Jan 29, 2013

Garment Factory Fire in Bangladesh: How do this Affect your Company in Bangladesh?

A devastating fire in Bangladesh two months ago has left 112 people dead.  The matter is being blamed on lax enforcement of labor laws.  Companies operating in Bangladesh should be aware that the government is beginning to crack down, because of these many similar issues on companies that are perceived to be taking advantage of workers. 

Do yourself a favor and conduct a thorough compliance audit of your business.  The Bangladesh government will be conducting more inspections and will likely begin to file more prosecutions and fine more companies.  Avoid the embarrassment and get a compliance audit done immediately.

The problems in Bangladesh seem to lie within the negligent way that labor and workplace safety laws are enforced.  It has been pointed out that adequate exits and fire extinguishers would have prevented the ensuing stampede and inferno.

Factory officials claimed that firefighting equipment was available at the site, yet a member of the fire fighting brigade stated that the equipment was nowhere to be found. This was in direct violation of a law that requires all garment factories to be certified by the fire service to operate; according to a senior official of the fire service, quoted in the article below, the factory “didn’t have a fire license and so there was no way they could have received a factory license.”

The factory, which produced garments for Inditex did not even have a factory license - amazing. The question that should be asked is, how did a garment factory without even a license to operate as a factory become a vendor for Inditex, one of the largest textile companies in the world? We all know how this occurs.

What do you think.  More on the matter may be found at: New Bangladesh File Kills Seven
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Chemical Leak at Samsung's Factory: Tragic News for Worker

The perils of working in manufacturing companies is, generally, well-known by employees of their companies.  Samsung has been targeted, recently, as a company that has not informed workers of the risk at working at their plants.

At my office near Samsung's office we, regularly, hear the chants from protestors.  The majority of the protestors have protested in order to claim compensation from Samsung for injuries that were alleged to be caused to workers and the family's of workers based on exposure to toxic chemicals.  A causal relationship is, often, difficult for the plaintiffs to prove, thus, they have turned to political tools at solving a perceived unethical treatment of these employees.

The protest I see the most is a protest concerning the increased risk of contracting leukemia from the chemicals utilized in the semiconductor and cell phone manufacturing processes.  Many of the chemicals have been banned in other countries.

In the recent matter, an employee died shortly after being exposed to diluted hydrofluoric acid that was leaking.  We may never know how many workers were exposed, but we need to realize and appreciate the significant risk that these workers are exposed to working in these plants.

Prayers go out to the families and congratulations to Samsung for not trying to hide an issue that should be further addressed with the assistance of the incoming administration.
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Other articles from the media that may be of interest:
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. 

www.ipglegal.com

Jan 28, 2013

Korean Legal News for the Week of January 20

This Week's Legal News Reported by Media
This Week's Posts from the Korean Law Blog
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Inside Korea's Two-Tiered Economy by Tom Coyner

In preparation for a BBC television interview (which failed to happen due to Skype Internet difficulties), I looked into the indicators and foundations of current South Korean sentiment. What I discovered was much less sanguine than official Bank of Korea statistics that the news agencies and embassies frequently quote.

In addition to the below excellent report from which I can personally recognize a number of young Koreans who fit the article's descriptions, please consider findings from Gallop Korea's recent report. During the second half of each November, Gallop Korea polls some 1500 South Koreans above the age of 19. This past November's results were largely similar to those of November 2011, polling sentiments about the coming calendar year.

 Here are some of the highlights: "How do you feel the ROK economy in 2013?" (percentage of replies) Worse: 40% (previous year's poll had a 'worse' rating of 43%) Better: 12% (no change from the previous year's poll) Similar: 46% (previous year's poll 'similar' rating was 43%) "How will your household fare in 2013?" Worse: 27% Better: 17% Similar 55% "What will happen with unemployment in 2013?" Decrease: 10% Increase: 48% Similar: 39%

Of interest is that the first two questions' results, given the 2.1% margin of error, were statistically identical for the past two years. If there is any optimism about 2013, it would be because there is a 6% rise in expectations that unemployment will decrease versus a 3% drop in those expecting unemployment to increase. Still, given that half of the population believes unemployment will rise in 2013, I would caution government workers and politicians not to cheer too loudly. Now, contrast the above with today's Reuters news release on the Bank of Korea's sanguine report that customer sentiment was the strongest in 8 months at 102 versus Decembers 99 score, with 100 representing neutral feelings. The BOK also projected the coming 12 months to be just 3.2% - which is entirely in line with fantasies that this government agency has been broadcasting for the past years.

