Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Thursday, July 10, 2014

Service of Process Can Frustrate IP Rights

Service of process is the fairly mundane procedure by which a party to a lawsuit gives an appropriate notice of initial legal action to another party (such as a defendant) in an effort to exercise jurisdiction over that person so as to enable that person to respond to the proceeding before the court, body, or other tribunal.  Notice is typically furnished by delivering a set of court documents (called "process") to the person to be served.

Within the United States, this is usually a fairly simple matter that involves having a licensed process server (or in some cases, a U.S. Marshal or Sheriff) deliver a hard copy of the Summons or other legal document to the Defendant or to a corporate representative, in the case of a corporation.  For some corporations, it may be sufficient to serve the Secretary of State where the company is incorporated.

In those cases where a party to be served is difficult to locate, the court may permit substitute service through publication in a local newspaper.
For the vast majority of cases, process can be routinely served in one or more of these manners, and a defendant would have a tough time arguing that he was not properly served, if he chooses to default and claim that he didn't know about the case.

But for brand owners whose infringers often reside well outside the United States, service of process can become a rather tricky prospect -- one that may even frustrate all relief entirely.

International service of foreign judicial and extrajudicial documents is governed in general by the 1965 Hague Service Convention.

Prior to the enactment of the Hague Service Convention, service of process in civil cases was generally effected by a letter rogatory, a formal request from the court in the country where proceedings were initiated or underway to a court in another country where the defendant resided. 

This procedure generally required the use of consular and diplomatic channels as the request had to be made to the foreign minister (Secretary of State in the United States) of the defendant's country by the foreign minister of the originating court.

Since 1965, member states designate a central authority for service of process and requests go directly there. 

In addition, some governments allow some type of service directly by mail or personal service by a person otherwise authorized to service process without involvement of local courts.

By way of example, the United Kingdom and Hong Kong permit a person or corporate entity to be served through simple International Registered Mail. The People's Republic of China, however, formally objected to this process and insists that any form of such service is not only ineffective, it is illegal.

Therefore, the process of service of process on a Chinese national can take months or sometimes years, and cost tens of thousands of dollars. In some cases, the documents must be translated into a foreign language such as Cantonese or Mandarin.

And, to make matters even more challenging, assuming that the Chinese national or entity does not participate in the foreign proceeding, there is no guarantee that the Chinese government will enforce a foreign default judgment against his assets located there.

The end result is that that the People's Rebublic of China has effectively insulated approximately 1/5 of the world's population from simple service of legal process from abroad.

Wednesday, July 9, 2014

Chinese Counterfeiters: Experts at Gaming Complex Systems

It has been said that, in both fun and geopolitics, Americans play simple checkers, Russians play the more challenging chess and the Chinese play the most complex game of all -- Mahjong.

Undoubtedly, Chinese culture encourages and rewards skill at successfully navigating complexity.

Consequently, the Chinese counterfeiter is fluent and adept at using the inherent complexity of the international legal and technological system to hide financial assets, creating a confusing web of identities designed to mask illegal conduct through an elaborate web of anonymity and dead-ends.

The following is a classic "case in point" of just one such counterfeiter.

A Chinese national by the name of Lin resides in the city of Putian in the eastern Fujian province in the People's Republic of China.  

Putian has over 3 million Chinese nationals living and working, a testament to the thriving international trade in counterfeit goods, as much of this city is dedicated to serving that industry through manufacture and distribution.

He takes a genuine pair of Nike tennis shoes, disassembles them, studies the stitching, creates his own CAD design on a computer, and oversees the production of 10,000 counterfeit pair using a cheap labor force, completing and shipping the order within a matter of days.  He can sell 3,000 of the goods for $15,000, and markets the remaining inventory of 7,000 pair for $50.00 per pair on the Internet.

The factory that Lin works in is a nondescript building with a street address that might be associated with several dozen other companies.  The entity that Lin manages might be called "Fujian Sneaker and Shoe Trading Company Limited," a Hong Kong-based limited liability company, at least on paper.

But if one were to actually order and translate a copy of Fujian Sneaker and Shoe Trading Company Limited's corporate documents on file in Hong Kong, one would not find any evidence of Lin or the Fujian factory.  Rather, an unknown individual named "Jing Kim" might be listed as the company's sole owner, along with a business address in Beijing, one that has no clear ties to Lin's factory.

Furthermore, assume that Lin's counterfeit goods are openly sold to customers and distributors on a commercial website associated with the Internet domain name

This domain name could have easily been registered by Lin's assistant for under $10 through an ICANN-accredited registrar in China such as Chengdu Fly-Digital Technology Co., Inc., and could be hosted for a few dollars a month, through a shared webhost such as  IPage's web servers are located in Sweden, far outside of the easy reach of Nike's aggressive intellectual property lawyers in Portland, Oregon.

This maddening maze of legal and technological complexity affords Lin virtual anonymity as he deposits the sum of $15,000 that the Italians paid for his sneakers into one of many bank accounts that he owns at the Agricultural Bank of China.  He will put the remainder of the profits generated from the Internet sales into a different account.

This bank is ideal for Lin, as it has dozens of domestic branches throughout mainland China, but also maintains overseas institutions in Singapore, New York, Seoul, Sydney, London, and Tokyo, allowing Lin easy access to his funds when he travels abroad.  

Of course, because each international institution claims to be a technically separate legal entity, Lin isn't particularly concerned that any of his accounts are exposed to potential foreign creditors, such as Nike, even if one of any of those accounts could somehow be connected to his workplace.

Of course, no one account is listed in connection to any company that has a clear legal relationship to Lin.

If one were to even begin to try to untangle the international maze built by Lin, it would take hundreds of hours and tens of thousands of dollars in legal fees and investigative expenses, with no one account containing more than $15,000 in it.

