Faculty Scholarship Digest
Daniel C.K. Chow
Daniel C.K. Chow, China’s Response to the Global Financial Crisis: Implications for U.S.-China Economic Relations, 1 Global Bus. L. Rev. 47 (2010).
This extremely informative article, part of a symposium on the global financial crisis, provides a detailed look at China’s response to the global economic crisis and potential ramifications of that response. Dan starts with an overview of the Chinese economy, which is highly dependent on exports (37.8% of GDP, compared to 12.7% in the U.S.) and on massive foreign direct investment, which brings both capital and technology to China. Although China was not affected directly by the economic meltdown in 2008 (for example, China and its citizens did not have significant holdings in mortgage backed securities), the dependence on exports and foreign direct investment left China’s growth very vulnerable to the crisis’ effects abroad.
Dan explains the response in China, politically and economically. Dan describes how ‘[m]any people in China believe that China was lulled into creating close economic ties with the United States based on a false belief that the United States economy was stable and prosperous with a world class financial industry, a prudent and conscientious government, financial regulators, and sophisticated consumers.” As Dan describes matters, “China’s leaders were . . . shocked and surprised that the United States government seemed to have completely overlooked the problem and may even have contributed to it.” As a result, China which had looked at the United States as a model for economic acumen worthy of emulation now views the United States with much greater skepticism and trepidation, with potential long-term effects on U.S.-China relations. The article canvasses China’s (effective from a Chinese domestic perspective) fiscal and monetary responses to the economic slowdown (which included substantial stimulus and the implementation of universal health care provisions) and discusses their potential ramifications for U.S.-China trade.
Daniel C.K. Chow, Counterfeiting as an Externality Imposed by Multinational Companies on Developing Countries, 51 Va. J. Int’l L. 785 (2011).
Dan has established an iconoclastic presence on the issue of counterfeiting, challenging widespread assumptions and reframing the problem. This article continues that important and powerful discussion. The article begins by challenging the claim of multinational corporations that counterfeiting and other forms of commercial piracy cost them hundreds of billions of dollars per year. Closely analyzing the assumptions underlying such claims (such as that each purchase of a counterfeit good (e.g., a fake Rolex) replaces a sale of the legitimate good that would have occurred). In short, Dan contends that multinationals are not hurt nearly to the degree they claim, and that their own behavior in the extent to which they try to combat and actually facilitate counterfeiting further belies the claim.
This is not to say that Dan considers counterfeiting harmless. To the contrary (much like the purported impact of Prohibition) Dan argues that counterfeiting causes substantial harms, albeit harms that the multinational corporation does not feel. These include the rise of organized crime to operate the counterfeiting operation, government corruption supporting and funded by the counterfeiting, and, in some cases, health and safety risks from the production or use of the counterfeited product. Moreover, the article contends, multinational corporations, by their branding practices and, especially, through their extensive efforts to “take advantage of lower manufacturing costs in developing countries, [where] they introduce technology in environments” with “weak legal systems” and “inept . . . governments” actually are a but for cause of a great deal of counterfeiting. Their actions provide them profit (through brand value and lower manufacturing costs) while leaving them immune from the principle costs described above. In short, far from being victims of counterfeiting, the article casts multinationals as its enablers.
Daniel C.K. Chow, Exhaustion of Trademarks and Parallel Imports in China, 4 Santa Clara L. Rev. 1283 (2011).
This article, part of a symposium on the doctrines of exhaustion and first sale in intellectual property, examines the treatment of exhaustion of trademarks under Chinese law, an issue likely to have rising importance in the future. Suppose multinational corporation X has a joint venture or a wholly owned subsidiary in China Y. X has a valuable brand, ^, that it licenses to Y for China. Y produces ^ brand goods in China and sells them both in China and abroad. Now suppose X has a similar arrangement with company Z in Thailand. If another company buys ^ brand goods from Z in Thailand, can it then import them into China? Or does that violate Y’s trademark rights? The answer turns on whether China follows the rule of “international exhaustion,” under which the first sale of the goods in any country ends the trademark rights, or instead adopts “national exhaustion,” which requires a sale in China to eliminate trademark rights.
The article examines cases and statutes to explain that in China the answer to the question is unclear at the moment. As manufacturing costs rise in China, the scenario described above is likely to become more common and the question, therefore, more important. Dan uses his expertise to analyze the competing pressures in China (to conform to international standards, which would tend towards international exhaustion/to protect mercantile interests, which would tend towards national exhaustion) that will ultimately determine the answer.
Daniel Chow, China Under the Foreign Corrupt Practices Act, 2012 WISC. L. REV. 573 (2012).