Obviously, whoever decides what goes into the economic basket of indicators has considerable influence on the results. For most South Koreans, more significant inflation can be seen in the substantial increases of food prices, utilities (electrical rates alone were hiked 4.9% last August and will go up another 4.0% this month). And many expect taxi rates to soon rise.

When it comes to unemployment, the most important figures are those assigned to young people. While the national unemployment average is officially recognized as being only 3.0%, only 60.1% of Koreans in their 20's are recognized as participating in the economy. And, of course, to have a part-time job, including working at a convenience store with a college degree, means one is "employed." Even so, at the end of 2012, youth unemployment was recognized to be only 7.5%.

No one seems to bother, however, how to reconcile 39.1% of young people being economic non-participants with just 7.5% unemployment. As the below article points out, Korea's largest 194 companies this past year offered 18,950 (down from 20,500 offered the previous year) career potential, entry-level jobs. Considering that virtually all South Koreans complete high school and a good 80% graduate from college or university, it is unsurprisingly that in 2012 a large portion of the 300,000 college graduates competed for those 18,950 jobs.

Possibly due to many discouraged job seekers having returned to college to gain additional degrees, we may expect as many 500,000 graduates out on the job market as soon as 2015. As the below article points out, many young Koreans have pretty much given up on marriage and raising children. It comes as no surprise that South Korea has one of the lowest birth rates among OECD countries. While many countries have a traditional pyramid-shaped demographic profile, South Korea has a distinctly diamond-shaped profile.

Finally, allow me to suggest why the consumer price index is as good as it may be. It could well be that many Koreans in their 20’s and 30’s are living at home, forsaking marriage without saving for their independent housing, but making the best out of a dire future by living for today by consuming more for short-term pleasures to somehow make up for their long-term disappointments. Given all of this and much more, the "news" about small, single-digit improvements in government statistics about CPI, inflation, unemployment seems divorced from the greater reality that makes up most Koreans' lives.

The real story is much more complicated, but few international news agencies take the time to dig down and discover what is actually happening with the majority of South Koreans. The real story is much more fascinating, if at times grim, suggesting that Korea could be operating on a two-part economy - that of large companies and the wealthy as opposed to that of small- and medium-sized companies and the majority of South Koreans. But that topic must be reserved for another message.

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.
www.ipglegal.com

Jan 25, 2013

Taxis in Korea Threathen to Go on Strike


The Seoul taxis, again, are threatening to go on strike because of the veto of a transportation bill by the president.  The bill intended to deem taxis a means of public transportation.

I have the pleasure to ride in a taxi, at least, twice a day.  This allows me to discuss the plight of taxi drivers with the drivers.  I have talked to dozens of drivers about the issues affecting their livelihood and most see their future not in the taxi business, because of the high price of fuel and increased competition.  However, most believe they have few other options.

The majority of taxi drivers, I have spoken to, drive 12 hour shifts six days per week.  

Most drivers are struggling.  Think about this.  An hour ride to the airport will cost you around KRW 50,000 from my door in Hannam Dong to Incheon airport.  This is thought of as a great fare, because of the lower cost of fuel and more efficient use of the vehicles time, because of the lack of need to pick up more passengers.  However, the driver risks not obtaining a passenger for the ride back to Seoul.

Most drivers claim that expenses account for 60% of the fare. Thus, they bring home around KRW 20,000 for the ride according to the drivers.  Seems to low to me.  I always give a tip and, these days, it is greatly appreciated. 

The largest expense drivers have is fuel.  The best solution seems to be to cut the fuel tax for tax drivers.  What is the big deal? Cut the tax.

I suggest cutting the tax, however, only in exchange for an enforceable passengers bill of rights that includes a driver being required to pick up all passengers - yes - even at night. 

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 23, 2013

Constitutional Court of Korea Declares Internet Real Name Identity Law Unconstitutional

The Korean Constitutional Court, late last year, declared the real name identification verification requirement in the Act on the Promotion of Information and Telecommunications Network Use and Protection of Information that required some providers of internet services with forums, bulletin boards and the like to confirm the identity of all users prior to the user being allowed to post comments on the site unconstitutional.

