GlobalBiz: How to avoid legal hurdles when expanding overseas


By Michael Muth,  GlobalBiz columnist

In this interview with attorney David Laverty, a principal of International Counsel, GlobalBiz explores the legal options and challenges associated with moving a small business into the international marketplace.

Laverty has more than 20 years of experience with contracts, investment and market-entry matters. In his work in the United States as well as in Asia, Europe, Latin America and the Middle East, David assists companies to better and more cost-effectively

Muth:   How can technology companies protect their IP in countries where IP protection and enforcement are weak?

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Interpro Translation Solutions is a sponsor of Michael Muth's GlobalBiz column

David Laverty:   Many companies don’t protect themselves with the basics from the start. They have patents and trademarks, but don’t register in other countries.   IP depends on country-by-country protection. There are treaties that allow you to roll out an application within other countries in a certain amount of time.   Some companies miss the window.

Are employees bound by individual confidentiality agreements? Are they allowed to have some rights to keep that knowledge?   Where you can protect yourself in a relationship is through a contract. A common mistake is that many in the U.S. stipulate our courts. The problem is even if you get a judgment in Illinois, how do you enforce it elsewhere?   There aren’t treaties that enforce this.   Arbitration is an option.   It is enforceable, with a few exceptions.

The different bodies of rules have relative advantages.   There is not a lot of difference between the ICC (International Chamber of Commerce) rules which are broadly adopted in Europe and Asia.   [But] in China there is CTAC, which has its own rules.   It depends a lot more on who the arbitrators are. Each side can pick one and agree on a third.   That will have more to do with the outcome than the rules.

Muth:   How do you deal with language issues?

David Laverty:  English is overwhelmingly the language of contracts in international projects. I lived in Korea years ago. If Korean parties were doing a contract with the Japanese, they would do it in English. Certain countries require certain languages. [For example,] Quebec requires French. You need to pay attention to which language governs.

How it works

Muth:   How well-equipped are most in-house legal counsels to address global legal issues?

David Laverty: On the international side ¦ most major companies have grown a cadre of internationally experienced lawyers /specialists.   Others don’t need or want a separate international team. Abbott [Labs] used to have a separate international team of lawyers. It then ¦ became a single team, with some domestic lawyers doing international work.

Muth:   What are the advantages and disadvantages of working with legal partners and networks in foreign countries?

David Laverty: Networks of law firms in part are meant to show their client bases that they have capabilities in other countries without having offices in those countries, which came in response to big law firms that had their own global footprints.

I’m a bit skeptical of these networks. There are at least 50 prominent international networks of lawyers. It used to be that they were hand-picked, carefully selected with stringent standards. Their true capabilities tend to be stretched. There is no substitute for personal experience in those countries.

It’s important to have a mix of firms to pick from. [A] firm working on a merger and acquisition deal may be overkill for working on a distribution agreement or contractual issue.

I’ve run across few situations where it becomes apparent that the local firm pays less attention and is not servicing you because of the absence of a network or affiliated office relationship. There are many ways to keep them in line.   ¦  Word does get out if people aren’t performing.

Muth:   What are the advantages and risks of outsourcing IP-based professional services to India?

David Laverty:   Legal process outsourcing is not legal advice, but it involves legal matters. There are services which fill in trademarks, and patent applications.

Even more broadly in litigation, you could have English-speaking lawyers in India who review massive quantities of documents.   They don’t make legal judgments.   They put together basic agreements, cut and paste in contract management tools where an in-house counsel can call up agreements; find out when they’re expiring, etc. Some things don’t need to be done by a U.S. associate and certainly not by a partner.

Muth:   What do most American attorneys need to know about the law worldwide?

David Laverty:   It can be hard to convince those domestic lawyers with years of experience in commercial transactions or M&A deals that there is something that could be missed. ¦How do you get the required information from whom and handle it cost effectively from people in another country?   When are you going too far and/or not far enough?

In a lot of countries, the law is the smaller part of the equation.   You can’t have the same degree of confidence in an agreement.   You have to be prepared to accept less in some jurisdictions.   How much should business leaders be worrying about cultural factors?   I say be true to yourself.   You’ll be seen as a person of integrity.

Muth:   Does it help that you re lived/worked/practiced law outside of the U.S.?

David Laverty:   I thought it was incredible to be able to work in Korea.   I have a lot more respect for a lot of the local firms than some [others] might have.   They might not be cranking out 500-page documents with the same bells and whistles we sometimes use here, but such provisions sometimes get in the way and might not be appropriate…

Muth: Anything else you want to add?

David Laverty:   Many smaller- or midsize companies might have people they’ve turned to for answers and think they’re the same people to turn to when doing business elsewhere.   I urge those companies to look beyond that set. You don’t have to go with the firm with the largest number of offices around the world.

Listen to the complete interview here.

This column was sponsored by Interpro Translation Solutions, a Lisle provider of software localization and translation services.