An Olympic Moment: Negotiating IP Licenses and Disputes with Chinese Nationals
Item: China, one of the world's largest and most promising markets, has seen a 20 percent annual increase in patent application filings over the last fifteen years.
Item: In 2007, the State Intellectual Property Office (SIPO) of China received 694,153 patent applications, an increase of 21.1 percent over the previous year
Item: As of May 2008, China is currently third in the world for the generation of invention patents behind the United States and Japan.
Item: If patent filings in China continue to grow at the current rate, the SIPO will overtake the USPTO (United States Patent and Trademark Office) by 2012.
Item: More than four million patent applications were filed with SIPO from early 1985 to December 2007.
Item: In 2005, 2,947 patent-related cases were filed in Chinese courts, representing an increase of 15.6 percent from 2004.
Item: Patent-related lawsuits involving international companies such as Pfizer, Honda, Philips, and 3M have increased by 77.5 percent over the past year.
Get the picture? Yes, we see. To be among the leaders of the IP pack, companies with substantial patent portfolios need to know how to negotiate with the Chinese.
Here are some resources:
Negotiating in China: Trust is Just the Beginning (h/t China Law Blog's post which adds the following advice to that provided in Trust):
Go into your negotiations prepared. Far too often my firm has had Western clients who insist on a particular term from their Chinese counterparts that no Chinese company can give or ever gives. If every manufacturer of widgets in China requires at least a 60 day turnaround time, you are wasting your own time and money by insisting on 10 days for you.
[Use] an already tested contract to gage the bona fides or good faith of a Chinese company. For instance, my firm has been using a non-disclosure agreement for so long in China that we can in large measure gage the legitimacy of Chinese manufacturers just by how they react to it. Legitimate Chinese companies always eventually agree to it (usually rather quickly, but sometimes with reasonable modifications). The illegitimate company refuses to sign, usually claiming such agreements are "never" signed in China or are "illegal."
Further negotiation advice from the China Law Blog
Negotiating in China
quoting an article of the same name from Harvard Business School Working Knowledge on the eight important elements underpinning "the Chinese negotiation style:"
Guanxi (Personal Connections)
While Americans put a premium on networking, information, and institutions, the Chinese place a premium on individuals social capital within their group of friends, relatives, and close associates.
Zhongjian Ren (The Intermediary)
Business deals for Americans in China don't have a chance without the zhongjian ren, the intermediary. In the United States, we tend to trust others until or unless we're given reason not to. In China, suspicion and distrust characterize all meetings with strangers.
Shehui Dengji (Social Status)
American-style, "just call me Mary" casualness does not play well in a country where the Confucian values of obedience and deference to one's superiors remain strong. The formality goes much deeper, however unfathomably so, to many Westerners.
Renji Hexie (Interpersonal Harmony)
The Chinese sayings, "A man without a smile should not open a shop." and "Sweet temper and friendliness produce money." speak volumes about the importance of harmonious relations between business partners.
Zhengti Guannian (Holistic Thinking)
The Chinese think in terms of the whole while Americans think sequentially and individualistically, breaking up complex negotiation tasks into a series of smaller issues: price, quantity, warranty, delivery, and so forth. Chinese negotiators tend to talk about those issues all at once, skipping among them, and, from the Americans' point of view, seemingly never settling anything.
Jiejian (Thrift)
China's long history of economic and political instability has taught its people to save their money, a practice known as jiejian. The focus on savings results, in business negotiations, in a lot of bargaining over price - usually through haggling. Chinese negotiators will pad their offers with more room to maneuver than most Americans are used to, and they will make concessions on price with great reluctance and only after lengthy discussions.
Mianzi ("Face" or Social Capital)
In Chinese business culture, a person's reputation and social standing rest on saving face. If Westerners cause the Chinese embarrassment or loss of composure, even unintentionally, it can be disastrous for business negotiations.
Chiku Nailao (Endurance, Relentlessness, or Eating Bitterness and Enduring Labor)
The Chinese are famous for their work ethic. But they take diligence one step further - to endurance. Where Americans place high value on talent as a key to success, the Chinese see chiku nailao as much more important and honorable.
And if you're looking for a China-knowledgeable IP litigation team, you couldn't go wrong by hiring Irell & Manella and asking them to include on that team new IP attorney and Mandarin-fluent Adam Goldberg (who does not "share my DNA" but is my step-son).
And if you're doing business everywhere in the world, What About Clients says of When Cultures Collide: Leading, Teamworking and Managing Across the Globe buy it, read it, refer to it and link to the blog.
Done.
