Troutman Sanders: helping Chinese companies to fight U.S. patent wars

2012/02/21,By Monica Zhang, China IP Magazine,[Comprehensive Reports]

Founded in 1897, Troutman Sanders LLP is an international law firm with 637 lawyers and offices located throughout the U.S. As the firm has developed over the last century, its reputation has grown as well. In 2012, it ranked 73 in the AmLaw 100. In 1997, the year that Hong Kong was returned to China, Troutman Sanders came to the beautiful island and set up its first branch office in China. Now it has opened two more offices; one in Shanghai and another in Beijing.

The above seems like a typical success story of an international law firm. But there is indeed one feature that distinguishes Troutman Sanders from the rest of its class: Troutman Sanders is focused on U.S. and Chinese markets, putting in place in China one of the largest operations among the American law firms serving the Chinese market. What has induced the firm to make such a decision? Why is China so important? How can they help both American and Chinese companies? Bearing these questions in mind, a China IP journalist interviewed four attorneys from Troutman Sanders to find the answer; they are the Intellectual Property Practice Group Leader, Douglas D. Salyers; Managing Partner of Hong Kong office, Eric A. Szweda; Partner, Kevin X. He; and Associate of the Beijing office, Sophie Chu.

Assisting Chinese Companies to Fight U.S. Patent Wars

China IP: To date, Troutman Sanders has more than 600 attorneys and 15 branch offices all over the world. The 2013 edition of Best Lawyers in America includes 128 Troutman Sanders’ attorneys. What do you think are the key factors to the firm’s success? What are the “secret tips” of Troutman Sanders in cultivating elite attorneys?

Mr. Salyers: Firstly, we start with good people. Historically, we have always recruited talented younger lawyers, and cultivated them through our own system. Troutman Sanders has a strong culture of always letting young lawyers to do things in the legal world rather than just sit in the office pushing papers around. In that way, we give the lawyers opportunities to grow, learn and practice law in a very sophisticated manner at a very early age.

The other key factor to our success is strong management—we manage our money well and we have a very stable leadership so that when good lawyers come, they want to stay where they are.

China IP: Troutman Sanders has enjoyed a long history since its establishment in America. Has it ever received any governmental encouragement or support in its early years of development?

Mr. Salyers: We have not received direct governmental assistance, but we recruit people from the government to join us. Our founding partner, Governor Sanders, was the Governor of Georgia. When he retired, he came and helped start the law firm. As a former Governor, he has a lot of connections in the political world to help grow our business. Through the firm’s history, we have recruited many staff members that used to work for the government, such as former patent examiners, who have contributed to produce a thriving firm.

China IP: What do you think are the most critical issues with regard to managing an IP law firm in China?

Mr. Salyers: As you noted, we are a very old firm. The original part of the firm started in 1897, so we understand the U.S. operations very well. But when we came to China we were somewhat of a new firm and needed to learn the market. Our management philosophy has been implemental development; we focus on our strengths and move to new areas of practice. One of the challenges we face in China is that talented people tend to move around a great deal. We’ve been fortunate that we have great stability here in China as well, but we constantly place emphasis on recruiting and maintaining the top talents in the market. One of our management strategies in China is recruiting the top talents who have already been recognized for excellence in their field and have many contacts. That is how we grow and develop—the key to our management.

We also do better than most firms in retaining people, identifying the business needs and clients. Among the 50 staff members we have in China, 45 are mainland Chinese, Hong Kong Chinese or Taiwanese.

China IP: Troutman Sanders entered the Chinese market in 1997 and set up its third branch office— the Beijing office in 2012. Compared with what it was like 15 years ago, what kinds of changes have happened to Troutman Sanders’ business status in China?

Mr. Szweda: In one sentence, our business has become more local during the last 15 years. When we first came to China in 1997, we focused on helping American businesses coming to China. Over the last 15 years, we have developed from helping foreign businesses to helping domestic businesses in the Chinese mainland, Greater China and then extending beyond, going global. Today, we do that first and foremost in Hong Kong.

