees and make collection less likely, it walked away from the case.

3. Many years ago, our law firm represented an American company threatened with a lawsuit by a large PRC company.  We told the opposing lawyer that our client had never contracted with the large PRC company and all the money our client had paid relating to the widgets at issue had gone to a Hong Kong company. We argued that because our client had never contracted with or paid the PRC company anything, the PRC company had no standing to sue for breach of contract. We also pointed out that if the Hong Kong company were to sue our client, there would be very public records of how the PRC company had been illegally funneling money to Hong Kong for years so as to avoid PRC taxes. The PRC company walked away and we have used this defense with nothing but success ever since.

During the 2008 recession, in Ranking Creditors: China is Dead Last, I wrote how our when our clients prioritize their creditors for payment they put the Chinese ones last in line:

I asked the client why 90% of his payables were Asian and Russian when I had always thought only about half its business was with Asia/Russia, with the other half being with North America. He responded by saying I was right about his business, but the Asian/Russian companies just “didn’t bug us as much to get paid.” We then started examining the payables and ranking them in terms of contract quality. In other words, of these approximately 40 creditors, how did they rank in terms of the strength of their contracts.

By this ranking, all of the bottom seven were Chinese companies.

We then talked about how many of these companies had made any real effort to collect. A bunch of the Korean and Russian companies had retained lawyers who had written demand letters. The letters for the Korean companies (all in English) came from Korean lawyers in Korea and Korean lawyers in Los Angeles, none of which we believed would be able to sue my client quickly. The letters for the Russian companies (all in English) came from lawyers in Moscow. We decided I would contact the Korean and Russian lawyers to work out payment deals, which I subsequently did. The few Japanese to which my client owed money were deemed by the client too important not to pay and so we agreed he would contact them himself, explain the situation, and start paying.

Not a single Chinese company had yet retained a lawyer and I explained to my client my firm’s history in trying to represent Chinese companies owed money in the United States. I told him of how Chinese companies expected my firm to take on these sorts of cases on a 5% contingency fee basis, with my firm paying all costs, and, believe it or not, sometimes even requesting we guarantee full payment. I told him of how we had successfully handled a number of business collection cases for Korean, Russian, and Japanese clients, but had not once even taken one on for a Chinese company.

Way back in 2008, I got the following email from a savvy Chinese national who was attending a U.Sl law school. This law student had written this email to a Chinese lawyer in China who had contacted him regarding their working together to collect debts on behalf of Chinese companies and he wanted me to see what he had sent, the translation of which is the below:

What does the contingency fee option look like? The biggest issue is of course the percentage that the attorney can deduct (both attorneys fees and costs, i.e. court costs, travel, etc.). The typical arrangement is 30–35% of any recovery after deducting fees and costs for the attorney, and the rest for the plaintiff(s) if there is no appeal. In appeal situations, the attorney gets 40%, in addition to costs. These figures might sound alarmingly high, but they are the norm in the United States, and frankly, lawyers just put these figures in a contract as a matter of course, and there is hardly any bargaining.

With the above said, Chinese companies must adapt to the rules of the game in the U.S. in order to get competent counsel to collect their debt. My understanding is that most Chinese companies don’t want to advance court costs, and they want attorneys to retain 5%-10% of any recovery. Based on my knowledge and experience, U.S. lawyers/firms will absolutely not take on very risky representations with such a low percentage. 5% -10% is not worthy of their time and efforts, and they might end up losing money after paying their overhead.

I am sending you this note not to educate or offend you, not at all. Rather, I think that in order for the vast number of Chinese companies to have a chance of getting their money back and to fight back when wronged, they must know the rules of the game and play by them over here. And they must not insist that the rules here be the same as in China; otherwise, they lose money rightfully belonging to them, and a chance to get it back through competent representation in the courts. Since you are, apparently, leading the efforts in debt collection, I think it is important that you start informing the Chinese companies what is reasonably expected over here by U.S. attorneys in terms of percentages, so that they don’t overlook collection of their money entirely simply because U.S. lawyers demand more in their contingent fee agreements.

The lawyer in China walked away.

