Welcome to today's think tech Hawaii talk law across the sea program. Today, we're going to be having an in depth look at we chat the app, the band and the legal battle against the band. My name is Elizabeth Chen hell. I will be your host today. I previously appeared on this program to talk about the we chat and the tiktok band and I'm very honored to have to introduce both speakers to share with about the having in depth look at the we chat them. Before my my I'm a patent attorney by training myself. I'm also a graduate of the Richardson School of Law of University Hawaii. So my first speaker is clay drew, who is the attorney and managing partner of the law office. He specializes in cross border merger acquisition, export control, corporate compliance commercial litigation international tax, but most relevant today to today's process and he's one of the founders of the US we chat users and lines, who successfully procured a limited injunction against the government's attempt to implement the ban. My second speaker is Chen, who Chen is currently of counsel at the international law firm of Appleton and law prior to practice, private practice. He had a long successful career as a council serving for famous companies such as Western digital line. Most relevant today he was the former senior council for tents in America. In that role, he supported Tencent's US private practice managing of the portfolio and the standard essential patents. Before we launch into the discussion on the ban. I will say a few words about the background, why we're here today. So on August 6 of this year, President Trump, citing the authority vested in him through the International Emergency Economic Powers Act and the National Emergency Act, decided to put a ban on activities of which app in the United States. The reason cited in the order was that we chat, which is a powerful messaging social media and electronic payment application, which is owned by a Chinese parent company, Tencent, and it has enjoys worldwide popularity has over one billion users across the globe. And unfortunately, according to the government, which also captures a vast amount of user information, therefore creating a national security risk. So I think this is a good time to turn the discussion, direct the questions to my guest here. I think you're a good person to start since you kind of can give us the inside school about Tencent, the technology, the company, and it's the same path. Thank you, Elizabeth. Let's see. Tencent is, as you mentioned, is an international company. Its main headquarters is based in Shenzhen, China. But it's operating internationally for its business out of mostly Hong Kong. The Tencent Group, the international business has today approximately 70,000 employees as of June this year. It's been growing for the last probably four or five years at a rate of 10,000 employees per year. I see recently that they just opened a new office in Holland and they're hiring like crazy. Their annual revenue is approximately in the tune of $58 billion US. The WeChat program is a relatively new phenomenon. Can we see the slide related to this? Yeah. So the WeChat program was launched in 2011 and included basic features like all social media chat programs like chatting and voice and video and call. Currently it has approximately 1.2 billion users, active users per month. In some of its interesting features in WeChat includes the WeChat payment feature which was launched in 2013. And it currently has about 800 million users, active users per month. And it's accounting for 1.1 billion transactions. Do we lose the slides? Yeah, 1.1 billion transactions per month. And in last year, this was a personal estimate that I did based upon its revenue. The WeChat payment program generated somewhere around 12 trillion US dollars. And this year it's looking like it's on track to about 15 trillion US dollars in revenue. It's a tremendous amount of money being pumped through the e-commerce side of WeChat essentially. And in 2016 WeChat launched the mini program which is basically these tiny programs that you don't need to install but you can run inside of WeChat. And this feature now has somewhere around 300 million users per day. And it includes somewhere around 2 million mini programs. And it generates in the tune of 115 billion dollars US in last year. And some of the more newer features in WeChat includes the blockchain encrypted electronic receipts which is used to kind of prevent financial fraud in WeChat payment. And there's also a feature now that's kind of minor but interesting. China now implements a fully mobile court system with artificial intelligence judges in the mini program. This has been used now across 12 provinces in China. And essentially anyone can file civil lawsuits or small claims through the mini program of the mobile court system. And 90% of the cases are basically disposed by artificial intelligence judges because they have no fact of controversies. And the other 10% they are allowed to go to online video hearings and etc. So these are all very interesting features that we don't really see a whole lot in some of the US based social media apps. It makes WeChat's influence also very, very powerful inside of China because predominantly most of the users are in China. Right, I think people who haven't been to China recently probably don't realize how powerful this app is. Because China for the most part is on a paymentless system now contactless, which we're going to, but we're still using credit cards but people there use their phone and their WeChat app and it's really hard to do anything even to get a meal without WeChat. So, Clay, you're based in Silicon Valley. So you're one of the happy users of WeChat, but do you use WeChat that extensively? And is that why you decided to found this US WeChat users alliance to stop the ban? Yes, indeed. I probably spend on average three to four hours a day on WeChat for business reasons, for personal reasons, because I represent mostly companies from China to do business in the US. I also maintain contacts with my family, my friends back in China. I think my WeChat is also a very powerful platform for me to post massages that I want to reach the people to because I'm very active on a lot of political and other issues. So this is very personal to me. Is that a primary reason for you to starting this alliance? The alliance was started, I think, very quickly and spontaneously because of the executive order issued by the president on August 6. We started the alliance two days later. And I actually wrote a legal memo within 