Posted on June 1, 2010 by Michael DiSanto

New Tax Subsidy for Biotech Startups

Small biotech companies may now qualify for tax credits or or cash grants equal to 50% of certain expenses incurred in tax year 2009 and 2010 in connection with any "qualifying therapeutic discovery project."  The IRS Notice defines a "qualifying therapeutic discovery project" as any project that is designed to:

  • treat or prevent diseases or conditions by conducting pre-clinical activities, clinical trials, and clinical studies, or by carrying out research protocols, for the purpose of securing FDA approval of a product under section 505(b) of the Food, Drug, and Cosmetic Act (new drug applications), or section 351(a) of the Public Health Service Act (biologic license applications);
  • diagnose diseases or conditions, or to determine molecular factors related to diseases or conditions, by developing molecular diagnostics to guide therapeutic decisions; or
  • develop a product, process or technology to further the delivery or administration of therapeutics.

To qualify, the biotech company must not more than 250 employees in all of its businesses (including the businesses of its affiliates).  Tax-exempt organizations under section 501(c)(3) of the Code and certain foreign entities are not eligible for either the tax credit or cash grant.

 

For more information on this exciting new opportunity for biotech startups, please review our  previously issued Tax Alert on the subject.

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Posted on April 19, 2010 by Michael DiSanto

New Tax Subsidy for Small Biotech Companies

Small biotech companies will need to move quickly in order to take advantage of a new tax credit enacted as part of the Patient Protection and Affordable Care Act of 2010. The new credit, which is contained in section 48D of the Internal Revenue Code, is equal to 50 percent of eligible costs incurred by small biotech companies in developing new therapies to prevent, diagnose and treat acute and chronic diseases. Some taxpayers may be eligible to elect to receive a cash grant in lieu of the new credit.  

One of our Southern California tax partners, Ruth Holzman, was interviewed in BioWorld Today about the research-based tax credit. 

"The biotech industry pleaded that a credit wasn't really going to be helpful because most of these companies don't have products yet, therefore, they don't have sales, they don't have revenues. So tax credits can't be used by them," Holzman said. Had the Senate stuck with only providing a credit, it would have been generating a tax benefit that "may never have been used," she said.

"So it really was a gift," Holzman said, noting that the cash grants are not subject to income tax.

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Posted on December 18, 2009 by Michael DiSanto

Friday Five: Hijackers, Industry Survey, Funding and Exits

After a multi-week hiatus due to the holidays and, of course, the ever-present demands of deal making as the year comes to a close, Friday Five is back to highlight a few of the top stories from the week. 

  • A group of hackers commandeered Twitter's DNS for about an hour on Thursday night, directing traffic to their own webpage.  According to the social media giant, its website and micro-blogging that plugged into Twitter's API were not affected.  This is the second time in less than six months that Twitter fell victim to a DNS attack, though it is the first time that a "Cyber Army" took credit for the fiasco.  What is a "Cyber Army" anyway?  Do they attend boot camp, wear uniforms and otherwise follow unquestioned orders from superiors?  I digress. 
  • Earlier this week, the National Venture Capital Association released its yearly Venture View Survey.  The survey polled more than 325 venture capitalists across the country, and the results were as expected with the industry professionals remaining somewhat bullish about the short-term future.  63% expected the total dollars invested in 2010 to stay the same or increase.  50% predicted an increase in the number of companies receiving funding.  The survey pointed to clean technology and Internet as the industries best positioned for higher investment levels in 2010.  Asia will continue to be a growing focus for investment dollars.  74% predicted an improved IPO market.  And the overwhelming majority predicted that funds raised in 2010 will be smaller than previous funds and the overall number of funds would decline over the next five years.
  • Regado Biosciences yesterday closed its Series D financing, raising $40 million from an investor syndicate led by LCF Rothschild Group that also included existing investors Domain Associates, Quaker Bioventures, Aurora Funds and Caxton Advantage Life Sciences Fund.  The New Jersey-based company is developing antithrombotic therapeutic aptamers with active control agents.  Regado's successful raise is a nice feel-good moment for emerging companies in light of the continued talk of general venture capital industry contraction.

