While China has had intellectual property laws acknowledging international rights since the 1980s and while there does seem to be some increased enforcement activities in recent years, there are still a great many violations by unscrupulous manufacturers and promoters.
What is a manufacturer to do to protect their rights?
First, we would always recommend that you discuss your individual situation with your intellectual property lawyers and their affiliates in China. If your attorneys do not have a working relationship with a Chinese or Hong Kong based firm, you might want to ask them why they don’t and how they have dealt with issues in China. If you don’t get satisfactory answers you may wish to consider alternate counsel.
Second, think clearly through how important your rights in China are. Are you worried about the market in China itself or in potential competitive exports to the U.S. or others of your key markets. It may be that the costs of trying to protect your IP outweigh the future benefits you will get from it so that it is just not worth being overly concerned.
If the threat in your key markets or in China itself are important then by all means consider filing trademarks, patents and copyrights in China. Even if your IP attorney does not have working relationships with firms in China, they will have affiliates they can work with to make the filings.
Another strategy is to not share all of your IP with any one manufacturer. We have known of companies that will send pre-formulated products or sub-assemblies to China with their “secret sauce” hidden or disguised. Others have divided manufacturing among different factories so that no one has the complete picture of a product.
But, even with IP filings and as much stealth as possible, a dishonest company intent on ripping you off will find a way.
We have found that one of the best ways to deter IP theft is to really vet the potential factories you are considering working with. As a first step, ask factories for a list of references you can talk to. But, beware, because the list of those they give you are not likely to be ones with whom they have had problems. Do your best to identify others they have worked with to do checking on your own.
Ask your sourcing and QC firm in China for their evaluation and reference checking in China among vendors and suppliers and just among the grapevine of people who know manufacturing in a particular area.
It is particularly helpful to walk through factories and their engineering and sample departments to see exactly what they are producing for others. If you see that they are and have been manufacturing for well know, well respected companies you should have some comfort. If they have had good customers for several years, the likelihood of their being bad actors is greatly reduced. It is very helpful to have your Chinese speaking sourcing and quality control people conduct inspections without you there. Because they can understand the language and engage employees in conversation, they may be able to learn much more than you can on your own.
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If you discover a factory you are working with to be infringing on your own or any other company’s rights, we suggest you very strongly call them out on what you have seen and threaten to take your business elsewhere or to report them to those they are infringing. You should know very quickly whether they are taking your admonishment to heart. If they do not, it should be a strong signal to you to find another factory.
Unfortunately, there is no absolutely certain way of assuring that you will be protected. But by having your sourcing and QC partners in China do good due diligence, remaining alert, and letting the factory know what your position is can help in protecting you.