Kevin's BLOG

Doing business in China?

posted 3 Jul 2013, 00:02 by Kevin Liddiard   [ updated 20 Nov 2013, 14:47 ]

Contracting in China involves numerous risks for a small/micro IT businesses. EOSD business owner Kevin Liddiard shares a recent experience in this blog.




I have considerable experience working on international projects, so when I entered into a contract in China I did so, I thought, with eyes wide open. I have travelled often to China, and have a good understanding of Chinese business culture. I established what I thought was a sound and trusting relationship with the principals of a high tech start-up in Shanghai, expatriates who spoke fluent English and were still US citizens. I thought I had developed considerable ‘guanxi’ (a harmonic relationship) with the principals and the project team. It was a pleasure to work with a young and highly talented project team.


I had high hopes of establishing my patented optical sensor technology in China, and the association with the Shanghai company was seen as the culmination of this objective. To this end I accepted an offer to consult on a related project funded by a large manufacturer of products in my technology field, and this company subsequently refused to honour the contract. With the exception of some costs I was not compensated for my advice. There has been no resolution after two years despite numerous attempts to seek an amicable settlement by myself and legal representatives.


The contract document was, incidentally, essentially the same as others I have had in the USA and elsewhere outside China, but had intrinsic weaknesses for business in China.


I would like to share the lessons learned from this disastrous venture.


Some general observations based on this (my personal) experience:


·         Contracts in China are viewed as non-binding and can be breached if the contractor thinks it can do so without penalty.

·         There is little corporate conscience concerning obtaining of intellectual property if it can be acquired without penalty.

·           Treaties on tax are ignored in China; expect to pay tax.

·         If a company decides to breach it will simply ignore you. This is Chinese Business Strategy 4: “Wait leisurely for an exhausted enemy”.

·         Chinese are very smart people and can easily arrange language translations; but they may use language difficulties to justify their position.

·         Westernised Chinese people will revert to Chinese business culture in China.

·       Arbitration on disputes is common in China, but whilst your dispute would be settled in your favour in your own country, cost and procrastination by your contractor may not warrant going to court in China. It’s your word against their’s, despite strong evidence supporting your case.

·         Small/micro businesses are pretty much on their own. Your Chinese lawyer may simply walk away because the business is not worth the effort or return. Your own government may be sympathetic, but will stay clear of taking a strong position (although large corporations often get high level support if the stakes are high).


The four main lessons I learnt from my failed Chinese contract are:   


1.       No matter how experienced you are in international contracts, seek legal advice from a Mandarin speaking lawyer who specialises in Chinese business contracts. Do this from the outset.

2.       Negotiate an upfront non-conditional retainer, but other than goodwill offerings don’t provide any IP/trade secrets until money is in the bank.

3.       Insist on clear rules in the contract as to where the work may be done (it was in mine, but was still

a matter of dispute).

4.       Insist on a dispute settlement option in the courts of your own country.


If you would like to follow up or comment, contact me at


Note: I am bound by the Wassenaar Arrangment in my contract dealings, and to my knowledge the work undertaken in the above project was related to products intended for the industrial and consumer markets.

Mosaic pixel technology

posted 2 Jul 2013, 23:59 by Kevin Liddiard   [ updated 3 Jul 2013, 00:00 ]

I have identified a number of applications for my patented MP-FPA technology, and at last there is a lot of interest in the IR community in short target range applications where the technology is at its best. I’m looking for partners who will preferably take over the IP, leaving me free to indulge in technology development.

The active microbolometer

posted 2 Jul 2013, 23:57 by Kevin Liddiard   [ updated 2 Jul 2013, 23:58 ]

With the rapid increase in silicon MEMS, LCD and solar cell foundries it should now be possible to develop the active microbolometer, but more than I can handle now, so I am offering the IP for sale.

About Kevin Liddiard

posted 30 May 2013, 07:53 by Gordon Kay   [ updated 22 Oct 2013, 22:47 by Kevin Liddiard ]

Kevin Liddiard is owner of consultancy business Electro-optic Sensor Design and Australian company IR Sensors Pty Ltd. These are his personal blogs.

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