The Act specifically required any company or individual who operated any type of website with over 100,000 visitors per day, on average, that allowed users to create content, to confirm the identity of the person prior to allowing them to post content on the site.

Over 130 sites were required to obtain confirmation of the identity of users intending to post comments.

The Constitutional Court ruled, in part, that the confirmation of identity requirement is unconstitutional since:

1.  Other less restrictive means are available to identify those that violate the rights of others;
2.  Little evidence exists establishing that the requirement leads to a substantial reduction in the quantity of illegal information online; and
3.  There is a potential risk that personal information of users could be misused.

The vast majority of sites have chosen to maintain, voluntarily, the real name verification system and we advise anyone intending to scrap their present system to consider the numerous interrelated laws that have not been deemed unconstitutional prior to changing their user identification policy.

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SeanHayes@ipglegal.com

 IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 22, 2013

Do you Need an Accountant to Terminate and Employee in Korea?

We have used, for all cases we were involved in regarding the layoff of Korean workers, accountants to argue that the layoff is for urgent managerial need.  We have, often, been questioned by clients if the extra expense is necessary.  Yes the expense is necessary and here is why.  

A case last year shows the need to utilize accountants in all cases where an employer intends to layoff workers based on "urgent business necessity" under the Korean Labor Standards Act (LSA). 

A case handed down by the Supreme Court in the first half of last year ruled that a layoff did not violate the LSA, since urgent managerial necessity existed because of "external factors," including the lack of overseas demand for the employer's products.

The Supreme Court confirmed the holding of the High Court that noted that the District Court was wrong in emphasizing the possibility that overall production and profits will increase from a newly constructed factory and the economic issues of the employer were based, in large part, because of interest and depreciation costs.

The interesting aspect is not the holding.  The interesting part is that no accountants were utilized in the District Court case (loss for the employer) and accountants were utilized in the High Court and Supreme Court case (win for employer).

Economic analysis, appraisals and expert witnesses should be utilized for all cases concerning the layoff of employees for urgent business necessity in Korea.

Other articles that may be interesting to the reader:

SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 21, 2013

Alternative Legal Fee Structures at Korean Law Firms: Limited Scope Representation

Many Korean law firms have been willing to work in relationships based on a non-time charge flat-fee or contingency basis for Korean clients.  However, many of these law firms in Seoul have been unwilling to work on alternative fee arrangements with non-Korean clients, because of, among other things, the requirement to represent the client in a far different manner than that of a Korean client and, also, reduced competition in the foreign-client market, because of the reality that only a few attorneys in Korea are capable of handling the needs of international clients in Korea.

Korean and foreign clients, often, have different expectations of the role of attorneys.  A Korean client is, often, willing to be a passive participant, since the client knows the attorney is motivated, primarily, through a significant contingency fee.  Contingency fees are common in Korea in all matters, including criminal and family matters.  Thus, clients often "trust" an attorney because of the knowledge that little money will be earned if the client doesn't prevail. 

However, I believe these flat-fee type arrangements, normally, lead to unsatisfied foreign clients, because of the want of these foreign clients to obtain more personal service and, also, be an active participant in the matter.

The clients that come to us, often, had significant issues with other attorneys, because of an inability of the attorneys to adequately communicate with the client and the perception, often rightfully, that the attorney was too passive in representing the interests of the clients. 

I believe the solution to this issue is not mere flat-fee billing, but a more nuanced "limited scope representation."

Often clients would like to be an active participant in the matter.  In many cases, a corporate client has the ability an wherewithal to be an active participant.  Thus, for the cash strapped clients it is, often, advisable to negotiate with the law firm to work under a "limited scope" basis.

Thus, some of the matter will be handled directly by the corporate client with, only, the guidance of the attorney and some of the matter will be accomplished by the attorney alone or in coordination with the client.

This situation often allows the foreign client to reduce its expenses, while, also, being an active part in the matter.

Other posts that may be of interest to the reader:
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 18, 2013

New Korean Government Ministries under President Park

The Park Administration has proposed the creation of a new ministry called, potentially, the Ministry of Future, Creation and Science (MFCS). The name sounds a little better in the Korean language.