That is all for now.  We won't have the same radio silence over the next few weeks that we did in late November.  Enjoy your weekend!

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Posted on December 11, 2009 by Michael DiSanto

Anti-Social? I'll Still Share Our Social Media Presentation

OK.  You caught me.  I'm not that clever.  It's not my title.  Our Advertising, Technology and Media group pens a very informative and entertaining blog -- LegalBytes -- that first used that title, so I have shamelessly plagiarized it.  I did, however, attend the social media presentation in Palo Alto on Tuesday, and it was a resounding success.  Joe Rosenbaum and Anthony Traymore filled their allotted 90 minutes with extremely useful, interesting and entertaining information for relating to the impact of social media on a company's brand.  That can be of particular relevant to emerging companies, since their tech savvy founders and employees.  The power of a tweet, Facebook page, etc. is a bit overwhelming when one really sits down an thinks about it.  United Airlines certainly learned that fact the hard way after an its baggage handlers damaged musician Dave Carroll's guitar--a quick Google search will give you some background.  Joe and Anthony discussed that case study and more during their presentation, as well as giving companies effective steps to deal with the phenomenon known as social media.  The presentation (It's 10pm: Do you know where your brand is?) goes hand in hand with the white paper on social media that we published on this blog a few weeks ago. 

Enjoy the presentation and, if it hits home with you, to steal from Joe's blog post one more time: 

If you are interested, please contact me (Joseph I. Rosenbaum) and we can work with you to help you engage us in your social media conversation with topics that are relevant to you. We will also be updating the research work already released in our Social Media White Paper with some of the materials and further work we continue to do in this area. Stay tuned – social media is not a fad.

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Posted on November 16, 2009 by Michael DiSanto

New Social Media White Paper and Seminar

Last Thursday, Reed Smith and Boyden Executive Search Agencies co-sponsored a well attended seminar in our New York offices where Douglas J. Wood, head of Reed Smith’s Media & Entertainment Industry Group, Sarah Needleman from The Wall Street Journal, and Kathy Ewing, assistant general counsel at Benjamin Moore, discussed the legal, social and economic implications of the social media and social networking revolution. 

If you missed the event, don't fret.  We have three MCLE-friendly seminars planned in our California offices on December 8th and 9th (details below) to discuss an industry-leading white paper that we just released entitled: Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon. The white paper, which includes contributions form our social media task force consisting of Reed Smith lawyers across many disciplines affected by or involved in the social media revolution, is an interdisciplinary piece that explores the compliance and litigation risks of social media from a broad spectrum of topics, including advertising, data privacy, employment, government contracts, product liability and securities.  This is a must read for anyone working in (or merely intrigued by) the world of social media.

As mentioned, we will be hosting a seminar entitled: It's 10:00p.m., Do You Know Where Your Brand Is? The discussion will include:

Joe Rosenbaum and Anthony Traymore will be speaking at the seminar, and for those with law degrees looking to satisfy their mandatory continuing legal education requirements, you will receive MCLE credit.  The times and dates of the seminar are as follows:

Session I

  • Tuesday, December 8, 2009
  • Breakfast / Registration: 8:30am - 9:00am (yes, free food); Program: 9:00am - 10:30am
  • Reed Smith's San Francisco Office:  101 Second Street, 18th Floor, San Francisco

Session 2

  • Tuesday, December 8, 2009
  • Lunch / Registration: 12:30pm - 1:00pm (yes, free food); Program: 1:00pm - 2:30pm
  • Reed Smith's Silicon Valley Office:  1510 Page Mill Road, Suite 110, Palo Alto

Session 3

  • Wednesday, December 9, 2009
  • Breakfast / Registration:  8:30am - 9:00am (again, free food); Program: 9:00am - 10:30am
  • Reed Smith's Century City Office:  1901 Avenue of the Stars, Suite 700, Los Angeles

Feel free to email me if you would like to be included on the event's email invitation list.

