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Four Tips for Keeping Your (Marketing) Business China Legal.

How to do business in China

I wrote an article for Advertising Age Four Tips to Avoid Breaking the Law in China and though its focus is on the legal issues that arise from marketing in China, it also provides a basic  foundation of the common legal issues foreign businesses in all industries face in China.

I urge you to read the full article, but to whet your appetite, I leave you with the sections on intellectual property and contracts:

Intellectual Property.
China does a pretty good job protecting trademarks, but the only trademarks it protects are those that have been registered in China or that constitute a “well-known” mark. If your client’s brand name is not as well-known in China as Coca-Cola (and it is only within China that matters), you should assume that registering it in China is the only way for you to protect it.
Because China maintains a “first to file” trademark system, the first to file for a trademark almost invariably becomes the owner of that trademark. So you must register before anyone else.

As a rule, a company should register its brand as a trademark in China before marketing it. If it markets the brand before registering, the odds are good someone else will register that brand as its own. Many foreign companies have gone into China, marketed their brand, and then had to forsake it because someone else went ahead and registered it first. Trademark first, then market.

You should also consider securing a .cn and/or a .cn.com domain name.

And be aware that China, unlike many countries, provides for portrait rights, which means using someone’s portrait for profit and without their consent is prohibited. So make sure you have a written agreement.

Contracts.
In the United States important provisions left out of a contract will usually be implied by a court, whereas provisions left out of a China contract are usually treated as though they do not exist.

Here’s a great example: a U.S. company purchased and received a large shipment of laptop cases from China, which featured handles that nearly always broke when used to carry a laptop. The Chinese manufacturer insisted it had provided exactly what had been ordered, and if the U.S. company had really been concerned about the handles not breaking, it would have purchased the Chinese company’s $4 bags — not its $3 bags. In other words, the U.S. company should have specified in its contract that it would require the laptop bags be strong enough to hold a laptop.

Clarity and specificity in China marketing agreements are equally important. For instance, if you are paying to put your logo on a stadium, specify that you want it to be a particular size, on a particular wall, at a particular height, and visible at particular times. If you want exclusivity, specify exactly what you mean by that. Signing an “exclusive” contract with a stadium may mean exclusivity for one wall, when you thought you were getting it for the entire stadium.  Assume nothing is implied.

5 responses to “Four Tips for Keeping Your (Marketing) Business China Legal.”

  1. I read the full article. I’m a marketer who does business internationally and so I really appreciated your logo on the stadium example. That particular thing never happened to me, but something very close and it taught me that not everywhere is just like here. Thanks.

  2. Good article! “Exclusive” definitely means different things to different people; my dad has a favorite story about a business that thought it had exclusive rights to import Czech beer.
    Regarding domain names, I think you meant .com.cn, not .cn.com.

  3. The problem is, the contract is just the starting point for those with a duplicitous attitude, which, if generalized, undermines the reliability of the Chinese brand. Security is mercurial, and that is how I would describe the miser’s approach to any contract. The first question is not, how do we fulfill the terms of this contract,and create a longer term profitability; but how do we get around them in the short term, now that the “host’s” expectations are set?
    I’ve seen firsthand the generalization of this attitude in Shanghai’s business culture, to the point of it being a reflex. Personally I believe it cuts to the heart of wealth creation vs transfer (and communistic underpinnings of entitlement/expectation of something for nothing – or at a sucker’s expense). In China, it’s all about the transfer – with minimum accountability and only lip service to honor. It’s more honorable to outwit, to serve yourself at another’s expense, the call of the insecure narcissist and insatiable miser. Mind you, these are not assumptions. These are observations.
    There is little point in expecting or guaranteeing honor where honor is not generally considered a social value.
    In other words, the solution to contract abuse lies in the fundamental perceptions of the contract; not in its items.
    In some cases a contract is little more than a soporific before the bleeding. At any rate, it is not an expression of good will, no matter how many “gambei’s” are toasted.
    You can head off one problem only to find it’s only a matter of time before the beast rears its ugly head again.
    Every contract in China I’ve ever signed would have been far more useful had I owned a bird. YMMV, of course.

  4. There is little point in expecting or guaranteeing honor where honor is not generally considered a social value.

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