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Four Tips to Avoid Breaking the Law in China

Censorship, Corruption, Intellectual Property and Contracts Are the Four Biggest Legal Issues Facing Foreign Marketers in China, Says Dan Harris.

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QINGDAO (AdAgeChina.com) -- The four biggest legal issues foreign marketers face in China are censorship, corruption, intellectual property and contracts.

1. Censorship
China's censorship generally does not impact marketing, but it can. A number of Western social networking and blogging sites are always, frequently, or sometimes blocked in China. So any plans to employ social networking should consider which sites the Chinese government tends to block.

For instance, if blogging is part of your marketing plan, don't have it hosted by any of the leading blogging sites like Blogspot or Wordpress. That's because China's great firewall usually blocks all blogs on those sites so as to more easily block the blogs that actually offend.

2. Corruption
It's not uncommon for the Chinese media to offer up favorable reporting for a fee, or for ad salespeople to offer you "special" placement in return for you giving them personally "a little something extra."

Dan Harris
Dan Harris
Do not do it. Just don't.

Making these sorts of payments could cause you huge legal problems, particularly if the media outlet is government owned.

Such payments may be illegal under Chinese law, U.S. law (the Foreign Corrupt Practices Act), and European Union law.

Determining when such payments constitute illegal bribes is usually very complicated and case specific. It's not worth the risk.

3. Intellectual Property
China does a pretty good job of 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 just 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 that someone else will register that brand as its own. Many American 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 .com.cn 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.

4. Contracts
In the U.S., 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 there 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. Figure nothing is implied.

Knowing how China handles contracts, intellectual property, censorship and corruption is important for knowing how to market in China.

Dan Harris is a founding member of Harris & Moure, a boutique international law firm with lawyers in Seattle and in Qingdao, China, and co-editor of the China Law Blog (www.chinalawblog.com).


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