by Mike Bellamy in 'China Sourcing Information Center'
It is no secret that intellectual property protection is a problem in China. But many foreigners who are victims don’t realize that they can fight back.
I recently had the chance to interview Teresa from US owned/ China based CBI Consulting about her experiences on the front lines and the costs involved to represent western companies in this fight.
Here are some of the highlights of our talk which are relevant if you are doing business in China.
Q: Teresa, before we get started, give me a brief introduction so my readers and I know where you and your company are coming from.
A: OK, let me give it to you straight. We do undercover investigation to help our clients understand if their IP is being respected or not in China. If it is not being respected, we lead the charge to bring the offending parties to justice.
As you can imagine, the what a CBI investigator sees when he is under cover and applies for a job at the factory and gets a looks from the inside, may be different from what the buyer sees on a formal factory visit!
CBI originally came to China to manage anti-counterfeiting on behalf of Proctor & Gamble but now we have clients large and small in a range of industries. After all, IP theft knows no limits. While many business intelligence companies are content with conducting a seemingly endless amount of raids/research with no meaningful long-term results for their clients, CBI’s definition of success is assisting our clients in a way that assures they will need us less and less in the future. At CBI, we believe that the best model for our business is to provide our clients with a level of service that helps them save money and resources long-term. It is no surprise, then, that the bulk of our new clients come by word of mouth from our many satisfied customers.
Q: Thanks. Now I got it. How do you conduct a basic investigation and how long does an investigation take to complete normally?
A: Although CBI employs all the typical investigative practices such as surveillance, site visits, pretext visits, and media searches one would expect to see in the industry, CBI adopts the philosophy that there actually is no such thing as a “basic” investigation. Because our client’s needs are diverse, and our targets’ operations are equally diverse, CBI places and emphasis on communication and investigator autonomy. Rather than trying to make a complex situation fit into an abstract model about how an investigation should be conducted, we take an organic approach that provides us with the unique ability to enact comprehensive shifts in strategy mid-investigation should the situation call for it. Although we are experts, we know that our clients can often times provide insights that make or break an investigation, and as such we keep them well informed every step of the way.
Q: What is unique about your due diligence practice that separates you from your competitors?
A: We have the resources that no other company in China can bring to a case, and we normally do 25 cases per month. We do cases which take us three months and pay US$50,000 and we also do cases which are knocked out in three days for which we charge US$500. No one else in China can bring the capabilities to this work that CBI can for both large and small clients.
Q: Since you brought up costs, please break down your service fees in details as I hope you can be of service to some of my blog readers who have wrote in facing IP problems and in need of help.
A: CBI’s core practices originally focused on anti-counterfeiting and investigations and are still a mainstay of our business.
Enforcement actions generally cost between US $3000-US $3500 for administrative actions on places of manufacture; and US $2500- US $3000 for administrative actions against wholesalers.
CBI lobbies on behalf of clients for criminal cases with fees assessed based on the following tiered scale:
60% of fees for the successful arrest
10% of fees upon receiving official documentation of arrest warrant from Procuratorate
20% of fees upon successful criminal conviction
10% of fees upon documentation of product destruction
As with anti-counterfeiting investigations and raid actions, there is no “set” fees for our work. Give us the parameters and let us quote individually for each case. Every case is different and we study each situation individually. However, as a point of reference:
-Approximately US $1500 and up per company open-source litigation checks, red flag checks, general background
*With source inquiries, our professional fees are about US $2000 per company.
- $600 for Business Registration records on a given target
-US $500 per individual for litigation checks, red flag checks, industry associations etc.
Site visits are encouraged, especially to the clients we are targeting with the CSIC. Discreet inquiries at the Subject Company itself are quite revealing. Our professional fees for such visits vary depending on the target, location, time invested, etc. For reference, a simple site visit to a factory in Guangzhou which takes us one day may be US$1,200 plus normal disbursements including travel.
What are we looking for during our site visits? Whatever the client wants.
Does the factory have the capability to produce what it says it can? Does the company sub-contract work?
Special thanks to Teresa and CBI for giving me the interview and being open about their cost structure. If anybody is in need of services in these areas, I would be happy to make a personal introduction to CBI for you and ensure CSIC readers get preferential support.
Wishing you successful China Sourcing!
Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. He is also the author of “The Essential Reference Guide to China Sourcing” as a source of China legal and business information.