All told, Lin's ninety-two accounts at this bank alone total assets of over $1,000,000, mostly generated from the manufacture and distribution of fake sneakers.

You see, Lin's desire is to someday move to the United States and buy real estate and start his own fashion brand.

Thursday, February 20, 2014

China Viewed as America's "Greatest Enemy" in Gallup Polling Data

A recently released Gallup World Affairs poll surveyed Americans, asking them to name the United States' greatest foreign enemy.  More Americans viewed China, not Iran or Russia, as America's greatest threat.

A majority of those polled (52%) apparently view China's growing economic power as a "critical threat" to the "vital interests" of America into next decade.

Eight years ago, 31% of Americans viewed Iran as the USA's "greatest enemy," compared with 16% today.  China's unfavorable ratings have held relatively steady in Americans' minds, despite the announcement of historic reforms late last year that would shift China's economy to a more consumer-driven model.

In 1979, when Gallup first gathered responses to these questions from a representative sample of Americans, China's GDP was not even one tenth that of of the United States. That year, nearly two out of three of Americans polled reported that they saw China favorably.  

Today, China's meteoric rise has led a majority of Americans (52%) to report China as the world's leading economic power. Further, many Americans are beginning to view China's growing military strength and newfound economic power as a threat to U.S. strategic interests.

Gallup notes that in 1959, President John F. Kennedy gave a speech, noting that when written in Chinese, the word "crisis" is composed of two characters, one representing danger, the other representing opportunity.  Americans clearly see the potential for danger in China, but it is worth noting that commercial trade with China continues to grow, creating opportunity as well. Since China joined the World Trade Organization in 2001, America's trade with China has grown dramatically.  

However, many U.S. government officials have openly criticized Chinese currency manipulation policies and tolerance of counterfeiting as well as human rights abuses.

Will BitCoins Survive a Growing Crisis of Confidence?

We previously discussed brand owners' and law enforcement's collective concern that the virtual cryptocurrency known as the BitCoin could spur even more online lawlessness.

It would appear that those fears, at least for now, have been allayed by a number of developments.

First, in October 2013, the FBI shut down SilkRoad, one of the largest online marketplaces where narcotics, guns and counterfeit goods were openly traded using BitCoins.

Then, the People's Republic of China banned financial companies based there from handling any BitCoin-related transactions. Joining suit, Russia banned the currency, making it illegal to trade in any currency other than the official roble.

Both nations' decisions have led to a growing crisis of confidence in the realistic viability of the currency, even as ATM machines trading in BitCoins made their debut in Austin and Seattle.

Finally, Mt. Gox, the Tokyo-based exchange where millions of dollars of investors' BitCoins are ostensibly stored, announced a freeze on any withdrawals of the currency, spawning protests outside the company's headquarters.

As of today, the rights to a BitCoin held by Mt. Gox was only $118, whereas a BitCoin sold on another still-functioning exchange was selling for $570.  Both represent a stark drop from the currency's recent high of over $1,000 in November 2013.

Still, speculators are continuing to invest many millions of dollars in the virtual currency, banking on a rebound. Some are even accusing Mt. Gox insiders of buying up the currency at the deflated price and re-selling them on other exchanges for a premium.

One thing is certain, if Mt. Gox enters a "death spiral," making it unable to pay back its investors, there is a real concern about the currency itself collapsing under its own weight.

Monday, August 19, 2013

Chinese Car Company Seeks to Trademark "SNOWDEN"

HYLX, a small Chinese electric car technology company has reportedly submitted formal applications to register the name “SNOWDEN” as a commercial trademark in both Chinese and English language characters last week.
Zhu Hefeng, the company’s manager and the trademark applicant, reportedly said that he thought that "Snowden" would be the perfect name for the company’s new top secret technology that is currently in development and will, says the company, change the market for environmentally-friendly cars.  
No word from Edward Snowden on whether he will object to the trademark applications, but Snowden may have his hands full fighting America's intelligence establishment’s attempts to have him extradited to face trial for treason.
The article doesn't report on HYLX's efforts to register the trademark in the United States.  Snowden is already a federally registered trademark in the U.S. for wine.

Friday, May 17, 2013

America: Made in China

This image was taken from a real label that was found on the streets of New York.

The economic value of China's annual exports to the United States is estimated to be $417 billion, and growing each year. The number of American jobs lost to Chinese imports each year is likely in the hundreds of thousands. This data may help to explain why the Obama administration has struggled with a nagging unemployment rate of approximately 8%, even as the stock market reaches record highs.

It is no surprise to the consumer that very little furniture, electronics, toys or apparel are manufactured in the U.S. any longer, as these items are increasingly imported from China and other developing nations.

The Wall Street Journal has reported that the negative impact of cheap Chinese imports on the American economy is far greater than previously thought.

Similarly, a Wall Street Journal report in April 2012 found that America’s largest multinational corporations outsourced more than 2.4 million jobs over the last decade, even as they cut their overall workforces by 2.9 million. 

Outsourcing jobs to a cheaper foreign labor pool, and increasing the number of cheaply made products from China makes perfectly sound business sense at the microcosmic level in the short-term. Indeed, Wal-Mart has generated billions of dollars in profits derived virtually entirely from this very business model.

However, as a long-term matter, this strategy has the potential to tarnish brands, lower quality, encourage counterfeiting, and even destroy entire industries.

For example, in Deluxe: How Luxury Lost Its Luster, author Dana Thomas chronicles how some luxury brands have resorted to cheap, Chinese mass-market production methods, and how doing so has risked their previously sterling reputations.

No industry is immune from the effects of globalization, cheap imports and job outsourcing. Ironically, even U.S. patent lawyers have seen previously high-paying jobs outsourced overseas.