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Posted on November 13, 2009 by Michael DiSanto

Friday Five: Microbrews, Social Gaming, More M&A Activity

It's Friday the 13th, so horror film aficionados and those deeply consumed with urban lore are probably champing at the bit to leave the office and begin their evening, whether at home or out on the town.  I considered tossing in a headline or two about Jason Voorhees in this week's Friday Five, but for now at least, I'll resist that temptation.

  • While fictional murderers won't take up any more space on this blog entry, another Friday topic of regular interest, beer, will take center stage.  BusinessWeek penned an interesting article on Castle Harlan's $655 acquisition of United Malt Holdings, resulting in an 80% internal rate of return on CH's $90.5 million equity investment.  An interesting statistic from the piece is the fact that the sales of microbrews in the US increased 9% in the first half of 2009, following a 6.3% increase in 2008.  It appears that high-end beer may be the one market that was immune to the recent recession.
  • BusinessWeek gets two entries in this week's headlines with an interesting article on how the tough economic conditions of the recession should provide for fertile grounds for new startups.  There is certainly makes sense that tough economic conditions create a Darwinian atmosphere for startups, which forces some entrepreneurs to focus on profitability very early in the game.  In terms of short-term exits, though, it seems more plausible that boom times create far greater opportunities for all startups, whether elite or run of the mill.  Then again, I'm a corporate attorney, not a market analyst, so take that comment with the appropriate grain (or tablespoon) of salt.

Have a great weekend!

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Posted on November 6, 2009 by Michael DiSanto

Friday Five: IPOs, Venture Capital Funds, Exits and More

We are adding a new feature to the blog.  Each Friday, we will link to the top five headlines for global entrepreneurs.  Of course, the bulk of those will often involve Silicon Valley, since that tech-concentrated center remains the global front line of technology and venture capital.  Enough intro banter.  Let's jump right into it.

  • Talk about a long time in the making.  On Wednesday, Ancestry.com, a website that allows people to trace their roots by searching online documents, priced its IPO of 7.4 million shares at $13.50.  By my math, that will bring in approximately $100 million in aggregate gross proceeds, assuming that the round is fully subscribed.  It took Ancestry.com a scant 26 years from the time it was founded until it priced its IPO, making it the oldest venture-backed IPO of 2009.  Talk about patience and perseverance!  Read more.
  • Who said that it was next to impossible for venture capitalists to raise additional funds in this economy?  Greylock Partners obviously missed that memo, as the Silicon Valley stalwart recently announced the closing of Greylock XIII, a $575 million fund.  They also announced the addition of Reid Hoffman, co-founder and current Executive Chairman of LinkedIn, as a new investing partner.  Read more.
  • I wonder what ridiculously expensive champagne former British investment bankers Eldar and Roy Tuvey will be drinking in celebration this weekend after selling their company, ScanSafe, to Cisco for up to $183 million earlier this week?  The founders are set to spit up to a cool $60 million between them.  With an exit like that, they can afford to take a bath--literally--in 1990 Louis Roederer Cristal Brut, which is priced around $2,500 per bottle.  The exit was also a good win for London-based venture capital fund Balderton Capital.  Yahoo Finance estimates that Balderton enjoyed a four times return on its four rounds of investment in ScanSafe.  Not bad, indeed.  Read more.
  • The government of the People's Republic of China doesn't seem squeamish about the future of its venture capital market.  China's key economic planning body recently launched 20 venture capital funds to develop China's growing technology sector.  Read more.  That news certainly seems to support estimates that China's private equity industry will grow by ten-fold over the next five years.  Read more.  Yes, I know that is two headlines combined into one, but who is truly counting anyway?
  • When Google head honcho Eric Schmidt talks, people tend to listen.  When he talks about his view of the employment trends in Silicon Valley's technology sector, even more people turn an inquisitive ear or two.  Read more.

Enjoy your weekend!

