Had a great discussion with a bunch of my law firm’s international lawyers the other day regarding how so many of our clients are expanding in Asia beyond China and how so many of them now have an Asia strategy, of which China is just a part
We then talked of how this has changed the work we do as their lawyers, especially when it comes to IP protection.
Five years ago, our typical manufacturing client would call us for legal help in starting a factory in China or for outsourcing their product manufacturing to a Chinese factory. With the former, we would help them set up a Chinese entity (either a WFOE or a Joint Venture) and with the latter, we would draft their manufacturing agreements — such as an NNN Agreement, a Product Development Agreement, and a Manufacturing Agreement. Whether the company was going into China to manufacture its own goods or to buy goods from a Chinese company, we would discuss their intellectual property requirements and typically help them file for a trademark or a patent in China, occasionally a copyright. Most of these companies were new to Asia, though some had operations in Europe.
Things are very different these days.
Many of our manufacturing clients have been making product in China for years and they are now seeking our help to add another Asian country (usually Vietnam, Thailand or Taiwan, but also sometimes Indonesia, Malaysia, Cambodia, India and Korea) to their manufacturing mix, or because they now want to sell their China-manufactured product in China and/or somewhere else in Asia. These companies either have an Asia strategy or are seeking our help in formulating one. Whereas five years ago, a common question for us was “Dongguan or Suzhou,” today we equally often hear “Ho Chi Minh City or Jakarta?” Five years ago, we would get asked what we knew about “exotic” places like Yantai. Today it is exotic places like Semarang, Roi Et, and Bavet.
Needless to say, it is not just manufacturing companies that need to guard their IP in China. Software companies, gaming companies, food and beverage companies, and consumer goods companies are registering their IP in various countries in Asia at what feels like a record pace. Rising costs in China, U.S. tariffs on Chinese products, and the emergence of companies out of their COVID hibernation have all accelerated this, especially in the last month or so.
The icing on the cake for many companies is the fear that what happened with H&M, Nike, and Adidas (and many others) could happen to them. More than one company has told us that they would like to have their Asia strategy in place before the Beijing Winter Olympics because they are afraid of what the politics surrounding those games will do to their ability to work with China.
The China Plus One strategies of our clients means our IP discussions need to go beyond China to include pretty much all of Asia. Five years ago, only around twenty percent of our clients needed to consider trademark, patent, or copyright registrations in a country other than China. They were new to doing business in China and so they needed IP protection there. We would ask about their IP needs for North America and Europe, but had been in both places for so long they were invariably covered.
Today, about half of our clients need IP protection in an Asian country other than China. Fortunately, the trademark regimes of most Asian countries are sufficiently developed to allow this in a relatively straightforward way. The real key for foreign companies expanding beyond China with their products is to be sure to recognize that any China-registered IP will provide no protection outside China. In other words, in most cases companies must register their IP in whichever Asian country they are doing business. Please also remember that for IP purposes Macau and Hong Kong (and obviously Taiwan) are essentially separate from China. If they will be moving your manufacturing to Mexico or Poland or some other non-Asian country, a brand new set of IP protection issues arises.
In all, an exciting time for IP practitioners, and hopefully for IP owners as well!