24 hours on how to challenge this executive order. The reason, of course, not only because WeChat is so important to me and to the Chinese American communities in the US, but also I, the exact order, it really ticked me off, you know, way that because it is, I believe it is racially motivated. We know that the president has done a lot of things against China and against Chinese Americans in the past a year or so. And 2020 has been the climax of all the discriminatory policies and actions been taken by the government. And the WeChat executive order is one of the things I believe has been racially motivated and it's not really based on national security. So I guess I'll turn the question back to Chen as his point. Chen, you were in charge, at least of the US patent portfolio. Do you see from your assessment, you know, no longer with 10 cents so you can probably give us an objective assessment. Do you really think this app presents a nationally security risk? Was the president right in saying that? I personally don't believe it's any worse in terms of security for users compared to say to any of the other social media applications we have in the US such as WhatsApp and all that. Now there are cyber security reports and privacy reports done on comparing WhatsApp as well as iPhone messenger and also WeChat. And some of the security experts have noted that WeChat unlike WhatsApp is an end to server encryption social media chat program. It's a claim that it's somehow worse. But we all know that social media companies like Facebook in WhatsApp, they gather users data regardless of whether or not it's end to end encryption or end to server encryption. And this has been noted in some previous tech dissects about WhatsApp. What most people do not realize is most social media companies as well as high tech companies, they gather users data using what's known as aggregate data collection, meaning they anonymize the user information, the private information of the users are essentially taken out. So even though they are gathering your data, like your behavior, they don't know that it's particularly you. What they see is, you know, they'll say, Oh, these are the millions of users who are looking for these information. Or these are the millions of users who are chatting about this particular topic or something. And that's what they care about. They don't really care who is actually doing it, but they do keep track of what is being discussed and what is, you know, talked about in the relevant information. So as far as I know, we chat is gathering aggregate data across essentially billions of its users. And it uses this information for advertising purposes, as well as some content removal purposes. And some people will call it censorship. Yes. But it's in effect, you know, Twitter does content moderation, as well as number of different US social media companies that are even read it or some of the conservative news media companies that they also moderate the content on their social media platforms. They remove inappropriate or misleading information. And that's what we chat program does in itself as well. I do have to say that the artificial intelligence technology behind we chats content moderation is actually very good. And it's it is very good at detecting what they think is considered to be bad information. Whether you like whether or not they're getting rid of some of the information that's a different criteria. The AI doesn't care. It just knows which type of information is supposed to get rid of but in terms of its algorithm technology, it is much better than some of the other US technology companies. Right, I would like to flesh out. Given trans explanation and clay's point that there's a racial component, I will probably put it more as a cultural component. I think part of the concern, even with chance explanation that you know this technology may even be more protective users than what's up for example or Twitter, or what have you. I think there's a distrust on the US side that the US or the Chinese government has a much closer relationship with its high tech companies and that will form the ground of suspicion. And that's for either one of you to to comment. Do you think that's true. So, in a way, you know, which has been singled out because there's a cultural difference. Question to me. Either one of you. Yeah. Well, I think the suspicion of the Chinese government. Its relationship with high tech company, I think it's legit to some extent. But it is not enough. Again, from the very beginning from the first day I organize this campaign. The first day we filed a lawsuit. We made it very clear that we do not represent 10 cent. We have no relationship with the Chinese government. We're just here trying to protect the average users of we chat in the US. So, I mean, from the foreign policy standpoint of view, you can have legitimate discussion with the Chinese government on how to say, remove this suspicion that it is not enough to infringe upon the American we chat users first amendment rights on its constitution. If you look back to your lawsuit, I believe you want preliminary injunction, not on the other grounds, but in particularly on the first amendment rights ground. Correct. So, you think this is really a civil rights litigation protecting the users first amendments. And how about the other, for example, the vested the vested power vested in the president through the IEPA. Actually is a related issue. The IEPA has given the president authority to impose economic sanctions on foreign adversaries in a emergency situation. But there is a limitation to such the presidential power. One of them is the president shall not interfere or prohibit personal communications. That that restriction is actually comes from the first amendment. It's the same logic. If you read the legislative history, the IEPA restriction and exemption that placed upon the presidential power is in line with the First Amendment, even though we made the same arguments in our briefs, I think our first amendment arguments is strongly enough for the judge to make that decision. In the TikTok case, the judges use the IEPA grounds to issue the preliminary injunction. I think it is very similar on your mind and consistent with the reasoning behind the judge make the decision in our case. And Chen, do you have any additional insights on the relationship between Chinese high tech companies and the government, the Chinese government, of course. I think the concern is somewhat legitimate, although I would not say China is necessarily unique in that situation. Under