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Posted on November 4, 2009 by Michael DiSanto

China Updates

Our colleagues in China recently launched the China Media & Entertainment Blog.  We will, of course, keep everyone up to date on any developments, news or issues that pertain to the world of startups by linking to the blog entries here.  No better time to start that exercise than the present, so without further adieu, here are three recent blog posts for your reading pleasure:

  • World of Warcraft Controversy leads to War of Words between Government Regulators.  The latest move in the continuing saga betewen the Ministry of Culture in China and the General Administration of Press and Publication over popular online game World of Warcraft has led ot the Ministry of Culture reiterating its sole responsibility for the administration of China's online games market.  Read more.
  • Trading Culture in Shanghai. China has established an exchange devoted entirely to trading in companies that own or deal with culture. The Shanghai Cultural Equity Exchange, whose investors include the Shanghai United Assets and Equity Exchange, Jiefang Daily Group and Shanghai Jingwen Investment Co., Ltd., was established with the approval of Shanghai Municipal Government in June.  The newly established exchange is expected to be a platform for the trading of property rights, creditors’ rights, equities, and intellectual property associated with cultural assets. Trading will cover a wide range of cultural products, services, and companies operating in the press, publishing, film, television and Internet sectors, among others.  Read more.
     
  • Ministry of Culture Outlaws Online Mafia Games.   On July 27, 2009, the Ministry of Culture issued the “Circular on Investigation into ‘Gangs’ and Other Illegal Online Games.”  The Circular notes that some popular online games based on the themes of gangs, the mafia, or “godfather” concepts advocate obscenity, gambling, or violence and undermine morality and traditional Chinese culture. It goes on to note that these games encourage people to deceive, loot, kill, and glorify the lives of gangsters, providing a negative influence on youngsters. The Ministry of Culture has prohibited websites from running, publicizing, or offering such online games, and has also ordered its law enforcement bodies to step up oversight and harshly punish any sites that continue to offer such games.
  • Foreigners and Internet Games in China: "Unfair" Play Results in New Rules.  Foreign companies and their Chinese partners have always been major players in the Chinese online gaming market. The partnership normally is has the foreign company licensing rights to a Chinese partner. The Chinese partner is then responsible for developing the local market. The Chinese partner is required to apply to the Ministry of Culture’s Content Censorship Commission and the China’s General Administration of Press and Publication for pre-approvals to distribute the game. The Commision censors game content and reviews the license agreement, which becomes effective upon the Commission's approval. Chinas General Administration of Press and Publication examines the qualification of the Chinese partner to provide foreign online game services and decides whether to issue a License for Internet Publishing Service to the Chinese partner.  Read more.

 

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Posted on November 2, 2009 by Michael DiSanto

Market Recovery?

 

After a two-day trip to Boston to represent three of the four US gold medalists in beach volleyball from the 2008 Olympic Games in Beijing in their efforts to reform the governance structure of USA Volleyball (I know, not exactly a Silicon Valley technology deal, but nonetheless an very enjoyable and, in my opinion, worthwhile endeavor), I am back in the heart of Silicon Valley.  The most recent installment of the monthly technology newsletter from Morgan Joseph & Co (a middle market technology investment banking firm) monthly technology newsletter was sitting in my inbox upon my return.  Of course, virtually everyone doing business these days, particularly companies and investors considering funding events or acquisitions, is extremely aware of what is happening in the markets, so I thought this may prove to be a good read for those interested.  The "Market Highlights" introduction sums up Morgan Joseph's current view (at least, as of printing) of the market, as follows:

All eyes were on U.S. third quarter corporate earnings as investors anxiously waited to see a return of top-line revenue growth, demonstrating that the economy has turned and that a recovery is well in place. The reports of Google (GOOG: $551.72),Microsoft (MSFT: $26.37) and Amazon (AMZN: 94.98) as well as many others exceeding third quarter revenue and earnings expectations provided some additional momentum to the current equity market rally and provided further signs that the economy is indeed recovering.

I sure hope so.

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Posted on September 8, 2009 by Michael DiSanto

Skydiving Lessons for the First Time CEO

For any CEO of a startup, building the company is like skydiving, except that the CEO will be building and deploying a parachute while falling to the earth and hopefully avoiding the crash.

