China Cracks Down on Copycat Architects
In China, the business practice of bootlegging is not just confined to DVDs and Louis Vuitton handbags. Foreign architects have discovered that their designs, even their company names, are also attracting copycats. But some are beginning to fight back. In one of the first cases in which the government is allowing a foreign firm to sue a Chinese business, Woodhead International, Australia’s second-largest design firm, filed a lawsuit in Shanghai earlier this year against its former local partner on the basis of “unfair competition.” Very few of these cases ever made it to a Chinese court in the past because foreign companies had limited powers in China.
The firm being sued now, called 5+1 Werkhart International, is led by Liu Li, the former head of Woodhead’s Chinese operations from 1999 to 2005. Woodhead alleges that Liu used its name to win commissions—then diverted these projects to a separate company. The Australian firm says that it learned of the scheme after clients began complaining about poor quality designs and shoddy drawings.
Woodhead fired Liu after learning of the alleged theft, but it claims that Liu’s abuses didn’t end there. For its Chinese operations, Woodhead had chosen the name “Wu He,” an almost direct transliteration of its name. After being sacked, Liu established a firm called 5+1 Werkhart. Not coincidentally, Woodhead alleges, the words “five plus” are pronounced “wu he” in Mandarin.
“We believe it was a deliberate plan from day one to approach an Australian-based company in China to build up a little bit of trust and confidence and use that name to build up his personal credibility,” says Geoffrey Lee, Woodhead’s managing director. “It can happen to anyone—SOM, RTKL—all these guys. Small architects who are opportunistic can register RTKL in Shanghai or Guangzhou or Shenzhen, for example, and there is no legal requirement that you have any relationship with the company.”
Liu could not be reached for comment. Arguments in the lawsuit were expected to begin last month.
In this and similar cases, the problem stems from the fact that until 2004, when China joined the World Trade Organization, foreign-based companies were not permitted to establish wholly owned foreign enterprises (WOFE). This restriction meant that they were required to seek a local business partner, some of whom proved more interested in profiting from their partners’ names than in establishing legitimate businesses.
But things are changing. Current practices make it financially feasible for companies to establish WOFEs, and so large firms who have worked in China for many years, such as Perkins Eastman, are beginning to expand under these new rules. “Intellectual property rights protection has improved sharply in China in the past five years,” observes Boris Armstrong Qi, a Shanghai lawyer who specializes in intellectual property law and represents Woodhead. “There is no prejudice against foreign companies, I don’t believe it.”