Chinese law, if a company is a certain size in terms of number of employees, I believe only a few hundred. It is required by law to have a Communist Party representative committee among its employees to be established in the company. This is not necessarily to say that this employee committee will interfere with the running of the company itself. But it is a sort of a mechanism for monitor of employee rights because the Communist Party of China does technically represent sort of the workers union in a sense. So in terms of that fact, and I'm not going to necessarily say how many percentage of Tencent employees are Communist Party members. It is actually astonishingly large number, which is not surprised because given that a majority of Chinese high tech university graduates are actually Communist Party members. You would expect that for a Chinese high tech company like Tencent was 70,000 employees, there will be a significant portion of the employee base who are Communist Party members. And when I was in China for a month or so, I actually came into contact with some of the Communist Party member employees of Tencent. They have a club. They actually their only sole activity is not some like secret meeting to discuss party politics is to basically to have a movie night every weekend. They give out free tickets and so that's, you know, it's a social club kind of thing. But I will say this type of organization and the Chinese government's connection to its high tech company is no worse than necessarily say US companies their connection to US companies. I would urge everyone to know that, you know, Apple or Intel have a lot of ex government employees in their in their current employee sections. Some of them have actually previously worked for the Defense Department or even the CIA or the NSA. It's not surprising if we apply the same logic to US companies. I think people will think that's crazy, you know, it's like if the Chinese government say, oh, Apple cannot do business in China because it has a lot of these you were ex US government people or ex US military people who are now working for Apple right. And that will be kind of very paranoid in the sense. Right. I mean, I used to work for Apple we started I certainly noticed, especially in the government affairs branch of the legal department there are many, many people who previously worked, not just for the American government before you know the Chinese government as well. But I think what the US audience when they've confronted with the situation you we do hear cases where, for example, when some of the department justice wants to crack open iPhone for some security information, Apple was willing to stand up and and fought the government against that practice, and maybe given you know Chinese current political structure and that's something the Americans may be looking but not seeing and therefore concluding that these two, you know, the company and any government are much more inclusion in China than elsewhere but that that's a cultural difference and again going going back to clay. So I think you're very smartly kind of didn't touch on this national security issue. You fought on the the stalwart of US constitutional first amendment amendment right.  So you put in a government at bay currently what do you think is going to happen. What do you plan to do as a new administration comes in. We have a two prong strategy. The legal strategy has already started and we won the preliminary injunction. The case is now both pending in the district court as well as the ninth circuit. The US government has appealed to the ninth circuit. A month ago, they already lost one motion. They found a new peel on the preliminary junction again. And we're going to have a hearing in January, hopefully we'll have a decision sometime later in that month or sometime in February. At the same time, we have already been in contact with the transition team of the new administration. I cannot divulge any details right now, but my hope is we can convince the new administration to withdraw that exact order, because any future litigation would be futile and it would be a waste of government and judicial resources. Right. So I guess I'll throw the same question back to Chen. Let's say, assuming, you know, I'm sure clay has extremely competent teams, most likely succeed that just argue for argument sake if that's not successful. What do you think? How do you think Tencent will respond if there is a ban? Are they kind of working on other apps that could replace WeChat, at least for the US users? I heard rumors of that sort. Well, I think the legal position from Tencent is that they segregate what they call the international version of the WeChat app from the domestic version called Weixing app. So technically, these are two apps because they run on two sets of servers that are completely separated from each other in terms of user data. All international WeChat users data are basically resident outside of mainland China, mainly in servers in Hong Kong. This is why, you know, if the US government say request WeChat users data, they have to go through the Hong Kong Tencent legal department to do a data request or for content removal. This is how it's being handled in Tencent ever since, you know, when I joined the company probably even before. So Tencent's strategy is most likely going to be like they're just going to say it's two different apps. If you want to ban the WeChat app, it will only result in banning the WeChat international version, not the domestic Weixing program. It still presents a bit of a problem for, you know, all the users outside of mainland China, which is approximately 100 million users right now on the service. But I don't know if they're going to try to roll out necessarily a new one to replace the WeChat program. Thank you. My program, the director of the program is telling me we have one minute left. I want to thank you for very much for joining me. I also want to give Clay the chance. Any last minute words you want to leave with our audience today. The only statement I'm going to make here is that I hope the new administration will take a more pragmatic approach to the China-U.S. relationship. I think that will resolve a lot of the disputes between those two countries as well as resolve this lawsuit. Well, on behalf of the law across the C program, I want to thank you two very much for spending your time and your knowledge, sharing your knowledge with us. And happy holidays. Thank you. Hope to see you again at the program soon. Thank you. All right. Okay. Bye-bye. Bye-bye.