Not a bad title and catch sentence, are they?  It is the hook that the Silicon Valley Association of Startup Entrepreneurs is using to promote its CXO Forum tomorrow.  For more information on the lunchtime presentation, CLICK HERE.

The topic certainly brings back some memories for me.  From mid-2003 until early 2006, I was a first-time CEO of an Internet company that offered hosted personal training solutions to health clubs through a SaaS model.  At the time, I had no training whatsoever on being the head of a company, other than what I had observed over the years serving as the outside general counsel for dozens of emerging companies.   Suffices to say, there was a lot of diving head first into the fire and then trying to figure out a way to survive.  

The experience, while extremely stressful and time consuming, was also tremendously rewarding.  There is a great sense of accomplishment associated with building a company.   Along the way, I learned some extremely valuable lessons.  My top 4 are:

  •  Always raise excess cash.  One of the most common mistakes that I see first-time CEOs make is under capitalizing the company.  I was guilty of that, as well.  Even though we put a ton of time and care into building out financial models to present to venture capitalists or angel investors, it is impossible to predict the future with any great degree of certainty.  Things take longer than anticipated, whether that is building out the team or further developing the intellectual property underlying your product or service.  Unforeseen hurdle after unforeseen hurdle arise with what seems like rapid-fire frequency.  It is very beneficial, therefore, to raise cash beyond what the financial model requires so that there are good reserves in the coffers.  Most venture capitalists will require this, but it is something that the CEO must focus on when raising money from angel investors. 
  • Start the fund raising process very early.  A CEO always wants to raise money when the company isn't in dire need of cash.  Otherwise, the valuation and the terms of the investment tend to drift farther in favor of the investors.  I think about it a lot like buying a house.  In this tough economic environment, banks are typically requiring first-time home buyers to have 6-12 months of living expenses stocked away for a rainy day.  Companies should follow the same model.  That means thinking about raising a first round of venture investment (or a second) when there are still sufficient cash reserves to survive another 6-12 months, or even longer.  That will help keep valuation at an appropriate level (i.e., valuation based on the business model, IP and execution) and the terms more toward the middle of the road.
  • Let your executive team do their jobs.  I regularly see first-time CEOs attempt to micromanage every aspect of the business.  It is true that the board will hold the CEO ultimately responsible for the company's performance.  Nonetheless, I believe that one of the best traits that a leader brings to the table is to trust the people he or she has selected to run certain aspects of a business.  My executive team was instrumental in driving the growth of the business.  I didn't always agree with some of their tactics, but I trusted their judgment.  That is why I hired them in the first place.
  • Select a mentor.  I cannot stress this one enough.  The ability to pick the brain of someone who has built one or more companies with a successful exit (or even a spectacular flame out) is priceless.  Learn from their mistakes.  Learn about their thought process.  Ask them to identify some of your strengths and weaknesses.  Ask how you can become a better CEO.  A great mentor is invaluable.  I did not follow this advice.  Had I chosen a good mentor, I have no doubt that I would have been a much better first-time CEO.

Seth Sternberg, CEO of Meebo, and Tae Hea Nahm, managing director of Storm Ventures, are the guest speakers at tomorrow's CXO Forum.  I'm looking forward to hearing what advice they have to offer on the subject. 

 

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Posted on July 1, 2009 by Michael DiSanto

"Hello World"

OK, I stole that line from Tiger Woods just before his professional golf debut at the Greater Milwaukee Open in August 1996. Nevertheless, it is a pleasure to jump into the blogosphere with my colleagues around the globe to bring entrepreneurs and investors our thoughts and reactions to the happenings in the emerging company landscape--a landscape that has rapidly expanded beyond its golden hub in Silicon Valley to virtually every corner of the planet.