My law firm has received a number of inquiries from Chinese companies and Chinese lawyers seeking to retain us to oversee their U.S. debt collection efforts or to file a creditor’s claim in a pending bankruptcy or receivership action. Yet, because the Chinese companies are so out of line in their expectation of American or EU attorneys’ fees, we rarely end up with these cases.

Chinese factories are hurting right now and they are desperate and desperate companies do desperate things like agree to ship product without getting any or only very minimal payments upfront. Chinese companies are notoriously bad at paying attention to their buyer’s credit records and I’ve been shocked lately by the incredibly favorable payment terms we are seeing even start-up companies get from some Chinese suppliers. My sense (and I say “sense” because I lack sufficient evidence to back it up) is that for all the complaining by Western companies of getting “ripped off” in China, the dollar value of the rip-offs is actually higher going the other way.

In part two of this series I will discuss foreign companies that are proudly buying product from Chinese companies with no intention to pay and are doing so for what they describe as “patriotic” or “moral” reasons, or as one put it, “economic terrorism.”

International lawyer

It has been eight years since my graduation from law school and business school. I started law school in the Fall of 2008 before the world fell apart . . . the last time. The reverberations of the financial crisis that started roiling the world in 2008 continued into 2012 when I graduated and started job hunting.  Now that we are in a completely different crisis – but one with such similar economic effects on the global economy – my heart goes out to law students and aspiring international lawyers who are stressed and feel stuck. I empathize with you to the nth degree, and I want to help.

In the past couple of months I have spoken with recent law graduates and prospective law students who want to work in the international arena. They are talented and ambitious, and I have no doubt that they will succeed in finding their path as an international lawyer. In case you are one of them or know someone in their shoes, I offer the following thoughts as an international transactions lawyer.

Very few international lawyers become international lawyers in their first job after law school. As a general rule, most law firms are not going to have a fast track to helping you become an international lawyer unless you had an established internationally-focused career prior to going to law school or unless you have otherwise engaged in the world (like spent a number of years growing up in a foreign country and you speak that language as well as the natives do). All law firms that are willing to hire new graduates want someone who is smart, adaptable, resilient, and knows how to work hard. If you fit that mold, then you did (or will do) well in law school. Those are the same skills you need to succeed as a lawyer at any firm. Your goal should be to find a good law firm, ideally one that already has an international practice, and learn how to be a good lawyer, after which you can learn to become a good international lawyer.

There are really only two types of law firms that have international law practices. The first is the mega international law firms, and you will need to be in the top of your law school class or be very well connected to even get an interview with a mega law firm in this depressed economic environment. The second are boutique international law firms. Most small and medium-sized law firms (including boutique international firms) will not have the bandwidth to hire a large cadre of recent law graduates because it is difficult for them to get their money’s worth out of a new law school graduate.

When I graduated law school and passed the bar exam, I assumed I was worth a lot because I was now a lawyer. I was wrong. In reality, new business lawyers are not worth much in their first couple years of practice because they first need to read and redline about a hundred contracts before they reach the point where they can relatively quickly draft a really good contract. It takes literally thousands of hours of work experience to molding  a smart person into a great lawyer. And while you are learning how to be a good lawyer, you need to keep your eye on how you will become an international lawyer. You can make a lateral move into the firm of your dreams, but you should know what firms and lawyers practice the type of international law you wish to do, and you should start getting to know those lawyers’ work so that you can then approach them as potential mentors. Most “regular” firms will not have the expertise or the interest to have any kind of international practice. You can create your own international practice from within that sort of firm, but doing so will likely be considerably more difficult because you will likely not get a lot of support internally unless you already have a proven track record of international work.

You need to decide now whether you want to be a lawyer with broad credentials or specialized credentials. Let me explain. You can be a general transactional international lawyer like me. I deal with all kinds of transactions, from FDI (foreign direct investment), to M&A (mergers and acquisitions), to financing (bank and investment capital). Or you can be, among other things, an international litigator, an international tax lawyer, an international trade lawyer, an immigration lawyer, an international IP lawyer, or an international employment lawyer.

