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Several lawyers from Paul, Hastings, Janofsky & Walker’s China and Hong Kong offices visited Atlanta last week to meet with local clients interested in doing business in China. “The biggest boys — the Coca-Colas of the world — know that China is important, and they’re already there. It’s medium- and smaller-sized businesses that need the know-how” to enter the China market, said Anthony C. “Tony” Chen, who works in the firm’s Shanghai office. Those are the clients that Paul, Hastings’ China lawyers are targeting on their swing through the firm’s East Coast offices, he said. China is becoming big business for U.S. companies — and law firms. The world’s largest potential market has become increasingly accessible with China’s 2001 entry into the World Trade Organization and ongoing reforms that make its markets more attractive to foreign capital. More than one-third of Fortune 500 companies have local headquarters in Shanghai, said Chen. Starbucks coffee shops dot the local landscape, and KFC does more business in China than in the United States, he said. Besides Coke, Atlanta companies with China operations include AFC Enterprises Inc., BellSouth Corp., Crawford & Co., GE Power Systems, Mirant Corp., Motorola Energy Systems Group, Scientific-Atlanta Inc. and United Parcel Service. And Home Depot is sizing up the market. U.S. law firms such as Paul, Hastings are hustling for a foothold in the rapidly expanding Chinese market by helping their clients do the same thing. About 160 foreign law firms are now licensed to do business in China, with 30 from the United States. And two or three times that many firms actually have a China office, said Thomas H. Bottini of the Missouri firm Armstrong Teasdale, which is licensed in Shanghai. Even with a license, foreign firms cannot appear in court or practice Chinese law, so often they operate as consultancies, he explained. Paul, Hastings started its China practice two years ago with the acquisition of Koo and Partners in Hong Kong and already has 85 lawyers in the region. After establishing the Hong Kong office, the firm opened offices in Beijing and Shanghai, using licenses held by its new partner. It now has more than 50 lawyers in Hong Kong, 20 in Shanghai and 10 in Beijing. The firm’s Atlanta clients doing China business include Laureate Education Inc., Meineke Car Care Centers, AstenJohnson Inc., Kurt Salmon Associates and Scientific-Atlanta. U.S. companies interested in starting China operations want to know how well China is living up to its WTO agreements and how open and transparent Chinese law is becoming, said David A. Livdahl, managing partner for Paul, Hastings’ Beijing office. One major concern is intellectual property rights. Many companies here worry that they will not be able to protect their trademarks and patents in China, said Chen, who heads the Shanghai office’s IP practice. However, intellectual property rights are enforced in China to a greater extent than Americans realize, he said. For example, when one client, an Internet company, had its source code stolen by hackers, the Shanghai police took it on as a criminal case. The police put 12 detectives on the case, arrested the hackers in three weeks and returned the source code, Chen said. “The Shanghai government saw [resolving the problem] as important to attract foreign investment to Shanghai,” he said. U.S. companies lag far behind Japanese and Korean companies in Chinese patent filings, said Chen — either because they think there is no patent protection in China or because it hasn’t occurred to them to register their patents there. Of the top 10 multinational patent filers in China, only one — IBM — is a U.S. company, he said. However, China has joined all the international IP conventions, he said. The Chinese patent office registered 300,000 patents last year, which is just a bit behind the figure for the United States. What’s more, China was No. 1 in trademark filings last year, with 400,000 applications filed, compared to 300,000 in the United States, he said. Compared to San Francisco, Seattle or New York, Atlanta’s share of the Chinese legal market is small, said Atlanta attorney James Y. Rayis, who has several clients with Chinese operations. But that is changing as Atlanta becomes more international and as the Chinese economy develops, said Rayis, who works in the Atlanta office of French firm Sokolow, Carreras, Lemoine & Partners. No Atlanta-based firm has an office in China, although Troutman Sanders has a six-lawyer outpost in Hong Kong. Several international firms with an Atlanta presence have China offices, namely Paul, Hastings; Jones Day, which has offices in Beijing, Shanghai, Hong Kong, Taipei and Singapore; and Holland & Knight, which has a one-lawyer Beijing office. However, plenty of Atlanta firms do business in China, ranging from the city’s big firms, such as King & Spalding and Morris, Manning & Martin, to intellectual property boutiques, such as Thomas, Kayden, Horstemeyer & Risley. “What happens is that you manage the interface between the U.S. legal system and the Chinese legal system,” said Bernard L. Greer Jr., senior partner in Alston & Bird’s international practice group. “We don’t purport to practice Chinese law,” he said. Instead the firm uses local counsel for expertise on local law, adds its own expertise on U.S. legal issues and then figures out “how the two fit together to the client’s best advantage.” U.S. lawyers working with Chinese counsel still can lead negotiations because they understand their client’s business, said Alston partner Darren C. Hauck, who has just returned from a trip to Beijing for a potential joint venture between a local client and one in China. Hauck agreed that smaller companies are getting into the Chinese market. His own client, which he declined to name, is “very small in a spectrum that includes Coca-Cola,” he said. But it’s riskier for small companies to start up Chinese operations, because they have more to lose than large ones, he cautioned. And there are still some procedural wrinkles to iron out in China. On Hauck’s Beijing visit, for example, he discovered that a squatter had built a hotel on property earmarked for his client’s joint venture. “It’s still the big guys doing things — but everybody is thinking about it,” he said. Related Story: Doing Business in China Requires Jumping Through ‘Flaming Hoops.’

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