When I first started practicing law in the late '90s, the dot.com boom was in its heyday. Entrepreneurs with dreams of an early and lucrative exit flocked to Silicon Valley to set up shop and search for local venture capital dollars. Those dollars were spent on extravagant launch parties, marketing efforts and anything else to bring attention to a particular dot.com, with the hope of driving web traffic through the roof. Top venture capitalists were willing participants, investing tens of millions into companies that left Wall Street investors scratching their heads on how anyone could justify those valuations. Nobody cared. The blueprint was simple enough: start an Internet-based business, do whatever it takes to attract the attention and subsequent investment dollars from well-respected venture capital funds. Landing a top-tier venture fund meant that the bulge bracket investment banks would soon come calling for an IPO, and then everyone got fitly, filthy rich. 

The money was so easy to come by in Northern California that entrepreneurs and investors largely ignored other established or burgeoning centers of technology and investment wealth. Cross-border investment deals weren't common--in fact, they were frowned upon because that left less room for local, well-respected venture capital funds, which meant less chance for IPOs led by budge bracket i-banks, etc. Government participating in developing young companies was really limited to venture capitalists accessing the federal government's coffers to expand the size of their investment funds. Non-dilutive financing from the government wasn't a priority. And nobody cared about sovereign wealth funds. Again, the Silicon Valley blueprint for success didn't depend upon any of those things. 

The false economy (some preferred to simply label it "insanity") had to end sooner or later. It did, of course. But boy, it was fun while it lasted.

Fast-forward a decade and the emerging company landscape has changed dramatically. Gone are the days where merely attaching "dot.com" to a title drew the interest of top investors. In fact, it draws a cynical look today. Gone are the days of extravagant launch parties as a means of catapulting to IPO riches. Entrepreneurs actually have to build a business. Investment dollars aren't flying out of Sand Hill Road like 17-year locust swarms. Venture capitalists are much more conservative with their investments, assuming they aren't stuck in the unenviable position of trying to raise a new fund during one of the tougher global economies in history.

The realities of doing business today has completely changed the emerging company landscape. The world is now a much smaller place. Silicon Valley venture capitalists are searching all over the world in search of the next great company. Entrepreneurs are sometimes forced to look more and more to angel investors or funds located outside of Silicon Valley for early-stage funding. Cross-border deals are becoming more and more prevalent. The sovereign wealth funds in China and the Middle East are becoming players in the game. And the American Recovery and Reinvestment Act in the United States and similar economic stimulus programs in other G20 countries have created a new, relatively untapped source of deep-pocket funding (non-dilutive funding, no less). 

In other words, the game has changed, whether temporarily or permanently is up for debate, though if I were a betting man (and I am in fact such a man), I am doubling down on the global platform becoming a bigger and bigger driver for emerging companies going forward. That brings us full circle to the purpose of this blog: leveraging our global network of partners and associates at Reed Smith to help bring a global perspective to the emerging-company happenings in the various geographic markets around the world.

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Posted on July 1, 2009 by Gregor Pryor

Hello, good evening and welcome

Despite longstanding resistance, I’ve finally been persuaded to release my humble thoughts on technology and law out on the blogosphere. Given that my whole career so far has been dedicated to the application of outdated law to digital innovation, I’m using this first blog entry to give my (probably outdated) views on the developments we have experienced in cyberspace in the past few years.

I’m convinced that many years from now, historians will look back at the late 1990s and 2000s as a period akin to the Industrial Revolution that happened in Britain, and then the world in the late 18th century. Remarkable developments in telecommunications, computing, software and engineering have enabled the huge and unstoppable growth of the Internet, from its early days as a rudimentary communications tool to the incredible phenomenon that it is today. These developments affect our everyday lives in innumerable ways. Our standard of living has increased dramatically. We can learn, interact and transact more quickly than ever. Our business methods and processes are more efficient than we could have believed possible 20 years ago. And we are still only near the beginning.