If you already know what you want to do, great. For instance, if you know you want to be an international tax lawyer, then it will be helpful for you to get or have an undergraduate degree or minor in accounting, and even better if you work at a CPA firm or become a CPA prior to becoming a tax lawyer. Those credentials and experience will help you rise to your peak at maximum speed. If you do not know what you want to do within the international realm, then learn as much as you can until you start to figure out what you want to do because you will be good at it and enjoy it. I  know too many lawyers who are really good at what they do but don’t enjoy being a lawyer, and now they feel stuck because they do not have an easy way to transition to another practice area they would enjoy more.

You have to become a good domestic lawyer first. If you have a hard time learning how to be a good litigation/tax/transactional/employment lawyer, then you are going to find it nearly impossible to be a good litigation/tax/transactional/employment lawyer on an international scale. Fundamentally, your work will not change. You will still be trying to decipher difficult questions for clients, and often there will be no perfect answer, just a range of potential answers with varying degrees of risk. When you add international laws, regulations, languages, customs, and enforcement on top of the regular knotty client questions, you add several additional layers of analysis. Some of us consider this fun – like a giant puzzle – but others get frustrated and wish things could just be simple for once. Most likely, you will vacillate between these two extremes, depending on the day or hour or minute.

I have been fortunate to have had many great mentors over the years, and I continue to lean on experienced professionals in my practice today to help me become a better international lawyer. When the world normalizes again, if you want to sit down with me, call me, or email me and pick my brain, I’m more than willing to offer you additional insights. And I’ll provide more insights in my next post on this topic, within the next week or so.

China contracts

Phone calls from potential clients nearly always start out fun and this economic downturn has brought my law firm a whole slew of new clients and potential clients needing legal help in dealing with the economic downturn.

This post is on three potential clients whose situations were so bad I had to suggest they not hire us. None of them liked what I told them, but two actually hired us anyway. One to try to deal with the matter on which they initially called, one to deal with another matter and to prevent a recurrence of the situation that precipitated their call.

All three calls started out pretty much the same with the nearly obligatory, “I got your name from so and so. She/he tells me you are the right/perfect/best person to solve my problem.” I respond by modestly agreeing that my law firm’s International lawyers are pretty experienced with these sorts of matters. All three phone calls quickly declined from there.

The declines began when the companies started telling me the facts of their situations. Two of the companies had purchased product from their long-time Chinese suppliers and had received — for the first time — totally substandard product. They both felt their  Chinese product suppliers had shortchanged them this time around because they were becoming economically desperate. See China Manufacturing Risks are Sky-High Right Now. Act Accordingly.

Unfortunately, neither company had a written contract with their Chinese supplier; they had both used purchase orders. They both wanted my firm to sue on a contingency fee basis and I immediately refused. My law firm rarely takes on a bad product lawsuit against a Chinese company on a contingency fee basis unless there is a valid contract that sets forth the product specifications and the defect in the product stems from failing to meet a contractual specification. See How to Prevent China Factory Problems and Trademark Theft That is Happening Like Never Before.

Both companies then asked me about how much we would charge them if we were to take their cases on an hourly basis and my response to both was the same: “You are welcome to pay us by the hour but if I were you, I would not spend my money on that and I would instead suggest you retain us to write you a manufacturing contract that actually works for China. That would be money well spent because it will go a long way to prevent this sort of thing from happening again. ” Neither company took too kindly to my suggestion — at least at first. One responded in such a way as to give rise to the title of this post. I totally get it. You have just lost a lot of money and the lawyer you have been told can help you recover it is telling you he does not like your case and instead wants you to pay money to prevent a recurrence.

The third incident was with a company that had supplied its own product to a number of Chinese ships. This company had failed to confirm that the ships to which it was supplying its product were actually owed by the company buying the product and it took our lawyers very little time to discover that they were not. Very roughly, this lack of a link between the company that actually bought the product and the ships to which the product was delivered meant we could not arrest/seize the ships to secure payment and the only way our client could recover on its debt would be to sue the purchasing party directly in an Asian country not exactly known for its rule of law. And the fact that our client had a lousy contract with that buyer did not exactly help.

