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Are China’s intellectual property issues getting better or worse?

by Tom Pattinson
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scales of justice

Lawyer Neil Sampson on conflict resolution, the ongoing IP battle, and China’s relationship with the UK

When did you first go to China and why?

I first went to China as a tourist whilst working in Hong Kong, and became very interested in the people and the development of the country’s economy.

There have been many books written about the challenges of doing business with China. In your experience working on conflict resolution, do you think China is a unique market to work with?

China is no different than other developing countries. In many ways, China is a developed country, but that status is not standard throughout the nation. Chinese businesspeople in many regions west of Hangzhou are not fully familiar with international business, which does lead to challenging situations. In relation to dispute resolution, and indeed all other business issues, I often paraphrase Deng Xiaoping’s famous remark about adding Chinese characteristics to international standards. There are challenges for average UK businesses in understanding the Chinese way of doing things, but once you appreciate the issues you just deal with them. Of course, the Chinese feel that there are challenges in doing business in the UK too.

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Have you seen a change in the way business is conducted with China? Has China become more international or has it fundamentally remained the same?

It very much depends on where you are and who you deal with. I have worked all over the country, and when I first went to Qinghai province around 1996, it was difficult to explain international trade. More recently, my experience there has been quite different. Business ethics, standards, and contractual obligations can be as one would expect in the UK, but some major Chinese SOEs still operate as they have done for decades.

Just recently we have heard of Facebook’s successful challenge over a trademark, as well as Apple’s unsuccessful challenge over an iPhone trademark. Are China’s intellectual property issues getting better or worse?

They are getting better; however, I have just dealt with a substantial listed company with major intellectual property interests where there appears to be a lack of real understanding of rights and obligations. Enforcement of international IP rights across China remains pot luck, although I do believe that the Chinese government is making inroads into the enforcement deficiencies in some inland areas.

What is the number one problem for British companies working with China that you have witnessed time and again?

British companies can simply fail to understand the Chinese market, both by vastly overestimating the potential for their business, and also by underestimating the complexity of establishing themselves in the country. It is always difficult to open a new market when complying with different laws and regulations, and where the language is difficult it becomes even more complicated. The number one problem is probably that businesses do not appreciate the amount of time it will take to establish themselves in the market.

Enforcement of international IP rights across China remains pot luck although I do believe that the Chinese government is making inroads

Chinese companies are investing heavily overseas now, with many companies going to IPO in the London stock market. Why do you think they prefer the London stock exchange?

I have listed a number of Chinese companies in London. The city’s perceived advantages are the ‘light touch’ of the UK regulatory framework, the costs in establishing and maintaining a listing in London, and the international nature of the city’s capital market.

In recent years, the UK government has made a concerted effort to woo China; do you think it has made a difference? Is it working?

It has made a difference, but there is a long way to go. I tend to act for SME companies who do not generally get the high-level government support larger companies receive. In 1996, Michael Heseltine took a Boeing 747 full of companies to China on a trade mission; this was subsidised by the UKTI predecessor and gave a considerable degree of credibility to the companies that took part. I understand that the German chancellor takes a similar trade mission to China every year, but the UK has never done it again, or certainly not in the same numbers.

What do you think is the long-term economic outlook for China?

It has to be good; any slowdown in the economy is temporary. The media loves to highlight lower trade figures and so on, but you would have thought that journalists would have learned by now that all economies are cyclical, and what is down today will be up tomorrow. How long is long-term? I would say that on any basis the prospects are good.

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