other part of it on the personal side on the schedule A as an itemized deduction.  If you're using it for a business and personal that, that you're going to be paying one bill for the utilities, which is going to come through your bank account with one bill, which you might have to break out again to the business and the personal. And then you could have repairs, like the roof repair, the roof or paint the building or something like that, which you might be breaking out between business and personal. Now the couple of different ways that we can do this, that the easiest thing to do is when we have these come through, the first question is, should we be putting them on, on our, our business bookkeeping side of things or should they be personal? So for example, if I'm paying the rent or my mortgage interest, it kind of seems like a personal type of thing. Should it be going through the business account at all? And you would think, well, maybe it would be the easiest thing to actually put it through the business account so that you can make sure that you're tracking it. Because if you have a schedule C type of business, you can, you're going to try to allocate part of it to the business side of things. So you could pull it into the, the business account and record it as whatever they're coming up, rent, utilities and so on and so forth. And then possibly periodically at the end of the year, most likely, or you could do it more often, like at the end of the month or something like that. If you want to do it for your own bookkeeping purposes and not just for taxes at your end, we can make an adjustment using the class tracking in a similar way as we did with the auto expenses. So if I turn my class tracking on, then I have this, I can have this breakout with this adjustment similar to what we did with the auto expenses saying, saying, look, this is the, this is the amount of the expenses on the bookkeeping side. This is going to be the tax adjustment. And then we have our tax, uh, and then we have our tax amount that's going to be useful for creating the schedule C or when you actually create the schedule C, you might, you might use the tax software to help you to figure out the deductible amount at that time. And then, and then put the adjustment possibly into QuickBooks. If you wanted to have your little tax adjustment basically within QuickBooks instead of having to print it out or export it to Excel and have your tax adjustment somewhere else.  Now another method that you could use is you can actually figure out what percent should be business or personal based on the square footage calculation, which is usually the calculation you get. You can get the ratio and then as you do the data input for those expenses, the utility, the rent, and so on and so forth, you can create a rule so that when the money actually comes in, you are properly allocating it between the tax deductible portion and possibly another account so you can kind of do the breakout as you do the data input. So that's another method that we can use. It kind of tracks it on a perpetual method instead of like on a periodic adjustment type of system. And the other thing that of course you can do is you may possibly have one QuickBooks account that has both your personal and business in it. A lot of people won't recommend that you do that, but if you're a small business, you might be able to do that and because you only need the schedule C and you might not want to pay for two QuickBooks online accounts so that you can track your business and personal. And if you get the plus or above, you might have the class tracking, which you can basically allocate out. And you could, I have done presentation on tags. So if you want to pay for a cheaper version of QuickBooks and use a similar concept with the tags, it's a little bit more complex to do, but you could use the tags in a similar kind of fashion. So if you take this concept and look at the course or section on tags, you could probably figure out how to do a similar kind of thing with the use of tags if you don't have plus or above, which has access to the class tracking. But if you had your personal stuff going through here, you can assign everything that you enter to either business or personal, and then you can have an income statement for both your business and personal type of information that would be broken out. And then of course, same kind of idea with the home office. You can break out the, the business, uh, uh, side of the expenses and the, and the personal side, either periodically or as you go using a percent usually derived from the square footage of the home office compared to the whole square footage of the home. Okay. So next time we're going to talk a little bit more about what the tax law generally says with regards to the deductibility of a home office. So we can understand that and then think about how we might design our bookkeeping to be, to be modeled around that so that we can have information that's relevant to us and have as easy a tax preparation process as possible, as well as possibly being able to document the differences between our normal bookkeeping, uh, input and the tax adjustments that are necessary so that if an audit happened at some point in the future, three years down the line, we can easily go back and see the reconciliation and say, Hey, auditor, this is what I did.  Here's my reconciliation or whatever.