I suggested to the company that it needed to change its procedures before supplying ships with its product in the future. I was going to tell this company it should in the future always require potential buyers provide a certificate of vessel ownership and then confirm that ownership with the applicable ship registry so there would be no doubt the vessel owner is putting its own ship at risk when it buys the product. But before I could say this, the person with whom I was speaking somewhat angrily told me he knew exactly what he was doing and he had never had this problem before. He made quite clear he did not think he needed any legal advice regarding his future business. In other words, I was to work magic on his problem now and not worry about him making the exact same mistake again.

In all of three of the above cases, these companies had been engaging in risky behavior for many years, apparently without having suffered any real consequences. It seems the old stockbrokers adage that “genius is a rising market” also holds true for China business. Or as I frustratingly put it to a company a few months back: “Look, my grandmother smoked a pack of cigarettes every day of her life since she was 16 years old and she lived to 92, but that just means she was lucky; that does not mean smoking isn’t harmful or dangerous.”

Having a good contract does not guarantee you will never have problems. Nor does it guarantee it will make sense for you to sue if something goes wrong. It does not even guarantee you will prevail if you do sue. But, in our experience (and that of pretty much everyone experienced in cross-border business), having a contract (1) greatly increases the likelihood your Chinese company will choose not to mess with you, (2) greatly increases the likelihood that it will make sense for you to sue the Chinese company if it does mess with you, and most importantly, (3) greatly increases the likelihood you will prevail if you do sue. It is the likelihood of losing at trial that causes companies to want to settle and Chinese companies are no different on this score than companies elsewhere around the world.

We lawyers are trained to think about and prepare for worst case scenarios. The current economic downturn is causing worst case scenarios to happen constantly and those scenarios are exposing those who apparently believed such scenarios could never occur. In other words, we lawyers are being proven to have been right all along. Or to put it more bluntly: We told you so.

We would love to hear from readers who are paying the price for having failed to properly document their China deals and from those readers who are faring relatively well for having done so. If any of you out there are benefiting from not having documented your deal or paying the price of having good documentation, we would love to hear from you, too.

Have at it, people. . . .

 

China employment lawyer

China presumes employers are more powerful than their employees and so it explicitly favors employees. For example, not only does the law permit employees to unilaterally terminate their employment contracts by giving notice of leaving (unless one of the very limited exception applies), employees also may terminate their employment contract and demand statutory severance for an employer’s employment law violation. Employees commonly resign and seek severance against an employer that failed to pay the employee in full and on time.

Consider this hypothetical. An employer and one of its employees enter into an employment contract which provides that the employer will pay the employee once a month for her salary earned in the preceding month. After several years of employment, as of mid-June the employee still has not received her salary for April. The employee resigns and brings a labor arbitration claim for all her unpaid salary from April 1 through her resignation date and severance for the termination. Will the employee prevail?

The short answer is yes. In a recent case based on facts similar to those above, the Hebei-based employer lost and lost big. The employer argued that its salary payment procedures were a common practice, but the court rejected that argument. The court went on to say that the law on this issue is clear: if the remuneration for labor is not paid in full or on time, the employee may terminate the employment contract and the employer must pay the employee statutory severance. Here, the employer’s failure to fulfill to pay the employee her remuneration on time exactly fits the situation stipulated in the law and the employer must pay the employee severance for her involuntary departure.

Note that there are a few exceptions to the law mentioned above, such as when an employer is unable to pay salary on time due to natural disasters, wars or other unforeseeable causes that cannot be resisted by human forces (which may cover COVID-19-caused delays); or the employer experiences difficulties in production and operation and its capital turnover is affected and after obtaining the consent of the workers’ union, it delays salary payments. But even in these instances, the employer’s failures to pay will be subject to the maximum period set by the local labor authorities.

Some Chinese provinces and cities have new COVID-19-related laws that provide limited exceptions to the general rule. For example, Shanghai’s new employment laws provide that if an employer’s failure to pay wages in full and on time results from circumstances beyond the employer’s control, an employee’s severance claim for termination of employment will be rejected. Note that most of the major cities in China are getting back to normal which means the pandemic-based exemptions will likely start disappearing.

What all of this means is that you as a China employer are not justified in delaying salary payments unless you fall under one of the limited exceptions and if you are right now behind on payments to your employees you should do whatever you can to fix that before the employee pursues legal action against you.