The rise of China as a global economic power and the stepped up and aggressive enforcement of the Foreign Corrupt Practices Act (“FCPA”) by the Department of Justice (9 investigations in 2003, 29 in 2007, 74 in 2010) have created a treacherous terrain for multinational companies (“MNCs”). One by-product of China’s state-controlled economic system “is that many persons who might appear at first glance to be private persons” from doctors to low-level employees of a seemingly private business might qualify as “foreign officials” subject to the FCPA’s antibribery provisions under the DOJ’s interpretation of that statute. Coupled with the opacity to MNC senior management of the “petty commercial corruption” that is a part of “daily business in China,” this reality makes China a “trap for the unwary” when it comes to FCPA violations. In this article, Dan details the major elements of the FCPA as interpreted by the DOJ and demonstrates how “their application to China’s current political system and business culture could lead to a wide array of potential FCPA violations.” The article gets deep into the weeds of the FCPA; contractors and pass-through payments, “anything of value,” “foreign official,” and joint ventures are some of the terms and entities described.
Beyond highlighting the problem, however, the article also details how to solve it: specialized compliance programs for the China business entities of MNCs. This section begins with an MNC’s consideration of seeking compliance as opposed to ignoring the possible violations. Dan describes the likelihood and risks of detection, the strategic value of self-reporting of violations and the other reasons that, on balance, argue for a strong compliance program. The article then turns to some of the critical components of such a program. This starts with a forceful program rigorously enforced, “an effective . . . program” needs clear written rules about “unacceptable behavior, [to] institute controls that can detect such behavior, and . . . [to] enforce the rules by immediately terminating those employees that violate such rules and, in appropriate cases, reporting the employees to the PRC authorities.” In addition, a program must have a substantial due diligence component for investigating joint-venture partners, a robust program for handling demands for benefits by PRC officials (including role-playing training simulations and reporting to PRC authorities under new, Chinese FCPA-style laws), and seeking advance rule clarifications from the DOJ.
Daniel Chow, Anti-Counterfeiting Strategies of Multi-National Companies in China: How a Flawed Approach is Making Counterfeiting Worse, 4 G’TOWN J. OF INT’L L. 749 (2010).
In this powerful article, Dan, an international expert on the counterfeiting problem in China, offers a highly revealing window on that problem and the ineffectiveness of current responses by closely describing the institutional interests and incentives that fuel the counterfeiting industry. The article begins by setting out the basic picture of counterfeiting in China, a problem that has exploded over the past decade with industry losses plainly in the billions of dollars; global trade in counterfeit goods is now estimated to exceed $250 billion annually, with as much as eighty percent of those goods originating in China. Dan then describes how the problem is not lack of enforcement as such. On the contrary, “there is a torrent of enforcement activity in China, but with little or no deterrence.” Dan documents that enforcement cases are easily brought, but the fines are small and criminal penalties rare. Why? The article explains that, although the PRC central government has engaged in many reforms to bring China’s intellectual property law into compliance with national standards, enforcement is a local matter, and local officials have local economies that rely on the counterfeiting industry. Moreover, very often the same officials charged with “enforcement against counterfeiting serve on the Board of Directors” of the companies engaged in counterfeiting in violation of PRC law. No surprise then, that penalties are light.
The article offers an equally strong critique of multinational corporations’ own anti-counterfeiting efforts, which amount to enforcement, enforcement, enforcement—with Brand Enforcement Units, private investigation companies and law firms all benefitting from a veritable enforcement industry that is ultimately not only ineffective but counterproductive regarding counterfeiting. The article explains the operational features and incentives that support this ineffective pathology. As Dan describes, “[e]nforcement without deterrence benefits a lot of constituencies,” and its failures lead not to a different approach but to demand for more enforcement. Although the article expresses no optimism of escape from this cycle in the immediate future, a final section outlines a better way forward, though success Dan cautions will have to be measured over years and decades. He points to shifting corporate incentives to a long-term approach, investing in education about the critical value of intellectual property to long-term efficient economic development, a more realistic accounting to corporations of the value of current enforcement approaches (present industry practice unrealistically assumes that each counterfeit product seized results in an additional sale of a genuine product, i.e., seizing a $30 fake Rolex is worth $3,000 on the assumption that a real Rolex that will now be sold) as well as addressing the problems through World Trade Organization and other legal actions that, successful or not, will help bring public scrutiny to the local corruption that is at the root of the problem.
Daniel Chow, Lessons from Pfizer’s Disputes Over its Viagra Trademark in China, 27 MARYLAND J. OF INT’L L. 82 (2012).
In China, everyone refers to Viagra as Weige, a term coined by the Chinese media shortly after Viagra’s official launch in the United States. “Weige is an almost exact homophone of Viagra” for a Chinese speaker, but also has a literal meaning of “great older brother,” which amounted to “a gentle and humorous name” that “spoke to China’s consumers” and aligned “with China’s cultural attitudes towards sex.” Pfizer’s own Chinese designated name for Viagra proved a flop, and, by the time Pfizer got around to seeking trademark protection for Weige in China, another company had gotten there first, with devastating consequences for Pfizer’s ability to control the Viagra market in China.