In light of these incredible changes, those charged with creating the laws that govern our society have been faced with an impossible task. Our laws have developed at an incredible pace in recent years, particularly as they pertain to the Internet and changes brought about by technology. Laws relating to intellectual property, data, commerce, privacy and jurisdiction have had to be rewritten by legislators. Where the legislators have been unable to keep up, the rules of business have taken over, producing case law through litigation that has allowed companies to keep operating within the law in an ever-changing technological environment. Some of these cases have been decided in the past few years, while some still rumble on. I am hugely excited by the prospect of the ongoing Google v. Viacom case going to trial, not least because its result will influence the way that content is treated on the Internet around the world.

At Reed Smith, we have been fortunate to have been involved, and still be involved, with many of the companies that have led this technological revolution. Many of our clients today are some of the world’s leading protagonists of change – they include household digital brands, global technology corporations, entertainment conglomerates, and leading research and development houses. The client list is formidable, and one I am proud to be involved with. One of the most exciting things as a commercial lawyer in this area is seeing your clients grow from small beginnings to become market leaders. In 2007, we helped our client Last.FM become part of the global CBS Corporation, when the founders sold the business for $280 million. We were lucky enough to have worked with the Last.FM team since the early days. Last year, we worked with our client Bebo as it joined the AOL group, having been previously involved in many projects that helped build the business in the face of unstable and difficult laws that apply to social networks. Both companies remain Reed Smith clients. Working with start-ups and helping them grow is core to our business, which is part of the reason we have started this blog.

Despite the fact that the global economic climate is challenging, we are still seeing strong activity in the technology start-up sector. Laws are still changing, VCs and angels are still funding and, most of all, companies are still innovating and shifting the goalposts. We have started working with some amazing new businesses already this year, and we want to start working with many more. So I’m going to use this blog going forward to talk about some of the things that we see happening in the marketplace, in the hope that it’s as useful and insightful as a blog written by a lawyer can be. I would love it if you take the time to use the Comments button to comment, offer feedback, challenge, berate, mock, agree, disagree, flame, pwn, do whatever – in a world that’s now so connected and full of information, I would just be happy that you’re engaged with the blog.

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Posted on July 1, 2009 by Zack Dong

Welcome From Beijing

Here I am, sitting in Reed Smith’s Beijing office and writing my first entry to the blogosphere. It was no small step to move from Chicago to Beijing several months ago, and I am still trying hard to adapt to the life in one of China’s most important political and economic centers. Reed Smith runs an office in a particularly vibrant part of the city. 

It feels great to be able to report business and legal trends here to colleagues around the globe from one of the most dynamic cities in Asia. It is a city that boasts of the highest concentration of colleges and universities in China, and a highly educated population. The potential is not lost on the city’s promoters, who have over many years of painstaking efforts established technology development zones and science parks to attract investors and seed money to fund start-ups. Zhongguanchun, an area in northwest Beijing, is where numerous domestic and Western technology players, not necessarily Fortune 500 companies, set up shop, taking advantage of the numerous investment incentives available there. I myself have recently accompanied a client in negotiating a lease for its lab there. 

The city is not immune to the global financial crisis that began last year. But relative to the export-dependent southern and coastal China, the city seems to have weathered the storm fairly well. Real property prices and sales in the city that dropped last year lasted until this spring. More recently, prices are trending upward again. The entire economy seems to be benefiting from a massive stimulus plan announced late last year. There seems to be a lot of confidence that the economic trouble is a Western problem.

On the regulatory front, the recent buzzwords have been “Green Dam Youth Escort,” a software program that purportedly would filter out pornography, violence, and “harmful” sites and addresses on the Internet. A few weeks ago, China’s Ministry of Industry and Information Technology announced that effective July 1, 2009, all new PCs sold in China are required to have the “Green Dam Youth Escort” program. The aim was to protect young people from “harmful” influence. However, industry sources and Internet users fear that personal information may be compromised, and that the software could cause PCs in China to malfunction and make them more vulnerable to hacking. The rules would put HP, Dell and other Western PC-makers in a difficult situation. If they fail to comply, they would be prevented from selling PCs in China, a huge and growing market. Yesterday (June 30), China’s state media reported that the government has decided to postpone the enforcement of the new rules, but it did not say why. Industry watchers are following the events closely.

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