During COVID, Trump famously claimed that China was stealing US technology and knowledge to gain an upper hand in manufacturing. That is where intellectual property came into play. Politics aside, intellectual property rights refer to the legal rights associated with creations that are the product of someone’s mind or genius, such as inventions, artistic works, designs, or symbols.
If you are sourcing intangible assets from China, it becomes especially relevant for you so that you can protect them against potential theft or infringement. In this article, we’ll explore the best practices to help you safeguard your IP when manufacturing in China, including applicable legal frameworks and practical measures you can take towards that end.
Why IP Protection Matters in China?
China is a global manufacturing powerhouse and rightly, so- it is cost-efficient, provides access to skilled labor, and speed of production, which may not be available in domestic manufacturing. With these advantages come hidden IP concerns, especially when you have created an exclusive furniture design or custom component, or are concerned about your brand name, or software integration.
IP can take different forms, such as copyrights, patents, trademarks, or trade secrets, but the ultimate goal is to ensure that only you reserve the rights to your product, and no one else can buy or sell it. Failing to protect your IP rights could spell disaster for your business, and before you know it, your product could be all over the market. Not only can this rob you of your competitive advantage, but it can also make your brand less credible and deter your long-term growth prospects.
1. File Your IP in China
It’s commonly believed that an IP registered in your home country would shield you in China as well. This is far from true as China works according to a “first-to-file” system, meaning that whoever first registers a trademark, patent, or design in China is entitled to its rights no matter who was the original creator.
The best way to avoid this is to register early and ensure that you obtain a trademark for a logo or brand name in both English and Chinese. If you have a unique product design, apply for a design patent or a utility patent in case of any innovation in functionality or technology.
2. Substitute NDA with NNN Agreements
Instead of a standard Non-Disclosure Agreement (NDA), go for a bilingual NNN Agreement, which stands for Non-Disclosure, Non-Use, and Non-Circumvention. See to it that your agreement is framed according to Chinese law and enforceable by Chinese courts.
These agreements protect you against manufacturers who may use your designs or information for their benefit or directly engage with your customers through your product. Under this agreement, they are also forbidden to share your IP with third parties.
3. Evaluate Your Manufacturer
Your IP risks are proportional to the credibility of the manufacturer you work with, so take time to get to know your manufacturer closely. Don’t dive headfirst into an agreement, but schedule an in-person visit to the factory or hire the services of a third-party auditor. Go through their licenses and certifications, or ask for references if possible.
A solid indicator of a Chinese manufacturer’s credibility is whether they have a history of working with well-known global brands or international clients, as these companies will have a greater understanding of the importance of IP protection and legal compliance.
4. Adopt a Modular Manufacturing Approach
Relying on a single supplier can add to the risk, so a smart, savvy strategy is to use multiple Chinese suppliers at different stages of the production process. For example, you can hire one supplier to provide the base components while another can be tasked with assembling the entire product. Doing this, you can prevent your complete product design from falling into the hands of a single manufacturer, who may then replicate the whole product.
5. Strengthen Data Access Controls
A strategic approach to information sharing works best where you only share information directly relevant to the manufacturer’s role in the production cycle. For example, when sharing design files, you can omit the final dimensions or use only generic labelling until production enters the final stages.
Ensure limited access to any proprietary software or firmware you have developed and convert design files into read-only or PDF formats.
6. Consult Legal Advice on IP protection
Someone well-versed in Chinese IP law can help register your IP in China, insert enforceable clauses into contracts, and suggest alternative enforcement mechanisms in case of a failed contract.
They can also advise you on the best course of action if a dispute arises and represent you in court to fight for your legal rights.
7. Leverage Chinese Customs Protection
It may surprise you to know that you can get your trademark or patent registered with the Chinese Customs. If counterfeit goods based on your designs arrive, customs authorities could detect and stop them from leaving the country.
8. Establish a System for Quality Control and Audits
Monitoring your supplier’s output is essential not only to maintain high-quality standards but also to prevent unauthorized production. A third-party inspection team can monitor the batch right before it is shipped, determine its quantity, and ensure that the packaging and branding are compatible with your specifications.
Final Words
IP Protection is closely tied to your business identity and existence as a whole, and the stakes are too high for you to ignore your legal rights when you manufacture in China.
Having the right knowledge about what this legal term entails and its implications is critical to secure your IP rights in China while tapping into China’s manufacturing potential.
By making IP protection a core part of your sourcing strategy, you can build your business on a robust foundation and safeguard the fruits of your hard work and creative genius for sustained growth in a competitive marketplace.
About the Author: Adam
