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Manufacturing in China: Protecting your Intellectual Property

 

One of the biggest concerns that clients always approach us with is the issue of IP Protection in China. In fact, this is probably THE most frequently asked question. And with good reason. Stories like this and this have captured public attention in the West and brought the issue of IP protection in China to the mainstream.

So, let’s take a closer look at this hot-button issue and how to navigate these treacherous waters.

Remember – US IP law does not guarantee IP protection in China

Trademarks, patents and copyrights issued in the US will offer you ZERO protection in China because Chinese law does not recognize these IP protections. It is crucial that you address this with your production partner in China at the very outset.

Too many Western companies initially overlook this in their haste to get their products to market ASAP, only to suffer the consequences later. If you have not registered your patents and trademarks in China, any Chinese company (including your contract manufacturer) is free to use your IP and sell your product there.

In extreme cases, manufacturing partners have even been known to register YOUR IP under their name with the Chinese authorities. Be smart and proactive – don’t end up as a warning tale.

Engaging with the Chinese IP regime

You can get a certain measure of protection by filing your patents, trademarks and copyrights with authorities like the State Intellectual Property Office (SIPO) and the China Trademark Office.

Remember to thoroughly research the relevant IP regulations in China because they may differ significantly from your home country. Also remember to have everything properly translated into Chinese because only these translated versions will be held as valid.

On the same note, carefully review the translated versions of any agreements signed with local partners. Any dispute resolution process will only refer to documents in Chinese and unscrupulous local manufacturers can take advantage of this by sneakily transferring IP rights to themselves in the Chinese language documentation.

Choosing the right local manufacturing partner

Registering your IP does not guarantee protection because the enforcement of these laws can be uneven and time-consuming. Ultimately, it all comes down to the people that you are working with and the relationship that you have established. For example, Apple and its contract manufacturing partner Foxconn have a longstanding relationship, and each is invested in the others’ success.

The lesson is to carefully select your partner only after extensive due diligence and directly address the issue of IP ownership and protection in all business contracts. And then engage with them continuously until you have established processes that aim to protect your IP at all stages of the operation.

The MorphoMFG Method

Over time, we have developed a method at MorphoMFG  that has proven 100% effective at preventing IP infringements. It can be more time and effort-intensive, but over the long run its results have been remarkable.

The strategy is to break down our clients’ products into different components and working with specialized factories for each individual part. This ensures that nobody in the process has your full design, making it that much harder to knock-off.

As an additional benefit, this also saves you money by keeping your costs low. Factories that make small component parts will charge you much lower rates than those that are executing full designs.

If your product runs on proprietary code, you would be well advised to do the final programming yourself in your own facility. Believe me, the cost of this will be worth the pain that it saves you later.

Having a reliable partner is only the first step in protecting your IP – you still need to protect yourself in case any abuses do occur. In the example from above, Apple trusts Foxconn because this is exactly how Foxconn ensures IP Protection in China – by splitting component parts between several vendors.

Always work to ensure the best possible outcome but enact procedures that prepare you for the worst possible outcome as well.

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