Every few months, one of my law firm’s international lawyers has to tell a client that the company or the IP the client thought it had somewhere in the world does not exist.
About a decade ago — before China got so much better at spotting such things — we were retained to help a U.S. company whose China general manager had stolen funds from its China subsidiary. Our investigation quickly revealed there was no China subsidiary. No China entity had ever been formed even though the China operations were manufacturing hundreds of millions of dollars of product a year, with around 100 “employees.” The general manager had lied about having formed a WFOE, no China taxes had ever been paid, and every “employee” had been working illegally.
A U.S. company once contacted us because its China joint venture company had started selling its product in the United States in direct competition with the U.S. company. We were tasked with determining whether this company’s China joint venture agreement gave the U.S. company the power to stop U.S. sales. The problem was that the Chinese language “joint venture agreement” was actually a consulting agreement and no joint venture had ever been formed.
A Norwegian company once came to us looking to sue its former China distributor for manufacturing and selling the Norwegian company’s product in China, “in violation of our China trademark.” The Norwegian company told us how its former distributor had registered the its brand name for it in China, and the Norwegian company even had a trademark certificate to prove this. The trademark certificate turned out to be fake and the trademark had actually been registered in the name of a Chinese citizen (probably a relative of the distributor) who was now licensing it to the former distributor.
In the above examples, the companies were fooled by people they knew. Equally common is the situation where a foreign company pays someone it does not know to register a company or IP in China (or elsewhere) but nothing ever gets filed. There are even fake law firms that collect money from foreign companies to register their IP or their company and then pocket the money and do nothing. These companies use the internet to thrive by taking advantage of companies not well-versed in operating internationally. These are the service company equivalents of the manufacturing companies that take money and never provide any product.
In addition to the above cases involving dishonesty, we also often deal with clients who for whatever reason — oftentimes rapid growth — have failed to stay current with necessary international registrations.
It is fast, easy and cheap to make sure your company’s entity and IP (trademarks, copyrights and patents) registrations are in good order internationally. So if you have any reason to doubt your company’s registrations, you should have them checked out. Like now.
Why not make this your end of year/New Year’s Resolution.?
What do you think?