The MFCS will be, primarily, involved in promoting investment in research and development. I am hopeful that the MFCS or whatever it will finally be named will not be a tool to simply return taxes to conglomerates.  Korea is in desperate need of growth in the SME sector and new businesses to compete with the ubiquitous and, hopefully, the MFCS can play a vital role in satisfying this need. 

Other proposed changes in the Korean Administration include:
  • Creating the post of Deputy Prime Minister of Economy
  • Creation of a Ministry of Maritime Affairs and Fisheries
  • Trade Section of Ministry of Foreign Affairs moved from MOFAT and merged into the Ministry of Knowledge Economy
  • Korean Food and Drug Administration moved from the Ministry of Health and Welfare to the Office of the Prime Minister
  • Creation of the Social Security Commission
  • Establishing a National Security Office in Cheong Wha Dae
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 15, 2013

North Korean Child Welfare Act Signed into Law in the U.S.

The U.S. president has signed the North Korean Child Welfare Act into Law. The bill, in short, urges the U.S. Secretary of State to protect North Korean children in nations outside of North Korea. The bills were passed by Congress with a unanimous vote of each chamber. Numerous orphaned North Korean children are living in China in less than adequate conditions. Many of the parents of these children have been repatriated back to North Korean from China by force. The Act specifically notes that the Secretary of State must "brief appropriate congressional committees on efforts to advocate for and develop a strategy to provide assistance in the best interest of these children." South Korea has been unable to pass like human rights bills in the Korean National Assembly because of vocal opposition from liberals. _________ SeanHayes@ipglegal.com IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 13, 2013

Korean Constitutional Court to Hear Case on Constitutionality of Prostitution

The petition of a 41-year-old alleged prostitute to forward a case on the constitutionality of punishing a prostitute for exchanging sexual favors for money has been accepted by a judge at the Seoul Northern District Court.

The Korea Times has reported, in part, that:

She was accused of having sex with a man in his 20s at a brothel in Seoul in July. The district court clarified that the judge’s request doesn’t question the part of the law that punishes buyers of sex.

“We don’t punish a woman acting as a concubine or a wife for hire,” Oh said. “In this regard, the law could violate people’s basic rights.”

Oh also questioned the effectiveness of the law, saying authorities should focus on punishing brothel owners and pimps exploiting prostitutes.

Under the law, both buyers and sellers of sex face one year in prison or a 3 million won ($2,830) fine, except for those who are forced into prostitution. Those who force women to work as prostitutes are subject to up to 10 years in prison or fines of up to 100 million won.

Proponents of the law claim it is rational for the authorities to punish both sellers and buyers of sex in a country where prostitution is illegal.

However, opponents argue the law could infringe on people’s privacy, saying all adults have the right to have sex, which should not be violated by the state.

This is the first time that a court has challenged the Anti-Prostitution Law.

Some people insist the law should be maintained while others are calling for a revision or complete abolishment.

“If the law is ruled unconstitutional, there will be no legal means to punish sex traders,” said Min Jong-yun, a 38-year-old office worker in Seoul. “I think prostitution is not like adultery. Of course all adults have the right to have sex, but prostitution is a different matter.”

“The prostitutes’ claims suggest that we should legalize prostitution and collect taxes from prostitutes. That should never happen,” he added.

Women’s groups expressed concerns that a ruling against the law could increase the number of prostitutes and create bigger social problems.

“I think it’s not a human rights issue at all,” said Kim Jeong-sook, chairwoman of the Korean National Council of Women.

“There should be no question about punishing prostitutes in this county. The law is not about regulating sex between adults, but about preventing the sex trade.”

“There are already hundreds of thousands of prostitutes in Korea. Prostitution is a big business here although it is illegal,” said blogger Song Se-jin. “Under the law, all of them are potential criminals. If they became prostitutes voluntarily, I think they should be respected as members of society.” 
I will update the readers of this blog when the decision of the Constitutional Court is handed down HERE.   I have been accused of, only, having boring issues related to doing business in Korea.  Ok guys - two articles now that don't relate to business.

