An informed choice: law firms in China

While rankings of law firms in China are helpful as far as they go (and WIPR may do them in the future), the diversity, number and strengths of the various operators in the country limit how comprehensive they can really be. There are certainly firms that can provide an exhaustive service whatever the IP issue, but others should not be overlooked just because their strengths lie in more specific areas.

There’s also the nationality question. There are, broadly speaking, three types of intellectual property firms in China. There are the local firms, the internationals and the local firms with clear, fixed international links. They all have roles to play in providing legal advice to clients, but those roles are evolving rapidly. In 10 years’ time, the situation may be quite different.

International

International law firms face two major obstacles in China. Firstly, there is the small matter of not being allowed to represent clients in Chinese proceedings. Effectively, foreign firms are prevented from offering full services in China to their clients—they aren’t licensed to practice and so are obliged to engage local practitioners to do some of the work they would no doubt like to do.

And secondly, there is the language issue. International law firms can find themselves stuck between competing wants—native English speakers to liaise with international clients are essential, but so too are native Chinese speakers. Not everything can be done in translation.

Despite these obstacles, however, it is clear that the most successful international firms with presences in China provide an excellent service to their clients, albeit at higher rates than local law firms charge.

Baker & McKenzie is one of the best established. Its Asia practice is headquartered in Hong Kong, but the firm also boasts offices in Beijing and Shanghai. Its large team is headed by Loke-Khoon Tan and has a range of international clients, including Abbott laboratories and Nokia.

Tan says that the firm’s strength lies in the depth of its practice, and the ability to cross the cultural divide between Western ways of doing business and the realities on the ground in China. And that doesn’t just go for the lawyers based in China and Hong Kong.

The firm runs a secondment programme, bringing lawyers from other international offices over to gain experience of Chinese legal practice, the better to serve international clients elsewhere. While Baker & McKenzie is far from the only firm to have such a programme, Tan cites it as a major tool to maintain standards in the future.

These days, many US law firms maintain Chinese and Hong Kong practices, but opinion is divided as to whether that will continue in the long term. The consensus view is that the restrictions on foreign law firms in China will remain for the foreseeable future. As Linda Chang, head of Rouse’s China group, puts it, “the government wants to protect this market...it’s still a big issue for foreign law firms”.

At the moment, international law firms bring things to the table that local firms cannot: long-established, international client relationships, the ability to communicate with clients effectively whatever their native language and, perhaps most importantly, reputation. A multinational headquartered in the US knows, with a reasonable degree of confidence, that standards at a US law firm are predictable and their methods of working are largely unchanging.

That is not to say that local Chinese firms can’t meet similarly high standards, but rather that in this case, familiarity breeds contentment. But as international firms do more and more business in China, and as enforcement systems become more transparent and user-friendly, it’s possible that, in time, companies will become more familiar with the local law firms and will start going direct to them for lower-cost, cradle-to-grave work on IP matters, cutting out the traditional big players.

“Numerous local PRC firms boast intellectual property practices. The most well established is probably CCPIT, which was started by a government initiative in the 1950s and, until the mid- 1980s, was the only trademark agency in China. Its institutional memory and size make it a popular choice with Chinese and international clients, and indeed, many of the newer intellectual property firms in China were set up by former CCPIT attorneys.”

And while there remains a gulf between the ability of some local law firms to provide the kind of service required and that provided by international firms, the situation seems to be changing. More and more, the best local firms are staffed with lawyers brought up in a more business-friendly environment. Some firms have international offices (CCPIT Patent and Trademark is present to some degree in New York, Tokyo and Munich), and others are making efforts to employ staff with international experience and solid foreign language skills.

One lawyer, who did not wish to be named, predicts that in the next decade or so, “the light will grow dim on foreign law firms”. But while some would agree with that proposition, others argue that the international players will remain successful. After all, China is not the only country with restrictions on who can practice—many others enforce some limitations, without unduly hampering the big players’ efforts.

Ultimately, they would argue, it’s a question of expertise, experience and institutional structure. Most of the big international player have had a head start of decades, if not centuries, on their Chinese counterparts, and that’s not ground that can be made up quickly.