We are finding that oftentimes salary reductions are the best solution to an inability to pay employees in full and on time. As we have been writing, many local governments are fairly lenient about salary reductions because they so much prefer those to layoffs. See BREAKING NEWS: China Releases Twelve Opinions on How Companies Resuming Normal Operations Should Treat Their Employees. But see also China Employee Salary Reductions: It’s Complicated.

Just remember that failing to pay your employees on time will allow them to resign (meaning you lose the talent) and sue you for severance (meaning you lose time and money). Salary reductions may be a solution, but you should never ever reduce any employee’s salary without first consulting with your China employment lawyer.

To learn more on how to handle China employment law matters, I urge you to attend my free webinar this Tuesday, June 23. For more about this webinar and how to sign up, please go to FREE WEBINAR – China Employment Law: What Your Company Needs to Know.

 

China Employment Webinar
REGISTER HERE for this FREE webinar!

A recording of this webinar will be made available to all registrants, so make sure you register today! 

China’s employment laws have always been complicated and highly local. But with the coronavirus, they have become even more local and even more complicated.

Foreign companies with employees in China face China employment issues and questions every day – often without even realizing it. What works or does not work in the United States, Canada, Europe or Australia often has little to nothing in common with what works or does not work in China.

China Employment compliance has become one of the most important issues for foreign companies in China and few foreign companies get it right. China employee disputes are common and Chinese government enforcement just keeps getting more stringent. The time, hassle and costs for foreign companies just keeps rising. Foreign companies need to know the employment laws relevant to their location and their industry, especially during the pandemic.

Please join Grace Yang on Tuesday, June 23rd from 12pm- 1:30pm PDT  as she helps you better understand China’s employment law landscape. The webinar itself will be approximately 75 minutes, followed by 15 minutes of questions. Grace will focus on helping you recognize key China employment issues and on what you can do to address real-life China employment law issues and problems. Among other things, Grace will cover the following:

  • The impact of Coronavirus
  • The basics of China’s employment law
  • How to draft an employment agreement that works for China
  • How to draft China-centric employer rules and regulations (aka employee handbooks)
  • The other “must-have” employment agreements
  • Frequently contested issues, such as working hours, overtime, vacation days and special leaves
  • Employee renewals, resignations, and terminations
  • Employer HR audits
  • AND MUCH MORE!

REGISTER HERE today!

China IP Theft
From the New Yorker.

In deleting old emails I came across one from a long time ago that I had written to a Spanish client that had retained my law firm to protect their intellectual property pretty much throughout the world. My email essentially set forth the following:

 

We should initially consider and discuss the legal options for protecting your IP, including the following:

  • Figuring out in what countries you should register your IP. Very generally, it makes sense to consider those countries in which you are having product made, those countries in which you do business, and those countries into which you sell your product or services. You also should consider the countries in which you are not presently doing these things but are planning to eventually do so.
  • Figuring out IP you have that warrants you spending money to protect.
  • Figuring out how to protect the IP you wish to protect. This will typically involve applying to secure/register a trademark, copyright or patent.
  • Figuring out what contracts make sense for additional or complementary IP protections. These contracts might include licensing agreements, trade secret agreements, NNN Agreements, trade secret agreements, confidentiality agreements, and non-compete agreements.

Equally importantly, we should consider and discuss non-legal means for protecting your IP, including the following:

  • Keep your key technologies and procedures in Spain.
  • Keep your key technologies and procedures confined to as small a group of trusted people as reasonably possible.
  • Design your products so they are difficult to copy.
  • Compartmentalize your production processes so no single entity can produce the complete product.
  • Outsource different parts of your products to different companies to minimize the risk of creating a new competitor.
  • Know who you are hiring everywhere in the world and make your employees sign non-compete and non-disclosure agreements (NDA).
  • Conduct due diligence on all of your potential and current suppliers and distributors. Select partners with reputations of their own to protect and include IP protection clauses in your contracts with them. Your odds of getting your IP stolen by a company with nothing to lose are way higher than by a company with a lot to protect.
  • Monitor the trademarks and patents and copyrights your competitors seek to prevent copycats.
  • Monitor IP violations and take prompt action against them. Your IP rights mean little if you do not protect them.

 

Getting your legal and operational house in order will obviously not prevent all IP problems, but it is a necessary start.

