As businesses seek affordable manufacturing solutions, China has emerged as a go-to destination for many companies. That’s made protecting your IP a major concern. This can be a difficult task if you operate in a single country, but adding a second set of laws as well as geographic distance can make protecting your IP that much more difficult.
The guide below gives you valuable insights into how you can safeguard your IP.
Common Methods of IP Theft When Developing Your New Product in China
The best way to combat IP theft is to be aware of the risks ahead of time. This includes having an understanding of your vulnerabilities at each step of production. That’s why we’ve broken down the common methods of IP theft into before and after you’ve launched your product.
1. Before The Product Launch
Before you launch your product, your IP will only be exposed to people you choose to share it with. This is one reason why it is so important to take time and care when finding business manufacturing.
Method 1: Reverse Engineering
Chinese manufacturers may try to disassemble and duplicate your product, a practice known as reverse engineering.
Preventing reverse engineering of products in China can be done, as we will see below, but the problem highlights the importance of doing your research to find the right Chinese manufacturer. A trustworthy partner is the single best way to prevent reverse engineering.
Suggested Precaution: Maintain the confidentiality of your product’s technical aspects. Share only necessary information with the manufacturer. If you are combining elements in your country, this can be even easier — you can manufacture different components with different companies. Of course, that can create a major headache, but it will protect your IP.
You can also do all of this overseas, with a black box approach. This is where you hire multiple manufacturers, each producing their own part of your product, and an assembly center that puts everything together.
Method 2: Illegal Disclosure
Manufacturers could leak your IP to competitors or reproduce your product under a different brand.
Many people think that a non-disclosure agreement (NDA) will protect them, but these are all too often useless pieces of paper. Either they don’t fit the legal requirements of China or the manufacturer simply produces your product without disclosing the information to unauthorized parties.
Suggested Precaution: Instead of an NDA, you really want an iron-clad contract with the manufacturer. This needs to be looked over by an expert in Chinese contract law. This will give you protection should a copycat strike.
So what kind of manufacturer is the safest for your IP?
An original equipment manufacturer (OEM) has expertise making products of a certain kind. When you work with them, you hand over your design files for them to produce. With an agreement tailored to Chinese law, you can retain most if not all of the IP rights.
OEMs are preferable to original design manufacturers (ODMs). This is because ODMs are already manufacturing a similar product, and the innovator is requesting a version tweaked to their own specifications. That makes it much easier for ODMs to steal your IP.
Finally, a contract manufacturer (CM) will have no technical expertise in the field and is simply charging you to produce products to your exact specifications. They will probably allow you to retain all of the IP rights.
2. After The Product Launch
Once you launch your product, the idea behind it is now out in the open. So no matter what measures you took to control your IP exposure beforehand, you can no longer operate in secret. This makes innovative strategies all that much more imperative.
Method 3. Counterfeiting and Piracy
Once your product hits the market, it could be subjected to counterfeiting and piracy. This is an increasing issue — with virtually any product of note being pirated many times over in the online marketplace.
This is a reality that is slowly dawning on many innovators. If you have a successful product, there will be copycats. And many of them will find a way to offer a lower price. What makes matters worse is that if they change the name and the mechanism isn’t easily patented, you’ll have zero legal recourse.
Suggested Precaution: Of course, if you can patent your idea, you should do so before you launch your product. That’s the best way to legally protect your IP. But that isn’t always doable. The same goes for trademarks. If you can successfully patent or trademark your product and/or brand, do it as quickly as possible. In China, the trademark process runs on a first-to-file system, so you have no time to waste.
Whether or not you can patent your idea, one of the best ways to combat piracy is to build in product tracking. This could include a holographic seal or some other feature that lets your customers know they have an original.
Some companies will add a superfluous element to their product just to verify it is theirs — like an imprint with a serial number on it.
These measures really only help if your brand has a strong connection to customers. If your brand doesn’t, you’ll have to compete outright with the companies copying your product.
Method 4. Cybersquatting and Brand Infringement
Cybersquatters may register your brand’s domain name in China, causing potential damage to your brand’s online presence. You might also find more flagrant forms of brand infringement.
Suggested Precaution: Register your domain names and related internet properties in China before launch or as soon as possible(such as www.namecheap.com). You might also want to invest in hiring people who keep an eye out for how your brand is being used online. In many jurisdictions, a history of not enforcing your trademark and patent rights can weaken your ability to defend it later on. Vigilance, then, is key to long term protection of your IP.
One thing many companies overlook is registering their trademarks in Chinese characters. Many bad actors get away with infringing trademarks by directly translating from Roman characters into Chinese characters — and that is perfectly legal unless you’ve specifically protected your IP in Chinese characters.
Legal Steps to Protect Your IP When Developing Your Product in China
If you are suffering from IP theft in China, you need to move quickly to legally protect your rights. Below are necessary steps to take:
Step 1: Register Your IP
Before starting operations in China, protect your IP in two ways:
– Patents: File your patent with the China National Intellectual Property Administration (CNIPA).
– Trademarks: File your trademark with CNIPA’s Trademark Office as well as the World Intellectual Property Organization (WIPO).
Step 2: Create and Enforce Contractual Agreements
You’ll want to get everyone in your production process under contract with explicit IP protection clauses. That includes manufacturers, suppliers, and employees. These will limit when and how your IP can be shared.
Contracts you’ll want include:
– NDA contracts with your staff (here are some free templates)
– Non-disclosure/non-use/non-circumvention (NNN) agreements written specifically for the Chinese legal system (here is a free template)
Step 3: Monitor and Enforce Your Rights
Continuously monitor the market for any potential infringement and take prompt action. Being relaxed in this regard will limit your ability to enforce your IP rights in the long term.
You should also monitor and run audits for your manufacturers (including factory inspections) to make sure they are respecting your IP rights.
There are many ways to monitor for infringement, including:
– Regularly searching for similar products on popular online marketplaces
– Use programs to search the internet and send you alerts when similar products come up
What Should You Do if Your IP Has Been Violated?
If your IP has been violated, you need to:
● Gather evidence:
You should meticulously compile evidence that can substantiate your claims of IP violation. This can include photographs, product samples, advertisement copies, or online screenshots. Purchase infringing products and document the process. In online cases, archive URLs where infringement occurs. Detailed records of your initial product development and IP registration will also prove vital.
● Consult with a legal expert:
Navigating intellectual property laws, especially in a foreign country like China, can be complex. A Chinese legal expert can guide you in understanding your rights, assessing the strength of your case, formulating an effective strategy, and preparing your legal defense.
● Seek redress through the Chinese legal system:
Depending on the nature of the infringement, options could include filing a complaint with administrative authorities like the CNIPA or local Administrations for Market Regulation (AMRs), pursuing civil litigation, or even seeking criminal penalties in severe cases. Remember, an IP violation case may require time and patience, but protecting your IP is fundamental for the survival and success of your business.
If you want to manufacture in China, you have to know how to protect your IP there.
This is easy to do as long as you use the strategies above. This will keep your risks low and your brand strong.
FAQs about Protecting IP in China
Q1: How does China law protect intellectual property?
China has strong IP protection laws — and these can help at any point in the product development process. The reason many businesses end up losing control over their IP is that their legal agreements are all framed around the laws of other countries. It is essential to understand Chinese laws and work with a legal expert who specializes in the country.
Q2: What is the current status of China’s IP protection and IP theft in 2023?
Over the past few decades, China has created more and more robust IP laws and enforcement mechanisms. Nevertheless, IP theft remains a concern for foreign businesses. Therefore, it’s important to take proactive measures to protect your IP.