INTERNATIONAL TRADE AND THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS

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1 INTERNATIONAL TRADE AND THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS Evan Y. Chuck International Trade Group Leader Managing Partner Shanghai Office Bryan Cave LLP Asia Pacific Business Outlook Conference Los Angeles, California April 8, 2013

2 Roadmap to Doing Interna0onal Transac0ons in China International Trade a Business View Focus on China Update on Opportunities Accessing the China Market The Right Partner in China Documentation Do s and Don ts in Contracts Protecting Your Intellectual Property in China Intellectual Property and the Foreign Corrupt Practices Act 2

3 Interna0onal Trade a Business View Planning Formation Operational Dispute Exit Tax Planning Foreign Regulatory Government Relations Outsourcing Offshoring Joint Venture M&A Licensing US/Foreign Customs Valuation Classification Investigation Seizures Export Controls and Economic Sanctions Antiboycott FCPA UK Anti-bribery Local Anti-bribery Arbitration Litigation U.S. Trade Remedies Bilateral Agreements - NAFTA - Multilateral - WTO US/Foreign Bankruptcy M&A Sale IPO Exit IP Protection Foreign Regulation Labor Environmental Food & Drug Anti- Counterfeiting 3

4 Interna0onal Trade a Business View Planning Formation Operational Dispute Exit Tax Planning Foreign Regulatory Government Relations Outsourcing Offshoring Joint Venture M&A Licensing US/Foreign Customs Valuation Classification Investigation Seizures Export Controls and Economic Sanctions Antiboycott FCPA UK Anti-bribery Local Anti-bribery Arbitration Litigation U.S. Trade Remedies Bilateral Agreements - NAFTA - Multilateral - WTO US/Foreign Bankruptcy M&A Sale IPO Exit IP Protection Foreign Regulation Labor Environmental Food & Drug Anti- Counterfeiting 4

5 FOCUS ON CHINA The Opportuni0es and PiDalls 5

6 Opportunity and Risk in China The Rise of RMB Private Equity Funds Consumer Brand Boom Retailers Franchises China s Corporate and Regulatory Environment Gets More Complicated DomesAc InnovaAon Policy Killing the Goose that Lays the Golden Egg? 6

Opportunity and Risk in China China s Labor and Employment Laws and Policies Favor the Employee New Taxes Assessed to Expats for Chinese Social

7 Opportunity and Risk in China China s Labor and Employment Laws and Policies Favor the Employee New Taxes Assessed to Expats for Chinese Social Security Structuring Equity IncenAve Plans for Chinese Employees Is ProblemaAc Increasing Costs Make AlternaAves ANracAve Vietnam, Cambodia, even Mexico 6

8 Accessing the China Market Avoid Retail Risk: DistribuAon and Licensing Agreements Sell Directly to Third ParAes from the US RepresentaAve Office Sell from China to the Chinese market Wholly Foreign Owned Enterprise ( WFOE ) and Sino Foreign Joint Ventures ( Joint Ventures ) 8

The Right Partner in China Due Diligence is Key Look for Chinese characters in the Name Card Look for State ownership, Control or Origins in State

9 The Right Partner in China Due Diligence is Key Look for Chinese characters in the Name Card Look for State ownership, Control or Origins in State Owned Businesses Publicly Traded Company outside of Mainland PRC Network of Public Sources, InvesAgators, Tax related Sources, Ex military Intelligence 9

Contract Documenta0on in China Deals Use of MOUs and nonbinding LeNers of Intent ( LOI ) Choice of law: consider US (NY or CA with arbitraaon clause); neutral laws UK, Hong Kong, or Singapore; China

10 Contract Documenta0on in China Deals Use of MOUs and nonbinding LeNers of Intent ( LOI ) Choice of law: consider US (NY or CA with arbitraaon clause); neutral laws UK, Hong Kong, or Singapore; China and CIETAC arbitraaon Chinese contracts vs. US contracts major differences Civil code influence on details of contracts Equitable remedies (i.e. injuncaons) limited under Chinese law Joint Venture Contracts Chinese law can trump certain provisions, regardless of how well they are draded Be prepared for re negoaaaon, not enforcement 10

11 Protec0ng Your Intellectual Property in China 11

12 Protec0ng your Intellectual Property Globally Assess global intellectual property protecaon needs by market share in Asia Consider trademark, patent, copyright and local internet domain site protecaon and strategy IP licenses in China should generally be registered Sodware that is licensed or sold in China is subject to registraaon Trade Secrets are most difficult to protect Consider review of trade agreements in the region Consider regional Pixie Dust assembly strategy 12

leverage first to file advantage for profit LiAgaAon defending the mark Beware of infringer strategies to cloud Atle to trademark Enforcement and liagaaon

13 Intellectual Property Chinese PiDalls First to File / First to Use Chivas Regal 88 and the proof of a well known brand Need separate applicaaons for different categories of goods Proposed amendment to Trademark Law allows single applicaaon for mulaple categories Domain Names Domain name squaners leverage first to file advantage for profit LiAgaAon defending the mark Beware of infringer strategies to cloud Atle to trademark Enforcement and liagaaon against online infringement difficult and costly Non use of trademark for three years may lead to cancellaaon RevocaAon by Trademark Office or third party applicaaon 13

China Intellectual Property and the FCPA Risk: Trademark registraaon and enforcement acaon may involve the AdministraAon of Industry and Commerce (AIC), Customs, or judicial authoriaes The Foreign

14 China Intellectual Property and the FCPA Risk: Trademark registraaon and enforcement acaon may involve the AdministraAon of Industry and Commerce (AIC), Customs, or judicial authoriaes The Foreign Corrupt PracAces Act prohibits offering or giving anything of value to a foreign government official for the purpose of obtaining or retaining business Also prohibits offering or giving anything of value to a third person while knowing that any or all of it will be passed to a foreign government official While knowing includes awareness of a high probability Government official includes poliacal paraes, candidates for office and officials of public internaaonal organizaaons 14

15 Why is the FCPA Important Today? More than 1,000 SEC and DOJ lawyers in Washington D.C./Silicon Valley focusing on such cases If you re in business in the BRIC, especially China, you have a bulls eye on your back Extended supply chains expose companies to more FCPA risk It s not the bribe, it s the accounang 15

China The Briar Patch of FCPA and Local An0bribery Law On the ground staff receive training, but oden fail stress tests Enormous pressure red envelopes and mooncakes with benefits

16 China The Briar Patch of FCPA and Local An0bribery Law On the ground staff receive training, but oden fail stress tests Enormous pressure red envelopes and mooncakes with benefits Hard to tell who is a government official Doctors Enterprises are owned by state owned enterprises Communist party members/pla FCPA local law excepaon is problemaac local law/pracace 16

17 Thank you! Contact informaaon: Evan Chuck Partner Bryan Cave LLP 120 Broadway, Suite 300 Santa Monica, California (310)

18 Our Global Offices 18

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