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China Discovers Lawyers

May 5, 2008


In America, lawyers can be ridiculed with humor without touching off any of the “political correctness” alarms raised when other groups are attacked. Attacking lawyers, of course, is nothing new. In the New Testament we read, “Woe unto you, lawyers! for ye have taken away the key of knowledge.” Florynce R. Kennedy, herself a lawyer, once said, “The question arises … whether all lawyers are the same. This is like asking whether everything that gets into a sewer is garbage.” Perhaps the most famous line ever written about lawyers is contributed to William Shakespeare. In his play Henry VI, Dick the butcher utters, “The first thing we do, let’s kill all the lawyers.” The fact is, however, that when lawyers are needed — to protect their rights or provide defense — people quickly put aside their negative perceptions and embrace lawyers as friends if not saviors. Still, people elsewhere marvel that America is such a litigious society. Lawsuits are often viewed as a road to an easy fortune. Lawyers are, in part, responsible for creating this culture through advertising, class action lawsuits, and contingency cases. Legal costs, however, are a necessary (and worthwhile) business expense, especially when it comes to copyrights, patents, and protecting intellectual property. This is a lesson the Chinese are quickly learning [“850,000 lawsuits in the making,” The Economist, 12 April 2008 print edition].

“Western firms are always complaining about the theft of intellectual property in China. From knock-off designs to copycat brand names, pirated music and fake drugs, China has a well-earned reputation as a free-for-all when it comes to patents and copyrights. Worse, there often seems little hope of redress: the courts are too distant and too incompetent; the laws are too weak or too vague; the culture is too resistant to the very idea of intellectual property. Yet help is at hand, in the form of Chinese firms with patents to defend. Since 2003 the number of trademark applications has grown by 60%; the number of patents has nearly doubled (850,000 are now active) and the number of lawsuits about intellectual property has more than doubled. The government is encouraging the trend in many ways, including signalling to the press to cheer it on.”

With Chinese political leaders openly encouraging their scientists and engineers to become more innovative so that China can become a global leader in innovation, this trend is likely to have legs.

“This enthusiasm marks a dramatic change. During the Maoist era, private property of any kind was seen as theft from the masses, and so subject to just expropriation. Only in 1985 did China begin to enact laws to protect patents. It did not enforce them much until 2001, when the authorities promised to crack down in order to win admission to the World Trade Organisation. China has since opened more than 50 courts that deal solely with intellectual-property cases, and Chinese firms are using them. Prominent litigants include a pram manufacturer protecting designs, a soya-milk producer defending an industrial process and a maker of Chinese medicines shielding a name that, roughly translated, means ‘mind and blood purge’. As companies in China establish brands and develop products, the incentive to sue will grow, particularly because the cost of bringing a case is minimal. ‘If you can afford a car, you can afford a lawsuit,’ says Tony Chen, who works in the Shanghai office of Jones Day, an international law firm.”

Although there has been an increase in lawsuits by individuals in China, Chinese leaders’ enthusiasm for legal action is limited to helping businesses protect their interests. Human and civil rights enforcement are not greeted with the same eagerness. Another difference between the Chinese legal system and America’s is that juries are largely uninvolved.

“In America, firms often settle intellectual-property cases out of court for fear of enormous awards by juries. That is not true in China, Mr Chen says, where a judge rules in the majority of cases and damages tend to be small. They normally cover legal costs, however, turning lawsuits into a self-funding method to battle piracy.”

That’s where the American and Chinese systems share a lot in common.

“Unsurprisingly, the main beneficiaries of the sudden interest in intellectual property are Chinese lawyers. Some reportedly earn more than $5m a year. Non-Chinese law firms sometimes provide advice on thorny cases. But they are not allowed to file patents or appear in court on behalf of a client—a proprietary process that Chinese lawyers are keen to defend.”

If the lawyers turn out to be the primary beneficiaries of lawsuits, Chinese jokes about lawyers won’t be far behind. For foreign companies that have seen their intellectual property rights ignored by Chinese firms, this new interest in protecting such rights is long overdue. Whether foreign IP rights will be pursued with the same enthusiasm as the protection of Chinese IP rights remains a question to be answered.

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