WIPO's innovation report, which was released this week, states that China is now the second largest R&D spender in the world and that in 2010 Chinese companies made more PCT applications than their French and British counterparts combined.
Although there are doubts over the quality of some of these patents and the extent to which PCT applications are converted in the national phase, there is no doubt that the amount of IP work coming out of China is set to increase dramatically over the next five years.
To find out how to win this work, Managing IP surveyed the Chinese in-house lawyers and businessmen who attended the China-International IP Forum in Beijing to find out what they look for in in-house counsel
First, Managing IP asked whether the firm or its domestic outside counsel were the decision makers when picking foreign counsel. Respondents were split, with 25% leaving the decision to the law firm, 22% taking the decision themselves and the rest making a joint decision.
Reflecting this result, some foreign law firms, such as Jones Day, have decided to set up offices in China and target domestic clients directly, while others are focussing on building up referral networks with domestic Chinese firms and worry that setting up an office directly could be viewed as a threat.
MIP then asked Chinese in-house to name the two most important factors when assessing which foreign counsel to choose. The options were: has a China office; has lawyers that speak Chinese fluently; understands Chinese business culture; is proficient in the law in its country; and cost – the law firm is reasonably priced and can forecast costs accurately.
Over 75% of respondents chose cost and legal proficiency as the most important. Language, culture and having an office on the ground were only seen as vitally important by 20% of the respondents.
This was demonstrated in a series of interviews Managing IP carried out with domestic in-house lawyers. Lin Hua, IP Manager for Shanda Interactive Entertainment, said that an office in China can be useful, but: "If an office is merely a front desk then it is meaningless."
All the domestic and foreign private practice and in-house lawyers contacted by Managing IP agreed that cost is the biggest sticking point, with some foreign firms recommending asking first-time Chinese clients to pay a certain amount every month, rather than risk missed payments at the end.
Chinese clients spoke of how they push hard for fixed fees, both for patent filing and for litigation in US, where the cost of fighting an accusation of patent infringement is hundreds of times higher than it is in China.
"We would tell them in detail that, for example, the cap applies in the discovery stage or initial pleadings. So if there are four key stages in a litigation, there would be a maximum price for each stage, and the firm would report it to us after each stage. The firm would then give us a detailed pricing plan based on our needs," said Wang Guixiang, senior IP manager at Suntech Power.
Managing IP used the statistics and interviews to compile a 10-point guide that looks at some of the key issues foreign law firms should consider if they want to win the work that will be coming out of China.
You can read more in the November issue of Managing IP. If you are not a subscriber, you can access the contents by taking out a free trial.
