4 Ways to Protect Your IP When Manufacturing in China
Easy Imex often handles inquiries about how to protect sensitive IP when manufacturing in China. As this article will point out, there are ways that you can reduce the chance of your product being copied and sold to competitors. Let’s run through your options.
Protecting your IP outside of China
The best strategy for IP protection is to prioritize IP registration in your major sales market/s. If you have a large budget and expect global sales, then you should register your patents and trademarks in every market you plan to sell into. This means that if you intend to sell your product in China, you also need to register your IP in China!
However, if you’re a small startup without funding, you’ll need to prioritize. It’s expensive and time-consuming to register IP in every market, so work out where your customers are located and register your patent and trademark in those jurisdictions.
Limit IP theft before manufacturing
If you have a pioneering product then you should definitely set up a Product Manufacturing Agreement that is legally binding and enforceable through mainland Chinese courts. As Dan Harris from China Law Blog points out, Chinese judges won’t enforce a foreign judgment. If you are going to the effort of preparing a contract, agreement, NDA, NNN etc. make sure that it is done correctly by a lawyer who understands how to meet China’s standards.
Product Manufacturing Agreements typically cover the following: quality requirements, lead-times, product and IP ownership, molding/tooling ownership, NNNs (non-compete, non-circumvention, non-disclosure), and penalties clauses.
Limit theft during manufacturing
If you have a product with multiple components, Mike Bellamy - China Operations Manager at PassageMaker - recommends separating the production of key technologies and having them sent to a trusted third party warehouse for assembly behind closed doors.
This process isolates the final product in a controlled location which limits the chance of someone stealing the idea and manufacturing for sale to your competitors.
Make your product copy proof
The surefire way to protect your intellectual property is to make it copy proof! As this excellent QZ article by Josh Horwitz explains, groundbreaking designs are not enough.
“Companies must create products that are impossible to copy exactly from the get-go, by focusing on a special feature they can protect, or creating a coveted brand name consumers will pay more for.”
This can include creating exclusive software to compliment your product, using complex manufacturing processes that prohibit easy copying, and focusing on your brand and after sale service.
On a final note, deciding to manufacture outside of China in the hope of limiting the chance of IP theft is ineffective. It’s simple for copycats to purchase your product once it hits the market, send it to China for reverse manufacturing, make a few slight changes and then compete directly with you back in your market.