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Autodesk isn’t exactly a first-time visitor to China. The software company, headquartered in San Rafael, California, established a modest in-house legal division in Hong Kong several years ago as part of its battle against software piracy. Now the company is focusing on China as a key location for product development, which prompted the opening last year of a research and development center in Shanghai. But the corporate legal work spawned by the new initiative is flowing to local Chinese firms with whom Autodesk forged ties during its earlier anti-piracy efforts rather than its primary law firm, Wilson Sonsini Goodrich & Rosati. “It’s fair to say that the Silicon Valley firms are not yet expert enough in Chinese law to be an exclusive source of legal help,” says Marcia Sterling, Autodesk’s general counsel. “In fact, I’m not sure any national or international law firm could be that for you in China unless they had a local office.” The situation poses a challenge to Silicon Valley’s homegrown law firms since China occupies an increasingly prominent place in the growth plans of American technology companies. Raising the stakes are a handful of out-of-town firms with extensive footprints in Asia that are positioning themselves to cash in on the tech industry’s China frenzy. In fact, with no on-the-ground resources in China, Silicon Valley firms risk being left out entirely as other firms prepare for the next big wave of tech-related legal work. O’Melveny & Myers and Shearman & Sterling — both of them relative newcomers to Silicon Valley — have each racked up an impressive list of tech clients with legal matters in China. “I feel that in terms of tech companies, we’re sort of meeting a need that is probably not completely fulfilled right now,” says Carmen Chang, a partner at Shearman & Sterling, which has offices in Beijing and Hong Kong and is in the process of obtaining a license to open a Shanghai office. Chang joined Shearman in July after working for the past decade at Wilson Sonsini. She says she switched firms because the nature of her China-oriented corporate practice required a firm with offices there. At least 30 of her clients agreed, including Google — the Internet search company and longtime Wilson Sonsini client — which transferred its China work to Chang’s new firm. Other Wilson clients, including UTStarcom and Fortinet, followed Chang over to Shearman. None of Silicon Valley’s indigenous firms — Wilson Sonsini, Fenwick & West, Cooley Godward, or Gray Cary Ware & Freidenrich — has offices in China. Among the prominent San Francisco Bay Area firms, Morrison & Foerster has put down the biggest bet, with 25 attorneys spread among offices in Shanghai, Beijing and Hong Kong. Heller Ehrman White & McAuliffe has posted about 20 lawyers in Hong Kong. For tech companies, the opportunities in China are enormous. Markets for high-tech goods and services in China are growing by 20 percent to 40 percent a year, says Jennifer Guhl, the director of international trade policy for AeA, a high-tech trade association. “You don’t see those kinds of growth rates in any other country in the world,” says Guhl. With China’s 2001 entry into the World Trade Organization removing many business barriers, American companies are pumping increasing amounts of cash and resources into the country. In 2001, U.S. technology manufacturers invested $4.8 billion in China, a 17 percent increase from the previous year, according to AeA statistics that are based on reports from the U.S. Department of Commerce’s Bureau of Economic Analysis. “Most companies have China on their radar screen,” says Guhl, “and either have plans that they are currently implementing or plans that they are currently developing.” While tech companies once thought of China primarily as a low-cost factory for assembling their products, they are increasingly viewing China as a vast market for some of those same products. As a result, the type of legal work runs the gamut from joint venture deals to developing capital markets. During a recent symposium on doing business in China, sponsored by White & Case, which has operated an office in Silicon Valley since 1999, the topics included due diligence regarding Chinese companies, structuring investments in China for tax efficiency and protecting intellectual property in China. Not surprisingly, the native Silicon Valley law firms that are accustomed to handling these types of matters for tech companies and venture capital firms are not prepared to cede the market to out-of-town outfits. “We as a firm are devoted to servicing tech companies,” says Barry Kramer, a partner at Fenwick & West. “As China becomes more important in the tech world we will absolutely make sure we will be able to provide the legal services people need in China. There’s just more than one way to provide that.” Rather than opening an office in China, Kramer says Fenwick can serve its clients adequately by using affiliate law firms already located there. In some respects, he says, working with affiliates offers an advantage because he can pick and choose an attorney with specific expertise in a matter rather than rely on whomever the firm happens to have in its branch office. “So long as there are good firms that we can use in China to assist us, I think it’s not an issue,” says Kramer. Fenwick has been taking steps to broaden its pool of affiliate law firms in China. It has also been thinking about hosting seminars and taking other steps to ensure that clients don’t look elsewhere when it comes to China-related legal matters. Despite such resolve, however, it is clear that out-of-town firms with China offices are making inroads into the Bay Area’s technology client base. O’Melveny & Myers, a firm centered in Los Angeles, opened an office in Menlo Park, California, in 2001 — after the tech bubble had already burst. While representing Silicon Valley companies in China was not the primary motivation for its Menlo Park branch, it was one of the key facets of the overall strategy, says Howard Chao, who heads O’Melveny’s Asia practice. Indeed, that practice group is based in the firm’s Silicon Valley office, where Chao spends more than half his time. The firm also has attorneys working from offices in Beijing, Shanghai, Hong Kong and Tokyo. O’Melveny already had some big tech names on its client roster before making its move into Silicon Valley, including Advanced Micro Devices, which makes computer chips. But basing the firm’s Asia practice in Menlo Park has helped it to scoop up a number of local tech clients doing business in China, including PeopleSoft, MIPS and Altera. Chao says O’Melveny could have housed its Asia practice elsewhere, including within the firm’s Los Angeles headquarters. “But I decided to go to Silicon Valley because I felt that was the biggest professional opportunity,” he says. “There’s a huge opportunity to help tech and venture capital firms as they started to expand into China, and it’s definitely proven true.”

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