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 6, 2013

Protecting Trade Secrets in Korea

We receive emails, regularly, requesting advice on the protection of IP rights in Korea and China.   Most of the issues I addressed in this blog come from these questions.  I realized, after writing over 900 posts on this blog, that I never drafted a post on trade secrets.  Don't blame me, blame my paralegal. :)

Definition of Trade Secret
As you probably know, a trade secret is, simply any design, process, formula or the like that is not known or readily ascertainable by a third party that may provide an economic benefit to the individual possessing the trade secret.  Notwithstanding, non-compete and non-disclosure agreements, Korea and most countries, typically, only protect trade secrets against an alleged violator when the alleged holder of the trade secret makes a "reasonable effort" to protect the trade secret and is able to establish that it has made this reasonable effort to protect the trade secret.

Protection of Trade Secrets in Korea
1.  Identify your Trade Secrets.  Draft a document in English and Korean identifying the trade secrets of your company.  This does not mean you need to write down the specific details of the trade secret.  Example: Formula for the Manufacturer of a Black Carbonated Beverage better known as Classic Coke. 

2.  Non-Disclosure & Non-Compete Agreements.  Have all that you do business with sign detailed and Korean-specific Non-Compete and Non-Disclosure Agreements.  Include a liquidated damages clause in these agreements.  These agreements should be executed by all suppliers, employees, directors and others in Korea that you are doing business with.

3.  Put in Place a Trade Secret Protection Scheme.  Before creating a trade secret protection scheme please consider how your trade secret is likely to be misappropriated by others - think, at a minimum, employees, vendors, suppliers and customers.   After the analysis, write down the scheme and integrate the scheme into your business.  We strongly advise discussing the scheme with a business or legal consultant.

4.  Due Diligence.  Due Diligence in hiring, firing, engagement with outside business partners and vendors.

5.  Enforce Your Rights.  If you are not willing to enforce your rights in a Korean court - you will, likely, become known as a company with softball managers and will, thus, likely be the victim again in the future.  Don't forget even the large Korean conglomerates are engaged in litigation to protect their IP - some of this litigation is, simply, to defer future violators.

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 4, 2013

Entering into a Joint Venture in South Korea

One of the major parts of my law practice for international clients, in Korea, is the structuring of joint ventures and the resolution of joint venture disputes in court and through arbitration.  I find, in most of these cases, the non-Korean party is not in need of a joint venture with a a Korean party to succeed in Korea and the Korean party does not realize or has no intent in satisfying obligations under the joint venture agreements.  

Thus, many disputes are caused by the realization by the non-Korean party that he/she doesn't need the Korean party and the realization by the non-Korean party that the Korean party had no intent in following the joint venture agreement.  

Do You Need a Korean Joint Venture to Succeed in Korea?

We find that a joint venture is, normally, only successful in a few situations.  The following are the major situations that we encounter that tend to make sense for both parties.
  1. The Korean party has instant access to a proven distribution network (retail outlets) or supply chain and the non-Korean has a product that easily fits into this supply chain.   Often this, however, is best addressed through a distribution/license agreement and, not, a joint venture agreement, but in some cases the joint venture makes sense.  Be careful, often a joint venture is not necessary and changed circumstances can kill the relationship.
  2. The industry is an industry closed to foreigners (few industries in Korea as closed to foreigners - ie. publishing) and the Korean party needs the expertise or money of the non-Korean party in order to succeed in the industry.  Be careful, needs often quickly change and, often, these industries are heavily regulated and, often, lead into a money pit that you will never dig anything out of.   Knowing the governor does not mean that you will receive government support.  Everyone in Korea has contacts, however, few are able to capitalize on these contacts, thus, don't be sold a can of hooks.
  3. The non-Korean party is broke and, thus, unable to commercialize an invention and the Korean party is in need of a new product line or has spare manufacturing capacity.   Be careful, the learning curve may not be as great as you think and this you may not be needed for too long.
  4. The industry is a niche industry with only a handful of players and the non-Korean can receive instant access to one of the main players through the joint venture and the Korean is able to gain access to the technology through the joint venture.  Typically, this is a joint venture between a Korean conglomerate (chaebol) and a multinational company.  Often these relationships are fleeting and lead us to many hours in arbitration.   
If you have money, have the expertise in doing business in Korea (or can hire experts), are not in a  regulated industry, carefully consider the market, have a local guide and are not in a need of joint venture because of the nature of the business - forgo the risk of a joint venture and hit road in Korea on your own. 

Other articles that may be of interest;
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team for one of the leading international law firms. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea).


SeanHayes@ipglegal.com

 IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com