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.