The Truth About Intellectual Property in China

If you’re planning to use China as a manufacturing base for your products, there are some home truths about intellectual property (IP) that you need to be aware of.

Counterfeiting accounts for around 8 per cent of China’s GDP, making it the largest counterfeit industry in the world, and if you have your product manufactured in China, there is a good chance that it will be copied.

Clothes, electronics, sporting equipment, toys, pharmaceuticals; there is nothing Chinese counterfeiters can’t copy, and often they do it so well that it is difficult to distinguish from the original. So how do you protect your IP rights when manufacturing in China?

Be first

Before you begin manufacturing, the very first thing you should do is file your trademark or patent application with the Chinese Trademark Office or State Intellectual Property Office. In China, the first to file is recognised as having the rights to that trademark or patent.

If you begin manufacturing without registering your trademark or patent, you could easily find a Chinese company registering it under their own name, as has happened to foreign businesses on a number of occasions.

Take precautions

The best way to protect your intellectual property is to limit the possibility of an infringement occurring in the first place.

One way is to make sure you have binding contracts and trade secrecy agreements in place with your China manufacturers, which include specific monetary damages if they or their employees are found responsible for IP infringements.

Another way is to develop partnerships and networks within China (foster local contacts who have a vested interest in preventing infringements). Having an import agent on the ground in China can also help to ensure your IP rights are not being infringed, and will be usefull for import from China.

Always register IP in the country you will be selling to as well. For example, register your trademarks and patents in Australia before going to China.

Take action

If and when an infringement does occur, be sure to act quickly. You have two main courses of action. You can either lodge a complaint with the Chinese Administration Industry of Commerce (often the quickest and most cost-effective way), or you can choose to take the offender to court (a much more costly and time-consuming process).

The reasons why IP infringements are so prevalent in China include:

• The culture — counterfeiting is not seen in the same light as it is in the west. You just have to look at the number of tourist markets in major cities devoted entirely to counterfeit products to realise counterfeiting is viewed as legitimate business.
• The bureaucracy — local governments can be uncooperative with investigations of IP infringements, as local officials may view counterfeiting more as an economic benefit for their region than a criminal enterprise.

The bottom line is there are real risks associated with intellectual property when manufacturing in China, and the more valuable your IP and the easier it is to copy, the more likely it is that it will be copied.

Your only real options are to protect your IP as best you can and take swift action if it is infringed, or choose to have your product manufactured elsewhere at greater cost.