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Q: Will phony law suits against western companies increase?
Almost all foreign companies must have a Chinese partner, which does nothing but collect money while the foreign company makes all the investment, designs all the technology, and invests all the money.
Recently, however, these Chines partners have been suing the foreign company, claiming they are operating illegally, and seizing almost complete control of the foreign companies' operations in China. The Chines courts unwaveringly support the Chinese partner.
The latest trend seems to be suing the foreign company for IP theft, claiming that the IP belongs to the Chinese company. This is happening to Apple at the moment, and the expectation is that court will rule in favour of the Chinese company, no matter how outrageous the claim appears to the rest of the world.
Will this increase as foreign companies start trying to move out of China? The Chinese partners will simply take the foreign company for everything they can get?
A friend who has worked in China for a number of years has suggested that most Chinese are still in survival mode, despite becoming more affluent. Hence the view that most Chinese are out to cheat foreigners at any opportunity.
if this latest trend is true, it is just a reflection of unspoken attitude to ALL things foreign, and the fact that even a well written contract is not worth the paper it is written on.
have no sympathy for the western corporation that took the risk, hope the shareholders sue them after china does, that is if there is money left.
this was the plan all along , why do you think they required a local partner in the first place. what ever ip the foreigner develops or brings in belongs to the company, china.
There has never been a requirement for any foreign owned company to have a Chinese partner though. The majority of small and medium sized enterprises moving into China have been WFOE or RO, neither of which require (though sometimes have) Chinese partners. The thing being talked about here is joint venturing (JV). JV's are particularly attractive to large companies that have an idea and concept that for various commercial reasons, would be better to locate overseas. This type of company flooded into China after the Open and Reform Policy and the development of various economic zones. Any company that enters into a JV should understand the risk. It obviously stands to reason that the manufacturing base that they are partnering with will want to steal ideas and concepts. It has also long been established that China offers little or no protection in terms of IP. But having weighed up all of the risk, the foreign company often chooses to go ahead anyway because the perception is the gain outweighs the potential losses. For many foreign JV partners, that will be the case. They are prepared to write off some loss in terms of IP to take the potential gain. That works well with short life cycle goods and commodities (typical of 95% of goods and commodities produced in China). In other words, the IP has limited value anyway. Go into a cheap manufacturing base like China, make the things then get out. That is cut and run business tactics and does work well. If the IP involves a commodity with greater long term value and a longer life cycle, it is not good business strategy to share it with the Chinese. It is just asking for trouble if you do and it is hard to have any sympathy for the organizations that later fall victims.
Shining_brow:
While I do agree with basically everything you say, I do think it's not entirely the overseas' company's fault if they enter into a contract that the law says should be 100% airtight, and then have that legal system completely disregard that contract later when it goes to court.
Kaiwen:
But that is the kind of commercial decision that companies have to make when entering agreements with companies in emerging economies and countries. Most executives will write off IP as long as the perceived return on the project is greater than the input value. That is not to say breach of contract or agreement is justified. However, companies must make contingency for loss when entering certain markets.
Yes, and then they'll drop off suddenly... as China runs out of foreign investing companies that leave for other countries to do what China used to do (but have better legal protections in place).
That will happen soon - around the same time that the Chinese economic bubble bursts (which, of course, will be all our fault!), and the world goes to shit!
Kaiwen:
I think you will find that protecting IP and patent in most emerging economies is no better than that in China. Such countries or states are often riven with corruption and dishonesty but offer the one thing that most large western corporations crave - cheap manufacturing and logistics costs.
Traveler:
I think the law suits are increasing because foreign investment is decreasing, and foreign companies are leaving. The idea seems to be to take them for everything before they can leave.
Kaiwen:
Maybe so Traveler, but that will rebound on them big time. As will politically motivated rejection of imported goods, manipulation of exchange rates, abuse of WTO trading practices and everything else China has been involved in. Those that live by their arrogance shall die by their arrogance.