Did I miss anything?

Listen above or stream on SpotifyApple PodcastsGoogle Play or Stitcher!

The large-scale shift to telework brought on by the COVID-19 pandemic is prompting businesses around the world to explore new avenues to engage with clients and friends. Harris Bricken is no exception, and we are proud to announce our new podcast series: Global Law and Business, hosted by international attorneys Fred Rocafort and Jonathan Bench.

Every Thursday, Fred and Jonathan take a bite-sized look at legal and economic developments in locales around the world in an effort to decipher global trends in law and business with the help of their international guests. No topic is too big, too small, too simple, or too complicated. They will be covering continents, countries, regimes, governance, finances, legal developments, and whatever is trending on Twitter.

In Episode #10, we discuss India with Hemang Parekh, a partner and transaction lawyer in Mumbai with DSK Legal. We cover:

If you have comments on this episode or if you’d like to suggest topics for future episodes, please email globallawbiz@harrisbricken.com.

And please follow Fred and Jonathan on social media to stay informed on upcoming guests and topics:

We’ll see you next Thursday for another discussion on the global business environment in Chile, with our guests Juan Cristóbal Palma Orellana and Mario Tapia Echeverría.

China manufacturing contractsHardly a week goes by at my law firm where one of our international litigation lawyers does not get a call or an e-mail from a company exploring its options for pursuing its overseas manufacturer for a bad product shipment or for no shipment at all. Each time, we patiently explain the costs and the hassles of litigating in a foreign court (or any court, for that matter), and almost every time, the company that contacted us concludes it does not make sense  to sue.

I find it frustrating that these situations are always occurring when the following can usually so easily prevent them:

  • Know your manufacturer. It is important that you have someone conduct at least basic due diligence on your proposed manufacturer. This basic due diligence ought to tell you whether the manufacturer actually still exists (definitely not a given these days with the economy at such a low point), whether it is properly registered and licensed to do the sort of business for which you will be paying it, and a bit about its financial standing and its reputation. Our international manufacturing lawyers have seen far too many times where companies have ordered and paid for product only to later learn that the “company” from which they bought the product does not really exist or is not licensed to make it or is just a really bad or disreputable company. It is not uncommon for our international litigation team to research a matter and determine that it has been tasked with trying to recoup money for product that was never delivered by a company that never really existed. Do not let this happen to you!
  • Use a good contract. In particular, use a contract that details your product’s quality requirements and clearly sets out how disputes will be resolved. For what constitutes a good overseas manufacturing contract, check out Overseas Manufacturing Contracts (OEM, CM and ODM). In many countries, agreement based on a purchase order and an invoice will not work.
  • Have the product inspected before you pay for it. I realize it is the rare manufacturer that will ship your product before you pay, but if the manufacturer will not let you inspect before the product ships, that is not a manufacturer with which you want to be doing business. There are excellent services around the world that can do this for you very inexpensively on a contract basis.

There are many other things smart companies do to protect themselves when using manufacturers overseas. They protect their intellectual property (IP) with NNN Agreements and/or Product Development Agreements and they protect their brand name by registering their trademarks  early. Companies that conduct due diligence on their manufacturers, use good contracts written for the country from which they are buying, conduct inspections of their product, and do what it takes to protect their IP stand a great chance of never being subjected to a lawyer lecturing them on the difficulties and costs of pursuing international litigation.

What are you seeing out there?

China Skyline

Register HERE today!

Whether to stay in China or exit China is a big question for many companies. This decision is driven by many considerations that vary depending on each company’s specific situation. There are though common questions companies should be posing in formulating their China plans: what legal, business, political, and moral issues should inform this determination?

Join international business attorney Dan Harris and D-Terra Solutions’ Senior Vice President of Sales and Marketing Mike Billman as they pose and try to answer these important questions. Dan and Mike will discuss what they see the future holding for companies looking to continue (or even begin) doing business in and/or with China.

This Greater Columbus Chinese Chamber of Commerce sponsored webinar will take place on Friday, June 26th from 11am-12pm PT. There will be plenty of time for questions.

If you have any issues or questions you particularly want us to address at this webinar, please email them to firm@harrisbricken.com.

Go HERE to register today!