This article takes us on a guided tour of this debacle, using these events as a case-study to explain how multinational companies come to fail to proactively trademark their products’ Chinese transliterations and why the consequences can be so financially damaging, even though the company does hold the patent on creating the product in question. Dan also sets out the solution for multinationals: obtaining a Chinese-language trademark based on transliteration before the English-language mark becomes public.
Daniel C.K. Chow, THE LEGAL SYSTEM OF THE PEOPLE’S REPUBLIC OF CHINA IN A NUTSHELL (2d ed. 2009).
This remarkable volume updates Chow’s original book published in 2002, which had grown from Chow’s experience, while on leave from the College, living in China and serving as in-house counsel for a major multinational enterprise seeking to expand its business in China. Much has changed in China in the seven years between editions, and the new volume covers these changes with the same inside-but-accessible expertise. The book covers both the basics of Chinese law in civil, criminal and administrative matters, as well as intellectual property and foreign investment, and the structure of the legal system as a whole, including the legislative and judicial branches and the communist party. New material covers everything from the 2008 Olympics, to economic growth, to the “Lawyers Law of 2007” which governs the legal profession in China.
Dan Chow (w/Anna M. Han) Doing Business in China, Problems, Cases and Materials (West 2012).
This first of its kind casebook provides material for teaching a course on doing business in China appropriate for both law and business students. Suitable for students without specialized knowledge of China, the book provides extensive explanatory text to provide context and background for its primary materials: statutes, cases, and contracts and agreements drawn from multinational companies doing business in China. The book also presents problems that such companies deal with in the special environment that comes from China’s unique historical and cultural traditions.
Not surprisingly, a broad array of business topics are covered, including the general business environment (which looks at trade issues, the political system, human rights issues and more), foreign investment enterprises (a critical, and unique, part of doing business in China), intellectual property, real estate, labor and employment, tax, dispute resolution, and corporate regulation issues such as mergers and antitrust. A remarkable compendium of information in an elegant and concise volume, replete with short problems and other teaching tools, the book is worthy of its place as first into this emerging field.
Daniel C.K. Chow (w/Thomas J. Schoenbaum), INTERNATIONAL BUSINESS TRANSACTIONS, PROBLEMS, CASES, AND MATERIALS & DOCUMENT SUPPLEMENT (Aspen 2d ed. 2010).
Dan and his co-author wrote the first edition of this very successful casebook with the notion that growth in the field had brought about the time to separate “the private-based law of international business transactions and (2) the public-based law of international trade.” (They have a separate book on International Trade). The success of the books suggests the widespread agreement with their conclusion, and this new edition (five years after the original) offers much new material across the book, as the field is one of steady but incremental change. The book continues the extensive use of problems “to give students practice in applying the legal concepts learned to actual fact situations.” A separate document supplement completes the new edition.
Daniel C.K. Chow (w/Edward Lee), INTERNATIONAL INTELLECTUAL PROPERTY, PROBLEMS CASES AND MATERIALS (2d ed.) (West 2012).
Over the past fifteen years or so, International Intellectual Property has gone from a niche offering that a few law schools provided to a staple of an intellectual property curriculum, and Dan and Ed’s casebook holds an important place in the field. This second edition keeps the materials current in this rapidly evolving field, both adding new developments and trimming that which is no longer current.
In terms of substance, the book covers the most important treaties and conventions in intellectual property, the growing importance of intellectual property in economic development and international business, and issues relating to developing countries and leading economies around the world. Thus, the book includes material from the United States and Canada, Latin America, Asia, and Africa. From securing trademarks under the Madrid Protocol to patents under the Patent Cooperation Treaty, this book has it covered.
Dan Chow (w/Thomas J. Schoenbaum), INTERNATIONAL TRADE LAW: PROBLEMS, CASES AND MATERIALS (Wolters Kluwer 2nd ed. 2012).
While traditionally International Trade Law and International Business Transactions were covered in a single law school course, Dan and his co-author consider such an approach confusing and unwise. The former subject “is now primarily a specialized branch of public international law,” while the latter is “largely private law with a smattering of public and private international law,” and both bodies of law have grown to be “enormous.” Accordingly, Dan and his co-author have designed this book and their separate book on International Business Transactions as compact companion volumes.
This second edition, while continuing Dan’s approach of reliance on primary source materials and rich use of problems, has been reorganized around “the most important of the global trade agreements . . . , the General Agreement on Tariffs and Trade (“GATT”).” Each GATT article is covered with specialized World Trade Organization (“WTO”) trade agreements integerated with the GATT article to which they relate. WTO agreements that are more independent of GATT are also treated comprehensively, but after the GATT materials are covered.