In IP, a lot of our businesses are representing Chinese companies in mainland China to solve disputes outside of the country, in the U.S. mainly. We also help them to get patent licenses, conduct due diligence and we help them analyze patent portfolios. Meanwhile, we also help foreign companies to bring their patents into China and protect their intellectual property.

China IP: For Troutman Sanders and other international IP law firms, what are the main obstacles in exploring the Chinese market? Could you share with us some of Troutman Sanders’ experience and lessons?

Mr. Szweda: What I have been telling people is that the Chinese IP laws are getting stronger and people are paying more attention to them. 10 or 15 years ago, the Chinese IP market was smaller and fewer people paid attention to it.

The Chinese system is different from that of the U.S. in some ways. In America, the companies can rely chiefly on the court system, but in China they have to rely on the administrative system as much as the court system. Therefore, it requires different strategies and different approaches.

In America, if you have a dispute that cannot be resolved, the companies would go to the court and believe that they will be treated fairly in both process and procedure. In China, before we go to court, we would go to the administrative departments first and try to get some the administrative authorities involved in advance.

China IP: How does Troutman Sanders choose to explore the Chinese market?

Mr. Szweda: We started business in China chiefly because we had clients that had needs in China. But, with every market we enter, we want to be relevant to the business community in that market. We have succeeded because we are hiring top lawyers in each market, with established business connections and strong reputations. We very much see a bright future in China and want to be involved. We see our legal practice as facilitating the interaction of two great economic powers.

China IP: What are Troutman Sanders’ plans in the next few years in China?

Mr. Szweda: You will see us in other Chinese cities. We are assessing the cities in China that have a higher presence of technology companies, such as Chengdu and Shenzhen, etc. The firm is looking to open at least one more office in the next few years.

Advices for Chinese enterprises

China IP: All in all, there have been more and more Chinese companies dealing with IP cases in the U.S., such as ZTE and Huawei. Is it a trend? Could you forecast the legal issues that Chinese companies may encounter in the U.S.?

Mr. Szweda and Mr. He: I think it is a trend that will continue for some time. The dispute between Huawei and Cisco is a company to company dispute, but you will continue to see companies like Intellectual Ventures bringing lawsuits against whoever manufactures products. As long as China makes products, it will be in the center of patent litigations. Not only are the companies from different countries suing each other in the U.S. courts, companies from the same country, like Japan, are also fighting patent wars in the U.S. That is because the market is so large and the penalties tend to be higher.

Another thing worth noticing is that the U.S. market buys and sells patents. NPEs purchase patents and start lawsuits for license fees. So Chinese companies should be aware of the fact that the U.S. market has become the central place where IP issues are getting resolved, and be prepared to deal with that.

China IP: Based on the view from the cases Troutman Sanders has represented, what are the major defects in the IP management of Chinese companies? How should Chinese companies prepare themselves before entering the overseas market?

Mr. Salyers and Mr. He: I think that the Chinese IP managers are getting a lot better. But some companies have to pay attention to due diligence. If you are entering a new market or you are selling products globally, you need to notice the IP rights existing in that particular area. Sometimes Chinese companies fail to pay attention to that information, and they are not getting a lot better at that as I see it.

If they are doing business in the U.S., they also need to get some local legal assistance. Many times I have seen a non-U.S. lawyer try to figure out what was happening in the U.S. and get it wrong. They should look for those local firms with strong reputations and also have branch offices around the country because disputes are going to happen in different places.

I also suggest that Chinese companies start building their patent portfolio and get protection in the U.S. before doing business. A company needs to have a good defense when it enters a market, particularly when it is trying to break into a market, because competitors in that market already have large amounts of patents. Without patents you will be fighting a defensive battle.

In addition, it is also common to see Chinese companies filing and accumulating patents, but they don’t know whether those patents can be licensed to other companies to obtain fees. So they just let their patents sit there. Patents are assets; they can not only be used as weapons in patent wars but also be used to generate profit, at least they can be applied to attempt to get some cross-licensing deals with competitors.

I think the Chinese companies have great opportunities in the U.S. because American consumers will buy the best products no matter from which country the products come. Japanese companies have been doing quite well. But at present in the U.S., the concern is about copying, counterfeiting and computer hacking. Maybe that is a problem that Chinese enterprises are facing.



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