International, but not international

While some American and European law firms can boast considerable history in China, and especially in Hong Kong (Baker & McKenzie, Jones Day, Hogan Lovells, Bird & Bird, and Gide Loyrette Nouel, to name a handful), other, technically foreign, law firms have even hardier roots. Take Deacons, the Hong Kong firm that traces its genesis to 1851, when a young English solicitor came to work in the colony, as it was then. Today, Deacons maintains an exceptionally strong Hong Kong practice, but also has offices in China.

Annie Tsoi, an IP attorney in Deacons’ Hong Kong office, explains that the firm is expanding on the Chinese mainland, with an IP partner expected to move to its Shanghai office soon.

While Tsoi acknowledges the difficulties that hers and other firms have had in coming to grips with the PRC legal systems (most of Deacons’ employees are trained under common law), she sees Hong Kong as acting “like a window” on China, providing opportunities for companies to get advice from an international law firm that nonetheless has close ties and history with the mainland.

Locally sourced

Numerous local PRC firms boast intellectual property practices. The most well established is probably CCPIT, which was started by a government initiative in the 1950s and, until the mid-1980s, was the only trademark agency in China.

Its institutional memory and size make it a popular choice with Chinese and international clients, and indeed, many of the newer intellectual property firms in China were set up by former CCPIT attorneys. Another government-instigated firm, Liu Shen & Associates, also garners excellent feedback from rivals.

But if these firms had a head start, other firms have quickly caught up. King & Wood is widely respected, and with more than 200 people working on IP matters, it’s one of the larger practices in China. It too boasts international offices, in Tokyo and the US, and a clear majority of its IP clients are international companies. With 12 different Chinese offices, it has unparalleled geographical coverage on the mainland—and that’s a key consideration for companies worried about infringement outside the major Chinese markets.

These types of firms generate their own work, both with local and international clients, but many also benefit from close ties with international operations. David Tian, at An Tian Zhang & Partners, explains that his team has worked closely with international players such as Freshfields Bruckhaus Deringer, Hogan Lovells and DLA Piper, on matters in the past. Unlike King & Wood, An Tian is an IP boutique, one of several that have emerged in recent years to cater to growing demand.

Kangxin & Partners is another such, though its client base is more heavily weighted towards Chinese clients (about 65 percent). That said, the firm has handled matters for international clients like Swarovski Crystal in the recent past. Unusually for a Chinese law firm, Kangxin can also trumpet the services of a native English speaker. Aaron Hurvitz, an American lawyer, assists the firm’s international clients with regard to the Chinese IP landscape and business markets.

Many Chinese firms promote themselves as having particular strengths in specific IP areas. Lian Yunze, an IP attorney at Hylands Law Firm in Beijing, says that “the best service comes from speciality”.

To that end, the firm has eight separate, dedicated IP teams, specialising in specific areas such as customs actions, domain name disputes, patents, trademarks and copyright. With a particular focus on anti-counterfeiting, the firm has enjoyed considerable success in the past 12 months. It filed five criminal anti-counterfeiting cases in 2010, securing jail sentences in three cases— that’s no easy feat in China.

Last but not least, there are innumerable smaller operations working on IP in China. While they might not have the depth of practice of some of their larger rivals, they can be extremely reliable for the right matters. Firms such as Jun He, Peksung and Wenping (based in Hong Kong) have all developed solid client bases and gain good feedback.

The other option

The future for Chinese intellectual property firms looks rosy. As the country continues to advance on the world stage, becoming more affluent and more innovative, there is not going to be any shortage of work. International law firms may have to adapt a little to counteract the rising stars of the Chinese bar, or perhaps explore alternatives. One possibility is an alliance. Many international players already have close links with specific Chinese firms, but some have taken it even further.

Rouse, for example, seems to have the best of both worlds. With its international consulting service providing advice to clients from across the globe, it channels the nitty-gritty work through Lusheng Law Firm, a wholly Chinese-owned company set up by a former Rouse partner. This exclusive arrangement suits both parties, and for clients, provides a level of certainly that is not always possible using other arrangement.

Whether this kind of set-up becomes more common in the future remains to be seen—as ever, the market will decide that. But what does seem clear is that the IP legal market in China is only going to get more crowded. And in a crowded marketplace, those firms that prosper will be those that can stand out from the crowd.